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Debt clearly manifests itself regardless of your age in life. Its probably accurate to say that credit will always be a part of the financial structure in our society. The mere presence and importance being put upon credit scores means we have to take on debt all the time. We are encourages to get our scores high enough to open up more financial opportunities.
It is sad to know that we get to be in debt in as young as our college years. Even before we have the ability to pay off our dues, we have to deal with student loans that will help us get the job to pay it off. We need to carry all sorts of debts up until our retirement - which some of us have seriously compromised because of credit.
But who exactly is greatly affected by debt and is in dire need to receive some sound financial advice?
Experian.com created an infographic as of October 2011 and it revealed the following information about the credit situation per generation.
Baby boomers have a total debt of $101,951.
Generation X have a total debt of $111,121.
Millennials have a total debt of $34,765.
Of course, this data was back in 2011 and two years after, there must be some sort of improvement already - or not. The difference between the Baby boomers and the Gen X are not so far off but the Millennials have a way lower debt than their two elders. But needless to say, the rising student debt in the past few years should have bumped their credit obligations are little higher at present.
Obviously, all three generations are in need of debt help but the financial advice for each of them will vary. We all have various priorities and goals as we grow older so it is probably just right to categorize our financial tips to them.
Money tips for the retired or retiring Baby Boomers
The Baby Boomers include people who are born after World War II - 1946-1964. Demos.org was bold enough to call this group as the generation debt. According to them, the baby boomers were the first generation to enter retirement with debt. These debts are mostly mortgage and credit card debts.
If you are part of the baby boomer generation, you obviously do not like to retire with debt. If you haven’t retired yet, you only have a few years before retiring. Improving your personal finances may be difficult to accomplish. You are not only saddled with limited income, you also have to deal with the limited time that you have.
Given that, here is a list of financial advice that we have for baby boomers (especially during their pre-retirement years).
Prioritize saving up for your retirement. While you may dislike being in debt during retirement, you need to prioritize building up your retirement fund. You can continue to pay your debts but make sure that your retirement fund is given financial attention too.
Look up debt relief programs that will help you pay for your debts in a short span of time. These include debt consolidation and debt settlement programs. They can get you out of debt in 5 years or less. Just make sure you analyze your finances carefully to see which program you can afford to pay off. Options like reverse mortgage can also be considered.
Stop using your credit cards. Demos also reported that the credit card debt of baby boomers average at $9,283 - a big difference from the $2,982 average of Millennials. You need to stop acquiring debt if you really want to retire without it.
Find sources of retirement income. If you still have a lot of debts, you may have no choice but to continue working. You probably do not need a full time work, but there are options to work part time to help you meet your financial needs.
Know the benefits that you can avail. Retired individuals usually have to deal with medical expenses and other health related issues and sometimes, this is a major financial burden. Fortunately, there are benefits coming from the government and other organizations. You may want to research about them so you can get financial assistance when you need it.
The Generation X financial condition
Next are the Generation X. These are the people born from the early 1960’s to the early 1980’s. Sometimes, people call this generation as the sandwich generation - having to take care of the baby boomers and the millennials at the same time.
The Experian infographic shows that they have the biggest debt average - $111,121. Most of the debt is actually tied up to their homes. After the crash of 2008, a lot of them probably had to give up their homes or sacrifice a lot of keep it. They also have credit card debts to deal with.
While these people still have a decade or so before retirement, it is understandable if they are currently prioritizing their debt payments. But do not make the mistake of using your 401(k) to pay your debts. While it may seem logical, it is not the right financial advice at this point in your life. You need to start thinking about your retirement - especially if you are among the oldest of this generation.
So here are a few tips that we have for you.
Seriously pay down your debts. You still have time to work on your debts so you need to work on it now. Think about the things that you can live without and choose to make the sacrifice so you have the money to get rid of your debt obligations. Use the many debt relief programs that can help you make better progress on your payments.
Make wiser spending choices. This is very important. If you haven’t bought your house, you can do so if you feel that you are financially ready and capable to shoulder the long payment scheme. But make sure that you choose the home that is just right for your needs and not based on what will make you look like a financial success. Even if you are approved of a million dollar home loan, do not get it if you can live comfortably on a $500,000 home.
Start saving up for your child’s college education. We all hear stories about the student loan problems and if you can afford to set aside money for it, do so. Teach your child how to save up for it too. That way, they get to be more responsible with money.
If you haven’t started it yet, save up for your retirement. This is very important. You still have time and it is only right that you save up for your retirement. That way, you do not have to work until your drop.
Financial lessons for Millennials
Last of the generations that we will provide financial advice to is the Millennials. These are the people who were born between the early 1980’s up to the early 2000’s. They are also known as the Generation Y.
In a lot of headlines, Millennials are getting praise for their financial choices. Despite the rising student debt that is crippling most of them, they have made better, although conservative, financial decisions. But despite that, here is another list of financial advice that we hope this generation can heed.
It’s okay to use credit cards. Reports have been surfacing that Millennials are skipping credit card accounts because they do not want to end up like their elders. That is understandable but they are not really addressing the problem. Instead of being afraid of debt, they might want to learn financial management to help keep themselves from abusing this purchasing tool. This is one of the easiest way to build up your credit score.
Build up credit history. Since we’ve mentioned it already, it really helps to build up your credit history. Unless you can save up hundreds of thousands to buy your home in cash, you will need to apply for a loan someday. You want to be able to get a low interest on that future loan. So right now, deal with your student loan debt, use your credit cards wisely and pay your dues on time.
Start saving up for retirement. Ideally, you should visualize the type of life that you want but it is not necessary. It may be a long way off but you should start saving up for your retirement already. That way, you don’t have to contribute a big amount.
Be wise with your financial choices. You have a long way to go in terms of your spending - buying cars, your first home, paying for your wedding, etc. Just be wise about all of the financial aspects of your life events.
Invest your money. Being a young investor is something that you should seriously consider. Letting your money grow from different baskets is a great way to work on your financial security. That way, you do not have to tie yourself to your job if you do not want to.
Try not to be too judgmental of credit because when used wisely, it can help you grow your personal financial standing. Work on developing the right financial habits so you can avoid the mistakes that your parents and grandparents made.