An American survey from GoBankingRates.com showed that those belonging to Gen X (defined as people born between 1961 and 1981) are carrying far more credit card debt than their generational counterparts. Some highlights of the survey include:
- Seventy-three per cent of younger millennials (aged 18-24) have a zero balance on their credit card
- Forty per cent of millennials aged 25-34 are carrying a credit card balance, with the median balance at $2,000
- Forty-six per cent of young Gen Xers (aged 35-44) carry a credit card balance, with the median amount owed at $4,000.This makes them the most debt burdened generation
- As Gen Xers age (age 45-54), their median balance dips back down to $2,000, in line with millennials
“It’s not surprising to see that the Gen X demographic group is the most laden with credit card debt. It is during these years (35-54) and life stage that your expenses inevitably climb. With mortgage payments, child care costs and potential costs for caring for aging parents all happening at once, it can be hard to balance the budget,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“The pitfalls of debt become more apparent if you have to turn to credit on a regular basis to cover your expenses,” says Schwartz.
Here are some tips on how to reduce your reliance on credit as you move through the different stages of your life.
If you are a Millennial
The very best way to avoid having a debt problem? Don’t accumulate it in the first place. Use credit only as a tool in your financial plan to help build a good credit history, for instance, by making small purchases and paying them off in full every month. Credit isn’t free money.
Reduce the student debt that you accumulate when you are young and in school. The less debt you have, the more money you can put aside as you start your career to help you avoid taking on debt as you approach life’s milestones, like buying a house or starting a family.
For the Gen Xers dealing with debt
Does it seem like there is a never ending series of expenses that swallow up your income the minute that it hits your account? It’s not surprising when you consider the cost of housing, child care, groceries (especially when you are feeding a growing family) and so on.
Carrying a balance on your credit card or line of credit may seem like a means to an end, but all that will do is load up on interest charges. There are other ways to get your paycheque to go further that will let you leave your credit card in your wallet.
You’ve got to track each dollar as it comes into your account and goes out again. That’s the only way that you can account for your spending and identify areas in which to cut back.
During these high spending years, your focus on spending may have to change to keep you out of debt, like having date night at home, brown bagging your lunch to work and going for a run in the park rather than having a gym membership. Most of your income may be earmarked for your mortgage and childcare expenses.
Keep your credit use down so that when you emerge from these “spending years”, you can use your cash flow to enjoy the things that you gave up, rather than servicing your debt.
Does your paycheque never go far enough to cover your expenses? Do you feel like your debt load just keeps climbing, despite your best intentions? Turn the cycle around today. Get in touch with one of our trained credit counsellors at 1-888-294-3130 or check out our debt analysis.