Millennials Identify the Culprit Responsible for Their Retirement Savings Shortfall - Debt
The temptation to acquire something now but not pay for it until later is probably as old as humanity. There's the ancient biblical story of Esau, who traded his future inheritance for a bowl of lentil stew. Christopher Marlowe, a contemporary of Shakespeare, wrote the famous play about Dr. Faustus, the man who gets everything he wants today but, in the future, has the devil to pay.1
Needless to say, there's a lot of money to be made from getting people to buy on credit. No wonder credit card companies pay an average of $167 just to gain one customer.2
Millennials, now in their late 20s through early 40s, are the first generation to grow up entirely in the era of easy, easy credit. Where previous generations had to apply for credit, this cohort has had it pushed onto them. But now that they are well into their careers and looking to attain long-term financial wellbeing, they are seeing the negative consequences of debt.
A recent poll of by CNBC reports that 40% of this cohort feel they are behind on their retirement savings. Of those, more than half feel that this shortfall is the result of carrying too much debt.3
The math is very simple. When you have to make payments on your student loans, credit cards, cars, and even medical debt, you don't have anything left over for savings. Add to this the fact that many see retirement as a problem that’s twenty or thirty years in the future. And you can see how serious saving could be put off.
Most people agree that debt can be a burden. The tougher question is, how do I get out from under it?
Laura Bogart, who writes about finance for GoBankingRates, gives four basic steps that Millennials (or anybody) need to take to get out of debt.4
Get real about your spending. You're probably not aware of where all your money is going. To get an accurate picture you need to carefully track several months of actual spending.
Exit the debt cycle. Stop spending more than you bring in. An easy place to start is by cutting out nonessential purchases.
Snowball your debt. Get aggressive about paying off your smallest debt. Then use the money you've freed up to attack the next largest. Repeat. The boost you get from your initial easy wins will motivate you to take on the larger loans.
Fund your emergency savings. Having a thousand dollars in an emergency-only fund will not only help you keep from going into debt next time a surprise expense pops up, it will greatly contribute to your peace of mind.
Getting into debt is easy. Getting out takes work and a refusal to quit. If your debt is hampering your ability to attain financial well-being, talk with your advisor about ways to get out from under this burden. You'll have less stress now and more options in the future.
Sources:
1. http://go.pardot.com/e/91522/wiki-Doctor-Faustus-play/968q1b/2630239722/h/_MLyce7A2bYsPQVJdoT3zlmriFkGjGOtN-_12MrlnNQ)
2. http://go.pardot.com/e/91522/quisition-cost-cac-in-banking-/968q1f/2630239722/h/_MLyce7A2bYsPQVJdoT3zlmriFkGjGOtN-_12MrlnNQ
3. http://go.pardot.com/e/91522/ent-2024--utm-source-cnbc-2024/968q1j/2630239722/h/_MLyce7A2bYsPQVJdoT3zlmriFkGjGOtN-_12MrlnNQ
4. http://go.pardot.com/e/91522/t-blocking-retirement-savings-/968q1m/2630239722/h/_MLyce7A2bYsPQVJdoT3zlmriFkGjGOtN-_12MrlnNQ
