By Matt McDevitt
As millennials, our perspective on debt has been greatly affected by the recent changes of society economically, politically and socially. We were young when the Great Recession of 2008 unfolded, an event characterized by poor financial decisions and irresponsibility in the banking system. We live in a time now where majority of people are carrying some sort of debt. This is largely due to the fact that you can finance just about anything. Society has been tricked into believing that it’s best to have what you want now and that it’s okay to just pay it back later over time. However, many of the people who follow that logic find themselves making payments on all the things they “own.”
I don’t see this as good practice in the slightest. Trust me, this is a problem. If it wasn’t a problem then books like Total Money Makeover and How to Get Out of Debt wouldn’t be best sellers for years on end. Millennials see this and recognize that something isn’t quite right about this whole debt thing.
A prevalent issue I see today among people is simply a misunderstanding of debt, what it means, how it affects you, and what to do with it. As a millennial, you grow up being led to believe that the only way to survive in this life is to go to college for a degree that you might not even know what to do with, accumulating tens of thousands of dollars of debt. I mean it sounds a bit nuts when you think about it. According to Ipsos Statistics, roughly half of college students have an idea of what they want to do after graduation. So that means the other 50% of college student are diving into thousands of dollars of debt without knowing where it will take them… Talk about risk tolerance.
Then when students graduate they are scrambling to find a job so that they can make their payments on their debt (or they’re just looking for debt-forgiveness). So the whole “prime-time” of life becomes about debt… But no worries, everyone is doing it right? Unfortunately yes. Now I am not saying to avoid college entirely. I am implying that one should take it seriously and view it as a major investment for their future.
Debt is becoming ingrained in our society and becoming as normal as death and taxes. Should it be though? The U.S.A. was not founded on the notion that “in order to be successful you have to borrow from someone else.” Rather, it was founded on the idea that you can create your own prosperity by the work of your own hands. However, times have changed indeed.
Now that debt is a normal thing today, its effects are becoming more noticeable in society. The student debt count is at around $1,200,000,000,000 ($1.2 trillion). That’s just student debt alone! I think it’s funny when economists wonder why economic reports have shown a steady decline in young entrepreneurs and small businesses. The answer is pretty obvious; most young people are a part of the $1.2 trillion dollar debt group! Who is going to take on the risk of starting a business when they’re thousands of dollars in the hole? …Not many. Just to think… the U.S. is around $19 Trillion in the hole.
I have to admit, I find debt troubling. Not just student debt but all debt. People have more debt now, within the past 60 years, than the entire world has had in the past 2,000 years! As a planet, we are in a very unique and interesting portion of history. The effects of our current state are yet to be shown in their full fruition. In 2008 crisis when the housing bubble popped, not many saw it coming. I will not be surprised if and when this student debt bubble pops. I am not trying to be pessimistic, but when a ton of people borrow a ton of money and can’t pay it back, bad things happen.
Independence and freedom is at the root of millennial motives so it is no surprise that most millennials hate the idea of being in debt to someone or something. As everyone knows, debt can be stressful. Many peoples’ lives are filled with anxiety about paying bills and simply not having enough money. (Check out Connor Grahams post on stress). Look around and just observe how debt has affected people in your lives. I am sure there are some good and bad stories, but I am pretty sure most will say that debt will way you down, steal half your paycheck, and usually cost you more in the long run.
So how do we approach this debt problem? How do we know when it is appropriate? How do we get rid of it?
First, you must understand; when you borrow from someone else, you are obligated and required to pay them back. Debt must be paid. If a debt does not have to be paid then it is not debt at all, it is a gift. Although it may be sad and disappointing to see your debt total, you must accept the fact that you borrowed it and must pay it back. Take responsibility for what you owe. You must change your attitude from depression to determination.
Second, know when debt is appropriate. If you cannot afford something, you should not buy it. It is critical to live within your means. Like I said before in other posts, the day of reckoning will come when you try to live a life you cannot afford. Humility is the road to prosperity. Some purchases like buying a house, or going to college (sometimes), are worth getting in debt for. However, it is critically important to be aware and in control of your debt with a prepared plan on how to deal with it.
Third, free yourself from debt. If you’re already in a hole, do your best to get out of it. You don’t want to live majority of your life as a slave to your debt. This may take living below your means for some time, but after you pay it all off, not only will you be freed from payments but you will also be freed from the financial pressure that once stressed you out.
Living life debt free should be a goal for everyone, but after you put out the fire of debt, be sure not to light it again! I encourage you to challenge the status quo on the topic of debt. As Cairn University would say “Walk a Different Path.”
Cheers & God Bless