Millennial Debt: How to Kick-start Financial IndependenceNov 07, 2018
Millennials aren’t the only Canadians in debt, but that doesn’t mean they aren’t struggling. BDO Canada’s Affordability Index survey recently found that millennials are the least financially prepared for significant life events. One in 5 millennials have also delayed moving out of their parent’s home due to lack of affordability. That’s why this month, we are focusing on financial independence and the steps you can take now to get there.
Why does everything seem so out of reach?
After graduation, there are many expectations to find a good-paying job, make plans to buy a home, and eventually, start a family. The problem is, all these things come with a price tag and it can be difficult to prioritize these life goals when you’re likely still paying back student loans and personal debt. The struggle is real and here are the stats to back it up:
- Over a third of millennials are overwhelmed by debt and don’t know what to do about it.
- 8 in 10 say they’ll need to spend more years in the workforce than their parents in order to retire.
- Nearly 20 per cent of 18-34 year old’s are actively delaying having kids because they can’t afford it.
- 57 per cent of millennials feel unprepared financially to buy a home.
What can you do about it?
Now that you know many millennials are facing the same challenges, what can you do to change your personal situation so you’re prepared for these events? Here are 4 changes you can make now that will pay off over time:
- Spend less on wants – Millennials admit that they spend more on wants than they should. This can become problematic if you’re sacrificing needs in the medium to long term. To balance your spending and avoid impulse purchases, take 24 hours before hitting checkout on your online shopping carts. Also, weigh out whether it’s a mindless purchase or something you actually need.
- Find a budgeting system that works for you – Only you know what will stick when it comes to following a budget. Take some time to experiment with a budgeting worksheet, a budgeting app or use a system like a bucket budget. You need a budget so you can predict upcoming expenses and plan for those unforeseen ones that come up.
- Save for those big (and small) goals – Having kids may not be on your radar yet, but it might be some day. It’s always good to have a plan so you aren’t left floundering when the time comes. Each month, you should divide your savings into a few different categories. One for emergencies such as car repairs or other incidentals, another for short-term extras such as holidays, birthdays or entertainment that’s outside your regular budget, and another for long-term goals such as a down payment, a wedding or starting a family, and remember it’s never too early to save for retirement.
- Don’t let debt ruin your plans – Non-mortgage debt has a way of eating up your extra cash and let’s face it, there’s a lot better things you could be doing with that money. If you’re ready to deal with your debt, use this calculator to see your options. You might want to try a DIY debt control, or, if you’re feeling overwhelmed with your debt load, it’s time to see a professional. An LIT can go over your current situation and recommend the best repayment plan for you, saving you mental stress and energy.