In the internet age, it’s possible to find information on personal finance quickly and efficiently. But, while there’s a lot of information out there, not all of it is reliable. Millennials are the main demographic who are trying to learn through apps and the internet to get advice on debt consolidation, strategies to grow wealth, wealth management, and other aspects of finance.
On top of this, millennials also face the most significant debt crisis out of all past generations. This article aims to provide accurate and easy-to-understand information so millennials can find viable solutions for the debt – that work. Keep reading for more.
Millennials may be defined as anyone born between 1981-1996. The biggest financial difficulty millennials have is mounting debt. This age group has the highest debt to income ratio (after-tax) compared to Gen Xers and baby boomers. As a prevalent problem, it is no surprise that millennials are looking for ways to consolidate and alleviate debt. You can play around with your budgeting to see if there’s wiggle room to put a little extra away by making lifestyle changes. Use a debt calculator to try different payment amounts to understand how things would work out.
Come Up With a Plan
The best way to move forward is to strategize on how to deal with the past. Don’t expect to throw money at your debt and see it magically disappear. You need to deep dive into how much money you owe, which lines of credit to prioritize, what your timeline looks like and many other factors. Here are a few strategies to deal with debt:
- Debt Snowball: Make all your minimum payments except that which has the smallest amount. Roll the pending amount into paying the next debt and keep doing that. You’ll see quick progress with this method.
- Debt avalanche: Pay all the minimums on your debts except the one with the highest interest rate. Pay this one off first. When it’s paid off, roll those payments into the debt with the next highest interest. Keep going, as this is a cheap way of paying off credit.
- Emotional debt: Prioritize paying off the debt that brings you the most mental distress. Whether that’s an old student loan or a loan with overly complicated terms, prioritize reducing your anxiety about your debt by first paying off the ‘scariest’ one.
In addition, the more you understand your interest rates and how much you need to put away every month consistently, the more likely you are to make a dent in your debt mountain.
A consumer proposal is an excellent option for those owing $250,000 or less. This debt consolidation method involves making a deal with your creditors – that they will then decide to accept or not. You’ll need a licensed insolvency trustee to guide you through the process and put together an offer. The offer could be to pay off a percentage of what is owed or to extend the time by which to pay off the debts (or both).
The proposal should ideally work for both you and your creditors. They have the option to accept or decline the offer, but the trustee will usually work to ensure it is an acceptable offer. If the proposal is accepted, you will need to make the payment as a lump sum or through previously defined periodic payments. You’ll need to adhere to other rules in the contract and attend two financial counselling sessions.
This solution is for those who need extra help with financial strategizing and follow through. A non-profit credit counsellor will look at your debt and economic history and quickly prepare a repayment plan for you. This repayment plan, called the debt management plan, will allow you to pay back your debt over three to five years. Remember, this is not a form of debt cancellation or reduction. You will still need to pay off all your debt. But the relief from the interest charges can be an excellent solution for millennials drowning in debt.
This is the last resort option when you’re trying to deal with debt. Filing for bankruptcy is a legal process where a licenced insolvency trustee completes required paperwork with you and notifies the government and the creditors. This process is used to provide relief from debt and will include following a set of duties. It can involve turning over most assets other than clothing, furniture, vehicles, most RRSP’s, etc., to the trustee. The value derived from the assets is distributed amongst the creditors but you can often purchase the items back from the trustee if you can afford it. After filing, you will be out of bankruptcy between nine and 21 months (for the first filing) if you complete the required duties. This is a viable option for those who don’t currently see any way out of their debt.
Are you finding high-interest debt catching up with you? You’re not alone. Debt is a common millennial problem, but with the right tools and strategies, you’ll be on your way to being debt-free. One of the best ways to tackle mounting debt is through what is called a consumer proposal. Turning your payments into one manageable monthly payment will go a long way towards easing your finances (and stress levels)!
When it comes to debt consolidation strategies, Kevin Thatcher & Associates know how to help. Our team of friendly and expert experts will help you see the light at the end of the debt tunnel.
To learn more about debt consolidation services, call Kevin Thatcher & Associates at 1-888-702-9801 or contact us here.