Millennials tend to avoid debt — other than student debt, of course. Some debt is OK, though; here’s what to know.
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With a climbing credit score, millennials aren’t quite the debt-saddled group of young people we think they are. While it’s true that millennials’ student debt is worse than any generation so far, millennials generally are getting better at understanding and tackling debt. From 2016 to the present, they’ve taken 8 percent off their total debt — they’ve also upped their mortgage debt by 6 percent. That second bit is actually a good sign, seeing as they’ve struggled with (and even put off) buying houses for a while now.

Dealing with debt

A recent Forbes article offers some explanations and even a bit of advice for worried millennials. Debt seems scary, but it’s actually unavoidable. Mortgages, for example, are a necessary part of home ownership (unless you’re obscenely wealthy and have hundreds of thousands in cash lying around). College debt is hard to avoid, too — tuition is more expensive now than ever before. So the problem isn’t being in debt. It’s having the resources and knowledge to get out of debt. You really can’t pay for cars, houses and tuition upfront, after all. Debt is a normal part of having a comfortable existence..

The article goes on to offer seven “baby steps,” adapted from Total Money Makeover, a book by Dave Ramsey. This is advice for paying off any debt; it’s been around since 2003 and continues to influence how people save and spend. Here are the condensed tips, taken verbatim from the article:

  1.  Save $1,000 in an emergency fund.
  2.  Pay off all debt using the snowball method (“any extra cash should go to the debt with the smallest balance”).
  3.  Save three to six months of living expenses.
  4.  Invest 15 percent of your household income into retirement.
  5.  Start saving for college.
  6.  Pay off your home early.
  7.  Build wealth and give generously.

What these mean

The emergency fund bit is self-explanatory, and the snowball method is explained via the link above. What might be tougher is saving those “three to six months of living expenses,” although millennials are known as a generation that saves money whenever possible (as long as Instagram isn’t getting us to spend it). Keeping this much in the bank is a smart idea, as you never know what could happen in the near future. The next step, investing into retirement, might be hard as well. You should consider contributing to an IRA or a 401(k) instead of just a simple savings account. Here’s some advice to get you started.

Saving for college can be done with a 529 plan. If you went to school and are already in debt, use the aforementioned snowball method and continue to budget carefully. Paying off your home is smart, as long as you can budget for a mortgage. If you can’t, you may be stuck renting with the rest of the millennial generation. The last bit of advice, building wealth and giving, is fairly general. You can build wealth through investment, whether in the stock market or through buying a home. Millennials aren’t fond of the stock market, however, preferring to invest through other means.


No one likes to be in debt. Millennials are debt-averse and risk-averse, with most chalking up these characteristics to the recession they experienced last decade. However, due to the inevitability of debt, it’s important to understand how to deal with it. Hopefully, the tips recounted above will give you a little shove toward smart debt repayment and money management.   

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Posted 02.26.2018 - 10:00 am EDT