How to Pay Off Debt and Live Your Desired Lifestyle
Like in the famous Queen’s song, millennials want it all.
Or so they say.
Many have a dream of what their lifestyle should be.
Millennials are the first generation to introduce a digital nomadic life- and workstyle and prefer experiences such as travelling other material possessions.
The dream career should respect their desire for freedom, work/life balance, and passion.
As a result, financial planning for Millennials can look somewhat different from what most people are used to.
According to a recent Merrill Edge report, two-thirds of Millennials would rather save money towards achieving their dream lifestyle than for retirement.
Unfortunately, financial laissez-faire has consequences.
Over 8 in 10 Millennials don’t save for the future.
Lack of planning exposes many to money issues, making it hard to repay debts or avoid problems when their income varies.
Manulife Bank finds that Millennials homeowners are the demographic group that has the highest mortgage debt.
What is more alarming is that almost half of Millennials would struggle to make mortgage payments less than 3 months after losing their job due to their no-saving approach.
They don’t plan for cost increase, which makes them vulnerable.
The refusal to prepare for the future can only bring further debt issues.
How can Millennials pay off debt and live their desired lifestyle?
Are Millennials not making enough money?
First of all, it’s essential to understand where the debt issue comes from.
Millennials are touching higher wages than their parents.
Two-thirds of Millennials even have a greater household income than their parents’ income at the same age.
Nevertheless, many still need to borrow from their parents and rely on their financial support to buy their first home.
Millennials are making more money.
However, costs have increased dramatically since the last generation.
Housing prices in Toronto only have increased by 33% between 2016 and 2017, affecting the ability of even high-income Millennials to afford the first property.
Additionally, Millennials have crippling student loan debt to pay off, which their parents didn’t experience.
Along with their financial challenges, Millennials have a thirst for freedom, adventure, and travel.
The bottom line: Without budget management, they can’t regain control of their finances.
Learning to budget and save
While Millennials may not want to walk in their parents’ footsteps, their desired lifestyle requires just as much planning.
Travelling is an essential part of the lifestyle of young adults.
Unlike previous generations, young adults make travel a priority, making planning roughly five international trips every year, which is more than Gen X and Baby Boomers.
Their financial situation doesn’t make travel impossible.
But it requires dedicated budgeting to make it work without creating more debt.
With different approaches to saving, the most popular budget division is the 50/30/20 rule.
Indeed, the method creates a sustainable budget by dedicating a portion to essentials expenses, another to fulfilling desires, and finally, the remaining goes into your savings.
- 50% of the income for essential costs, including mortgage repayment.
- 30% for wants, such as travel.
- 20% for savings.
The budgeting strategy gives Millennials the option to achieve both their dream lifestyle and the possibility to reduce debt.
Paying off debt
The 50/30/20 rule is designed to enable people to maintain a balanced budget without depriving themselves.
But for a generation who makes travel a priority in life, it can be easy to spend more than 30% of the budget on their desired lifestyle.
The result of which could aggravate debts and create financial difficulties.
To make the 50/30/20 rule works while travelling, Millennials also need to plan accordingly and stick to a strict travel budget.
Curbing overspending is not as easy as it sounds when you travel abroad.
Indeed, many find it easier to stick to a budget in their known environment, where they have an in-depth knowledge of costs.
But in a foreign country, one can be tempted to adopt a more relaxed attitude.
Enthusiastic travel blogger, Megan Jerrard , has published tips on how to make the most of your travel without putting your finances at risk.
Megan recommends paying upfront as much as possible so that there is no surprise cost later.
Additionally, avoiding credit card payment is a smart move to keep your debt under control.
When it comes to cost-effective travel options, travel rewards, off-peak dates, and local eating are Megan’s top suggestions.
Additionally, the 50/30/20 rule enables individuals to save toward a financial goal, such as tackling debts.
Therefore, reducing student loan debts and saving ahead of potential income fluctuations need to belong to the Millennial financial strategy.
Making saving achievable for Millennials
Most Millennials don’t plan for retirement savings.
They aspire to a different lifestyle and reject the traditional routine.
However, while their dream lifestyle may be different, they still need to consider their finances.
Millennials are more likely to encounter debts because they make vacation their priority fund.
In reality, they need an emergency fund that can replace at least 6 months of living expenses.
This will help reduce unexpected debt.
When the income and the financial obligations don’t match, Millennials can find that the 50/30/20 rule isn’t sufficient to tackle the existing debt.
Our licensed insolvency trustees are there to help you address crippling, unsecured debts:
- Student loan debts.
- Credit card debts.
Trustees can provide new insight into your financial situation, such as advising on financial restructuring to make the debt more manageable.
Debt relief options are also available for those who can’t pay off their debt and sustain their lifestyle.
- The consumer proposal can reduce your debt by up to 80%, creating sufficient financial breathing room to make your lifestyle come true and eliminate your debt.
- A credit counselling debt management plan can help waive interest rates, which can be enough to pay off the debt and live your desired lifestyle.
- For Millennials who find their dream lifestyle unachievable and are overwhelmed by unmanageable debts, the trustee can recommend filing personal bankruptcy. The process will forgive all unsecured debt and give the individual a fresh financial start.
We believe that Millennials can pay off debt and live their desired lifestyle despite the increase in living costs.
Get in touch with a trustee at Bankruptcy Canada to find the quickest way out of debt.