One of the most significant sources of headache for young people is their growing indebtedness. Several people believe that debt is indispensable in life. Although this looks true, debt has a huge opportunity cost. For instance, it postpones your plan to build as much wealth as you desire. Also, it makes it challenging to live fully in the present. There are many reasons responsible for this lifestyle. Hence, we have discussed seven reasons why young people are drowning in debt.
1. Poor Budgeting Skills
The result of numerous consumer surveys point in the same direction – the majority of the population do not have a budget. How do you intend to track your income and expenses when you have no framework in place? When asked about their monthly income, many people respond – “I don’t know where it all goes.” That attitude leads to wasteful spending. Learning how to create a budget will give you an instant overview of your income, expenses, and balance.
2. Addiction to Credit Cards
Credit card companies release enticing adverts that seduce young people to keep them close. Do you have an emergency? Just swipe it. Did you come across a nice pair of shoes? Just swipe it. This instantaneous lifestyle of getting anything you want with ease is responsible for many millennials drowning in debt. If you have your credit card with you, you can quickly pile up debts. A good recommendation is to throw them away.
3. Lack of a Debt-Repayment Plan
Have you heard the saying that – a goal without a plan is just a wish? Well, it holds concerning debts. Leaving your debts to chance is counterintuitive. Many young adults have no concrete plan to repay their debts, which explains why they keep drowning in them. There are several repayment strategies that you can leverage. For example, the debt snowball strategy says you should start with your smallest debt. Pay it off as quickly as you can. It inspires optimism and confidence that you can pay off the remaining ones.
4. Financial Incompatibility with Spouse
Is your spouse a spendthrift? If yes, that may be the main reason why you owe tons of money. Many people downplay financial compatibility just before they get married. Paying off your outstanding credit requires all the support you can get. Besides, you tend to inherit their liabilities. Thus, you need to be on the same page concerning being debt-free and building wealth. If your spouse exhausts their income on shiny objects, you will find it difficult swimming out of debts.
5. Appetite for Gambling
Young adults are turning to gamble in large numbers. Often, the lure to hit it big can be overwhelming. Coupled with the extravagant lifestyle of lottery winners, millennials are tempted to test their luck. Moreover, once you try it, you would not want to stop until you recoup your losses or win big. You can channel your gambling expenses into a savings account, an emergency fund, or a financial literacy course.
6. Apathy towards Saving Money
When emergencies occur, many young people are always ill-prepared for them. Without thinking about it, they turn to their credit card. Having a savings account is a simple task with huge rewards. In the event of laptop damage, job loss, or illness, you can count on your savings.
7. Low Financial Literacy
The only knowledge of managing money for many young people comes from their parents. Except your parents are wealthy, then you might not be getting excellent advice. If you do what your parents did, you will end up where they are financially. Unfortunately, that is where many millennials are.