Tag Archives: student loans

Understanding Millennials Financial Stress

1/15 Understanding Millennials  

Hi George: We spoke for a minute after your radio show with Phil Johnson today and you asked me to email you.

I am a 23 year old full time university student and I am on a full ride scholarship. I also work a part-time job and am lucky that it pays well. I have lived with my girlfriend, who is also a full time university student that serves on her weekends and volunteers once a week at KGH, in a modest apartment in downtown Kelowna. I am a millennial and I understand a lot of the frustration pertaining to the “zombies” of my generation.

I guess the issue I have is that I, like many other people my age, can only tread water and hope not to drown in financial debt. There is no way you can go to school today without access to a computer and internet. On top of paying for schooling, you have rent, utilities, food, insurance, gas, cellphone bills (another necessity in today’s world – and not the millennial’s fault) and so on.

If you do the math; a full time student spends 15 hours in class and is recommended to spend an additional 3 hours studying outside of the classroom which adds up to 45 hours/week of studying time. In addition, to keep a roof over your head, your belly full, and your vehicle that is required to transport you throughout your erratic schedule, you will have to work at least a 40 hours/week at minimum wage.

It is also recommended the average person gets 8 hours of sleep per day, or 56 hours/week. So we are now at 141 hours of our week dedicated solely to studying, working and sleeping while we only have 27 hours left to kill.

Hopefully you can fit all your driving, grocery shopping, cooking, eating, exercising, banking, personal hygiene, volunteer work, and maybe, just maybe, you will have the time to put your feet up and prey you don’t have any emergency expenditures. 

Now I cannot speak for all millennial’s, but the fact that I am on a full ride scholarship and still contemplating taking out a student loan frustrates me, and when I hear people on the radio commenting on how spoiled and lazy all of us millennial’s are, it frustrates me even more.

If you have any financial advice I would appreciate hearing it, and again, I apologize for the breadth of this email, but I thought you may be intrigued by a 23 year old’s perspective on why the majority of us millennial’s are broke.

A BIG thanks for your note. It’s so well written and thought out AND accurate! Sure wish I could magically insert your email into my book today!

You’re right that millennials get labeled. It’s mostly off US surveys of various degrees of quality and accuracy. In the next year or two, “you” will outnumber baby boomers so the world, including myself, really ought to be a little more careful in the generalizations. Thank you thank you! For every stereotypical millennial there are vast numbers of superstars and future leaders such as you.

Not sure when you’re done or if you read the Money Tools chapter If you’re about 25 or younger, but DO start thinking about the critical year after grad as outlined in there.

Nope, you can’t save right now. Reality sucks but it’s about financially treading water – of surviving and not thriving. And that’s you with a full scholarship, never mind the 90% or so that don’t have that “luxury.”

Do NOT let the need for some student loans depress  you! I know there’s really no such thing as “good” debt, but there is “better” debt on the proviso it’s not around for a decade. Everything in life is a trade-off and you’re not looking to use it for a three week Europe holiday. Just knowing that you hate doing it makes you more financially responsible than the vast majority of the world. Better sleep, less stress, a small cushion “in case” is worth using some student loan money!

The BIG goal, even if it’s funded with student loan money, as reasoned above, is to have a month of expenses in a savings account for any emergency. It’s fine if that’s half your savings, half your girlfriend’s for the time being. It’s worth the reduced stress and just knowing the next “emergency” will then be more of an inconvenience…

George Boelcke – Money Tools & Rules book – yourmoneybook.com

The Huge Payday of Today Savings

Trying to save money for the long-term when you’re in your 20s is kind of like the challenge with climate change. We know we need to, or should, do something, but we’re not really willing to pay a price to do it. Why? Because the payoff is so incredibly far down the road, and most people don’t want to make many today sacrifices in order to achieve it.

Yes, there’s a price to pay to set aside savings. It’s the stuff you’ll need to give up right now in order to have the investments way down the road. And that’s a value judgment where the long-term typically loses out to the “today” spending.

That’s the reason it almost has to be savings that come directly out of your bank account automatically. You can’t spend it if you don’t have it. My biggest financial regret is definitely not saving a few bucks every payday into an S&P ETF (electronically traded funds) index fund. Set it and forget it, because it’s a basket of the top 500 companies where you now own a tiny piece of each of them. That’s great diversification and it’ll take you less than 30 seconds to search that the S&P historical returns over the past 50 years are over 10%.

One more way to save, or likely to pay off about half your student loans in a year is also in the Money Tools book chapter called: Broke is the new rich.

If you’re graduating from university, you’ve had two or four years of living on mac and cheese. Now going into the work force with a paycheque, you have an incredible pent up demand for spending and buying stuff that you really couldn’t and didn’t for all those years.

