As economic trends change, the average person that files for insolvency is also changing.
In the past, there has been an increase in the number of seniors filing for bankruptcy and many people with a lower household income were running into issues because they were too reliant on debt to make ends meet.
Recent information about people filing for bankruptcy shows that there is a growing issue with millennials & debt.
Young people are the fastest growing demographic for insolvency, and this is not just because they are ageing-in to brackets that have a higher rate of insolvency.
The figures show that more millennials are facing issues with debt than ever before.
So, what is the relationship between millennials & debt?
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Why Are Millennials Filing Insolvency At A Higher Rate?
Anybody that was born between 1981 and 1996 is considered a millennial, and you would be forgiven for thinking that the reason that millennials are filing insolvency at a higher rate because the age group is getting older, and so they are more likely to have debt issues.
However, it’s not quite as simple as that because millennials are filing insolvency at a higher rate and at a younger age than previous generations.
There are a number of risk factors that may explain the relationship between millennials & debt.
Over 30% of millennials have student debt, and most that file insolvency still owe around $14,000.
Tuition fees have increased and the number of people entering the job market has also grown, which means that the return on investment in education is a lot lower than it was in the past.
For many people, the return on investment is negative and it is only a select few that can find a job that pays well enough to comfortably make their student debt payments.
Using Credit Cards To Pay Living Expenses
Many millennials use credit cards to make ends meet.
This often happens because they build up debt while in education and that carries on as they begin their career.
Eventually, they become completely reliant on credit and they are unable to pay their minimum payments.
Increased Use Of Payday Loans
Payday loans are designed to trap people in a cycle of debt and many millennials rely on them once they can no longer increase the limits on their credit cards.
Younger people are more inclined to use payday loans than older people, and around half of millennial debtors that seek help from debt relief services have an outstanding payday loan.
One of the major reasons that there is such a big problem with millennials & debt is that they have insufficient income.
Once they are trapped in a cycle of debt, they find it difficult to get their finances in order again because they simply do not earn enough.
They begin their careers already burdened with student debt, and their low income increases their reliance on borrowing and makes it difficult for them to pay their debts.
Lack Of Assets
Unlike older demographics, many millennials do not have any assets to fall back on.
The average millennial doesn’t own their own home and even those that do own a home don’t have enough equity to refinance their debts.
All of these factors add up to create a crisis with millennials and debt.
If you are a millennial and you find yourself in a difficult financial position, get in touch today and we can discuss debt relief options with you.
You can reach us by phone or fill out an evaluation form and we will get back to you.