Ways Millennials Can Be More Credit Card Smart

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With roughly 44 million Americans facing student loan debt, you might think that carrying this post-grad debt would be the biggest financial challenge facing millennials today. In actuality, more millennials are facing credit card debt than student loan debt. Of course, paying back student loans is important but so is learning how to budget wisely and capping your credit card spending. New Era Debt Solutions reveals ways millennials can reduce their credit card debt and get a few steps closer to achieving financial freedom.

According to stats from a 2018 survey conducted by NBC News/GenForward at the University of Chicago, 46 percent of millennials have credit card debt, while 36 percent have student loan debts. About 34 percent of millennials are paying off car loans, according to the survey.

Go 50/20/30.

If you haven’t already set up a budget for yourself, today’s the day. Use the 50/20/30 method to prioritize how much you should be spending. Allocate 50 percent of your income towards essentials like food, rent, utilities, and gas. Twenty percent of your income should be set aside for savings and retirement and if necessary, paying off debts. The remaining 30 percent of your income can go towards nonessentials, such as entertainment, shopping, and vacations. But make sure you know what your debt amounts are, otherwise your budgeting plan won’t benefit you.

Debt stacking.

Pay off the minimum amounts on all your credit cards, using whatever you have left on the accounts with the highest interest rates. The longer you wait to make a payment, the higher your interest rate will get. It may take a while to get out of the red but with some time, you will no longer be spending all your hard-earned money on interest.

Limit credit card use.

Make your monthly payments more manageable by capping your credit card use to 30 percent of your available credit limit. No one likes to be shocked by the numbers on their monthly statements, so don’t add more debt to your debt.

Keep housing at 30 percent of income.

This tip might vary depending where you live but if your rent is costing you the majority of your paychecks, consider finding roommates to share expenses with or moving back home. Housing expenses should be limited to 30 percent or less of your income. Finding roommates or moving in with your parents doesn’t have to be a forever solution but these living situations can help tide you over until you’re in good financial standing.

Find a side hustle.

If you’re driving to work, why not pick up a few passengers on your way and get paid for it? There are many side jobs out there with flexible hours to fit your schedule. Earn extra cash by driving for Uber or Lyft in your free time, selling your lightly-used clothing on Poshmark, or pet-sitting through sites like Rover.

Millennial Debt FAQs

Millennials have faced unique financial challenges compared to previous generations, and as a result, many have accumulated various types of debt.

What are the biggest factors contributing to Millennial Debt?

  • Cost of Higher Education. Many millennials pursued a college-level or advanced degree, resulting in an accumulation of student loan debt within the generation.
  • Credit card debt. Millennial borrowers in their 30s have struggled to repay their credit card debts as Millennials have emerged as the group with the highest delinquency rate for repaying their credit borrowings.
  • Auto Loans. Millennials are the largest group of auto buyers in the United States, and are the most delinquent group of individuals when it comes to repaying debts on their vehicles.
  • Mortgage Debt. With the cost of owning a house continuing to increase alongside with increasing interest rates, the most significant factor contributing to Millennial debt comes from mortgages. Many millennials have opted out of investing in a home and instead chosen to rent.

How does Millennial Debt compare to that from other generations?

Each generation has existed in time periods with varying financial conditions that uniquely contributed to their debts. Overall, Millennials tend to have higher student loan and mortgage debt when compared to other generations. They carry higher-than-average credit card debt, but not as much as the average individual from Gen X or Boomers. However, it’s important to recognize that debt is influenced by a multitude of factors, and individual circumstances within each generation can vary significantly.

Get Experienced Debt Help with New Era

New Era Debt Solutions has settled over $275,000,000 of debt since 1999 and wants you to be our next success story. To see if debt settlement is right for you, contact one of our friendly counselors or fill out the form on this page for your free debt analysis.