However, if you just live like a poor student for one more year, you’re not really make any lifestyle adjustments. You’re just living on very little money for one more year. If you can do that, you’ll be able to pay off a ton of your student loans in the coming year. Only one problem: Stay on your tiny student spending plan. Once you have a credit card, bought a vehicle, stepped up for some nicer furniture, or moved to a nicer place, it’s next to impossible to give all that up again.

Maybe two or three people in your entire grad class will do what we talked about the last four weeks. I hope you’re in touch with one of them for the next couple of decades as you watch them become incredibly successful financially…

Love This: Young Millennials Don’t Use Credit Cards

Well, finally some good news…sort of. This is based on U.S. stats, but let’s hope some of it applies here in Canada.

Credit card issuers are very stressed out: Millennials, those around 18 to 35 really don’t want, and don’t use credit cards. Only one in three even have them, they use the sparingly, and don’t carry much of a credit card balance.

Since they’re over 65 million people, it’s going to impact the future profits of card issuers. But why such a drastic change from their parents? It’s actually easy to explain. The U.S. had a massive financial meltdown from 2008 to at least 2010. So the vast majority of millenials would have lived at home at that time. They saw a parent, or relatives lose their job. Millions were home when the sheriff knocked on the door with a foreclosure notice, or had to move when their parents turned in the keys. They saw entire neighbourhoods wiped out, vehicles get repossessed, and felt the tension, fights, and stress at home.

Just like the students from Stoneman Douglas school in Florida will never be the same again when it comes to their view on guns. For a generation that’s labeled as having literally an 8 second attention span, their focus on gun regulations will last a lot longer. In that same way, the kids who saw the financial meltdown first hand will remember that for a lifetime.

Sadly, we don’t learn the horrific lessons of others. These things generally have to hit us personally, before we take notice. That’s generally the most frustrating thing for parents to realize when teaching their kids, even giving their adult kids feedback and advice. People don’t move until they’ve been moved. But when we’ve had that near-death financial experience, we generally get really smart, really soon, and it tends to last.

That’s the big picture, and the positive. On the reality side, 41% of them are buried in student loan debt and their income isn’t close to what their parents made. However, card issuers don’t really have to worry: Sadly, after age 30, credit card balances, even for millennials double, according to FICO, the company that creates credit scores.

It’s Grad Season and Lots of Businesses Want to Meet You

Your 17 to 21-year old has banks, car dealers and especially credit card companies salivating to meet them.

Those companies will do whatever it takes to get their business. Banks, and especially credit card companies, have THE best marketing minds in the country and want your teenager in debt to them – really soon and really deep.

We have a huge emotional attachment to our first credit card. It’s the reason they’ll do whatever it takes to be front and centre in your teenager’s wallet. Once they’re first, they own you and the memories and loyalties are way bigger than a teenager’s first boyfriend or girlfriend – and last a lot longer. On average, we keep our first credit card for over 15 years. It doesn’t matter the rate hasn’t been competitive for years, that the perks are junk or the fees they add on.

It’s not even important that they’re students and don’t have much of an income. For this group, the default rates are below average because, in most cases, parents will step in and pay the balance, or at least make the payments.

Why you? Because they can’t market much to your parents. Adults already have all the credit cards they need or want. So they can’t grow their business unless they get to you. It’s millions of fresh customers and bonus: You don’t know squat about credit and the dangers of credit cards, but you do love to impulse buy.

The same applies to banks wanting to get you hooked on an overdraft or line of credit once you have some income. That overdraft will be there for decades and it’s not like you know how to shop around for the best loan deal or rate.

Car dealers also can’t wait to meet you. How many cars are you going to buy in a lifetime? Three? Four? Five, maybe? Well, the average salesman sells maybe a hundred each year. So who do you think knows stuff and totally has the upper hand? It’s like bringing a plastic knife to a gun fight – you’re gonna lose, even if you bring one of your parents or a buddy.

So you’re all set. You’ve got your student loan payments for two decades, you got the credit card, an overdraft and that car payment. Grade five math says that most of your income is now going to pay all that. So someone telling you save some money is just a pipedream.

College and University Grads: Hold Off Spending For One More Year

Student loan debt in Canada is over $14 billion. It grows at over $1.2 million a day and adds 360,000 students a year, and tons of that $14 billion is saddled on people who are graduating this year.

College and University students should be well familiar with the phrases ‘short term pain for long term gain,’ and the concept of delayed gratification.

That’s because they usually don’t have much of a life, and certainly not a lot of money. They were just smart enough to get a degree and live like a poor student, for the benefit of a better income, with more education, down the road.

The downside is that some of the most broke people are those aged 25-35. That delayed gratification all ends, for most of them, with their first paycheque after graduation.

Usually, however, that poor student life tends to end immediately when they start getting a paycheque and spend like crazy – because they now have some actual disposable income. In fact, THE most broke grads, for the next decade, are lawyers, doctors, and pharmacists. Their income is generally significantly above average and they spend way beyond that.

