Young people have an average debt ratio of nearly 70%, compared to 11% among those aged 60 to 64, according to the report published by Citizens Advice. There are plenty of reasons why this might happen. This article is going to look at the top five reasons for this.
Millennials in the United Kingdom have lower incomes than previous generations when they were their age. Usually, there was a trend that each generation enjoyed a higher living standard than the one before. However, for those born between 1981 and 2000, this trend has declined.
This means people in their thirties have lower household incomes for the first time than those born in the past decade.
There is plenty of evidence that many people’s finances in the UK are out of order, especially those under the age of 40.
The cost of owning small luxury goods, which used to be a staple of the middle-class, has risen rapidly, while earnings have not been able to keep up.
Debt is rising, homeownership is falling, the cost of mortgage and rent is high, and despite an increase in payments, the pension crisis is not yet fully resolved. The result is that Millennials spend far more on housing than their grandparents had to – usually, they spend one-third of their income on rent or about 12% on mortgages.
Consumerism is a phenomenon that can be seen in the UK society quite often. Especially on Black Friday a lot of people go shopping even though they might not need the products they buy. Impulsive buying is very likely among Millennials – especially the age group between 18-24 says that 61% of them have already bought something that was on sale although they didn’t need it.
Unfortunately, consumerism is often promoted by retailers, banks (with low-interest rates for savings) and even politicians (because consumerism drives economic growth).
An increasing trend among Millennials is the use of credit cards. They are very likely to pay for everyday goods and services, including entertainment, grocery stores and clothing, and make online credit card purchases. This can lead to financial problems if credit is used that cannot be covered by their income.
Unlike other demographics, an average millennial doesn’t have a house to their name. And if they do, it’s not enough equity to refinance their debts. And millennials who own businesses without public liability insurance, they can lose the company very easily if an unfortunate incident happens.
Thus, Millennials usually don’t have assets and are more likely to file for bankruptcy quickly.
Any bankruptcy is a tragedy, but if you’re just starting your life, it’s especially bad.
Apart from the actual upfront costs of the bankruptcy itself, it overshadows your finances for several years, even though the bankruptcy only lasts a year.
So, make an effort to live within your means, save for the rainy day and endeavour to pay your bills on time.