When it comes to home buying, millennials in particular are facing a number of challenges. By and large, most millennials believe that owning a home is a good investment but large student debt loads are wreaking havoc on the ability to accumulate a down payment and/or build up the necessary credit history to buy a house.
- A recent study for the National Realtors Association found that 80 per cent of millennials blame student debt for not being able to save up for a housing down payment.
- BDO Canada says that on average a student in Canada is graduating with $28,000 in debt, which climbs up to $100,000 if you pursue a speciality.
- A survey from Real Estate group Zillow found that 65 per cent of millennials identified home-ownership as the best (or most important way) to accumulate wealth.
- A survey from Bankrate.com said that 2 out of 3 millennials don’t have a credit card because of large student debt loads, even though they know the importance of building a good credit history over the long term.
“While student debt is classified as ‘good debt’ because it is an investment that will in theory help you increase your earning power, the amount of debt you take out today is going to impact your ability to achieve your goals in the future,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
Act today to achieve goals tomorrow
“Home-ownership is a great long-term goal that can help you accumulate wealth, but it can take years to get there. You need a down payment, job security and a good credit history. You’ve got to remember that none of your financial goals work in isolation. What you do today in terms of saving and how you utilize credit will figure directly into your ability to achieve your financial goals in the future,” says Schwartz.
Here are some tips to help you manage your finances and achieve your financial goals in the long term:
Don’t let student debt stand in the way of your long term financial goals. The best way to avoid a student debt problem? Minimize the amount you need to take out in the first place.
Education is expensive, and student debt is a bit of a necessary evil for many people. However, you can reduce the amount that you need proactively. Get a job year-round to help pay for expenses or delay your education for a year and amass savings.
Use this as a credit opportunity
Many students make the mistake of using credit as “free money” when they are in school to make ends meet.
Instead of having that point of view, treat the availability of credit as an opportunity to establish your credit over the long term with a solid repayment history. Not only do you need a good credit history to buy a house, it will help you be able to secure a lower interest rate from your bank.
Use your card for small purchases and pay the balance every month.
Not only is this a chance to practice good credit use as it support your long term goals, it also give you a chance to use good budgeting practices, right from the get go.
Set a monthly budget that will permit savings, so that you can start on saving for your down payment. Every little bit counts.
Does student debt have you stuck? Are you unable to gain any traction towards achieving your other financial goals, like being debt-free or home-ownership? It’s time to take action today, so that you can achieve your goals for tomorrow. Contact one of our trained credit counsellors at 1-888-294-3130 or visit our free online debt analysis.