But delay the big spending spree of the cool plasma TV, the new car, a ton of clothes, and the good furniture for a year. If you can live like a poor student, and keep that mindset for one more year, you’d be amazed what happens.

If you spend like you did in school for one more year after graduation, you’ll clear up at least half of your student loans. If you didn’t have any, you’ll have a savings fund of $10,000 to $15,000 in just one year. For anyone with student loans, they’re not something you really want to have around for the next two decades. It’s pretty depressing to have to send that payment each month, year after year after year. Get on with it and get it over with. 10-year old pizza isn’t very attractive. Neither is a 10-year old debt.

It’s a life-changing decision you can only make once: Take on rent, car payments, a bigger credit card balance, the usual work-related expenses, AND the hangover of the student loans, or press the spending pause button for a year. If you choose the former, ask some grads from the last few years what financial stress is like. If they’re honest with you, it’s not a place you want to be for the next decade or longer. But it’s always a choice.

Ease yourself into the world of big-time spending. It’s not your job to turn the economy around in the next few months. If you delay that need to spend like crazy for another year, it’ll be so worth it. If you don’t, I guarantee that years from now, you’ll tell your kids to do exactly what I’m suggesting to you right now.

Back to School Does Not Mean Suspending Financial Reality

Back to school is a $50 billion industry this time of the year. But, by all accounts, it was a bust, in spite of some really great Staples commercials. And retailers are pretty freaked out as back to school is their best indicator of the Christmas season.

For one group of students, back to school didn’t end two weeks ago, and that’s University and College students. First, I know a bunch of students are still shopping for textbooks, and will again, for the next term. Here are nine great sites for comparison shopping on line. But first, start with your professor and ask if you can purchase a prior edition, which you’ll find used, if you try:

Cheapestbookprice.com Allbookstores.com Abebooks.com A1books.com Bookfinder.com Valorebooks.com Biblio.com and Textbook411.com.

There are also a number of U.K. sites for used science textbooks priced so cheap you’ll still be ahead, even after shipping. Finally, if you’re game to rent your textbooks, there is a new site that has saved students over $41 million as of July this year. It’s at chegg.com

While this may be your first few weeks of school, or the final year, do remember that the average student graduates with a degree, but also about $4,00 in credit card debt, and more than $20,000 of student loan debt. THAT will assure being broke for a lot of years to come, even after you start to earn a paycheque. And let’s be honest, it’s not the textbooks or course fees. More often than not, it’s the pizza and beer, the need to own a car, clothes shopping, or trips to the mall. But ask yourself some of these questions. And these questions aren’t just for students, but probably the rest of us that are broke or living paycheque to paycheque:

• Are you mature enough to delay pleasure?
• Are you prepared to be a winner with money?
• How long after graduation do you want to be broke?
• Are you prepared to say the four hardest words out loud: I can’t afford it?
• Do you believe that getting that free T shirt to sign up for a credit card is a better deal for you or the credit card company who now has you trapped and helping with that going broke project they have in mind for you?
• Exactly how do your marks go up when you think you need a plasma TV, or a 23 inch flat screen monitor?
• Are you prepared to live like a student for a few years, so later in life you can live like 95% of the world can’t afford to?
• If you need a car, is this an actual need, or a desire? If it’s legit, are you prepared to drive a “stay out of debt” student car for $2,000 max?

The great news is that you’re an adult now. So choose to act like it, financially. You’re smart enough to go to University! You ought to be smart enough to know that credit and getting into debt is not your friend.

Do you even believe that student loans count as debt? If not, you’re like most students. But you’re also kidding yourself, and will be financially doomed for at least a decade after graduation. No, you won’t think about that today. But you’ll remember my words in about five years or so, I assure you. 70% of the population lives paycheque to paycheque. This year, and for a few more years, you’ll be in a temporary state of broke. That’s part of being a student! Just don’t join the 70% of the world AFTER graduation when every dollar you finally earn goes to rent, food, student loans, and the hangover of credit card debt for stuff from years ago that you can’t even remember charging.

And one more thing for parents:

If you have a son or daughter across the province, or the country, who needs access to some money in a hurry, what do you do? Paypal has just developed a student account.
One of their VPs has six kids and got stuck trying to figure out how to send one of them some money.

The cost is 2%, so when you’re sending $100, $98 shows up at the other end. It’s in Beta testing, but you can get it right now if you already have a PayPal account. If not, you may have to wait. It’s great to have competition from PayPal. Right now, the banks and Western Union have a virtual choke hold on this area, and charge a lot of fees.

Another way is to set up a bank account where you and your son or daughter has a debit card. It can be your son or daughter’s account, but with your card and secret PIN number you can make a deposit into the account and they can access it at the other end.

Just make sure the account is set up without holds on the money, or they’ll be waiting two to six days to get access to it! What’s NOT a solution is to give you kid a supplemental credit card linked to your card. It’s too risky and too tempting. Don’t do it!