Currently, Millennials are feeling the stress and increasing pressure of debt and it’s impacting many areas of their lives. The AICPA released an article called “How to Take the Stress Out of Debt” in which they talk about the mental burden debt brings on top of the financial burden. They reported that nearly 75% of Millennials have debt and 43% have anxiety from their debt. This affects their sleep, work, and relationships in negative ways. But what can you do to help with this debt stress?
The simple and truthful answer is to get out of debt.
Yes, easier said than done, but even getting into less debt can greatly decrease your stress. Show progress in paying off debt, and you’ll see the anxiety melt away as well. There are some keys to this process though…
Recognize and Organize
People in debt often feel overwhelmed by the end number on their loan, mortgage, and credit card statement. The kneejerk reaction is often to pay the minimum, avoid thinking about it too much, and assume you’ll pay it off later after marriage, a new job comes, or you pay off a different loan. The problem with this is how you may not accurately be seeing where your money is going.
Breaking down the end number into all the smaller numbers that make it up is a great first start. You may be paying fees on some accounts you don’t use because you don’t keep enough money in them (shut those accounts down!). You may have two credit cards, and one may have a lower interest rate, so you should pay the other off first. And speaking of those credit cards! You need to see what monthly recurring bills you are paying. Sure, Netflix, Spotify, Hulu, and Amazon prime all seem like essentials, and their monthly cost is affordable, but when you add up their combined monthly cost and multiply it by 12 to get the yearly cost it can be staggering. Also, check to see if you are grandfathered into a cell phone plan in which the price has dropped over the years. A co-worker recently told us their cell phone bill that was $110/month got reduced to $70/month just by them asking if the plan was still the same… They got the same service for $40/month less ($480/year!) just by asking! There are many parallels to this that could save you hundreds if not thousands.
You Might Have Gotten In Debt on Accident, but You Won’t Get Out that Way
Once you break the numbers down, you’re going to have to realize that the way you got into this is not going to be how you get out of it. So many people feel like they woke up one day to $5,000 on their credit card which they don’t have the money to pay off and expect to wake up another day having the money to pay it off. The thing is you didn’t all of a sudden have $5,000 in debt. You had $10, then $145. Two months later you had $1,786 of debt. Eventually you got to where you are, and eventually, you can work your way back. People often want to make one payment per month on their card, but making multiple payments per month, just like you made multiple purchases, can help you chip away at the debt. Even if you make large chunk payments, these smaller payments from unexpected income, bonuses, or even side jobs all get you closer towards your goal. One thing is for sure; it takes more intentional thought and decision making to get out of debt than it does to get in debt.
*Image from the AICPA “How to Take Stress Out of Debt” Article
Manage Your Discouragement
Students often feel incapable or insufficient while paying off student loans or debt acquired from credit cards because they see no near end in sight. Realistically, student loans are going to take a while to pay off. There are ways to expedite the process, such as not paying for the most expensive product when you can get one for a lower price that serves the same purpose or even refinancing a loan or mortgage. No matter how you do it, you must realize when you make progress. Even small payments after you land your first job (show me the Benjamin!… singular, you won’t be making a ton) are something to be proud of. You are making the right decisions, you are responsible, and you are in the same boat as a lot of other people your age. Debt is not something to be ashamed of or discouraged about, but something to be handled efficiently as to cause as little of a headache or roadblock in your life as possible.