By and large, humans
are drowning in debt.
Tagged as the new form of slavery, an unbreakable hex, and several other terms,
the level of debt has risen and so have the metaphors. Economist Paul Mills
outlines the effects of our high levels of public, corporate and private debt,
exploring the idea that debt is a form of slavery with consequences that far
outstrip its advantages of bringing forward future spending power.
Developed and developing countries often find themselves on opposite extremes.
They’re marked by several differences, but one factor that brings both
spectrums together is debt. Economic conditions suggested that borrowing money
was a reasonable course of action in the 1970s, particularly for poor
countries, which perceived few, if any, alternative ways to address the
economic plight of their citizens. The fact that these deprivations exist
alongside great wealth is shocking, but they pale when compared to the scale of
global poverty.
Pinned as the generation “screwed” by the current economic climate,
Millennials are slowly turning the tide when it comes to their financial
health, with more student loans than ever before. More than half of millennials
are carrying credit card balances month-to-month, and with comparatively lower
wages than previous generations, trends like delaying marriage or home-buying
seem to make sense. Last year, according to Northwestern Mutual’s 2018 Planning & Progress Study, the average millennial (ages 18 to 34) had
about $36,000 in personal debt, excluding home mortgages. This shows that debt
can feel both crushing — and endless.
Just over 60 percent of millennials with debt don’t know when, or if, they’ll
ever be able to pay off what they owe.
Adults owe an average of $5,178. The old rhetoric around debt was binary and
overly simplistic (there is good debt and bad debt — the former is necessary,
the latter a result of your lack of willpower or wisdom) but debt is generally
frowned upon by financial advisors
like Brice Capital because it does the opposite of what you want your
accounts to do: cost rather than earn. Millennials seem to be entering their
adult lives thinking that because they already owe so much, getting into more
debt won’t matter.
The obvious issue here is that for most people, debt is necessary for a basic quality of life. Things like financing a car or getting an education aren’t typically paid for out-of-pocket by the average family. It’s a privileged notion to assume that living without any debt – ever – is feasible for the majority of people.
Very few people are able to look into their future and see financial freedom. So many people today graduate from college with extensive student loans and consumer debts on top of that. They struggle to find a job and, sometimes, they never find the job they want. One day–often in a person’s mid- to late twenties–they wake up and take an assessment of their life and all they see is crippling debt.
Are you working just to pay bills?
So, what’s the most effective way of taking control and eliminating debt? According to the Harvard Business Review, researchers may have found the answer — and it isn’t necessarily what you’d think.
What repayment strategy is most likely to motivate them to get them out of debt? Should they disperse payments equally across all accounts each month or concentrate payment on one account? Research suggests that people are more motivated to get out of debt not only by concentrating on one account but also by beginning with the smallest.
Strictly looking at the numbers, it’s smartest to pay down the accounts that carry the highest interest rates first. That way, you’re staving off as much interest as possible and don’t end up owing even more. While it typically goes against the advice of financial advisors, who will cringe as they see the lost dollars in interest piling up, new research highlighted by the Harvard Business Review supports this strategy for paying off debt as being the method most psychologically beneficial.
However, what makes sense mathematically on paper doesn’t always work best in real life. Paying down debt is as much about motivation as it is about money, and most people fall into a different camp of debt repayment: Prioritizing accounts with smaller balances, rather than those with higher interest rates, according to research from the University of Michigan. Financial institutions like Brice Capital support this notion, offering various debt management plans that ensure consumers take control of their finances, pay off their various debts, and learn to live a life free of debt.
Understanding Control and Financial Emancipation.
This is especially important for young graduates and those entering the work environment. This won’t be easy, nor will it happen overnight, but it all starts with a financial attitude adjustment. We need to stop abusing credit cards and personal loan facilities by adopting a financial attitude adjustment before we dig our debt graves deeper. The price of being blacklisted or under debt review is too high. Start nurturing the relationship you have with your money today.
Over the years, several financial organizations like Brice Capital have sprouted up, creating various debt settlement and emancipation solutions for individuals. These organizations are helping individuals manage their finances before running into debt.
Be consistent and patient.
Make sacrifices by not purchasing the items you want today on credit but delaying them until you’re financially capable to afford them. This will save you from paying high-interest rates. Start budgeting and planning. Look at your unnecessary expenses and cut them. Ensure that your income is always greater than your expenses. Take control.
Hone your ability to understand how money works in the world. Garner the knowledge, skills, and confidence needed to make responsible financial decisions that suit your financial situation or consult with financial analysts from organizations like Brice Capital on the different methods you can adopt in overcoming debt.
Create a practical budget.
Once you understand your spending patterns and, more importantly, your spending issues, you can come up with a budget. Most likely, if your credit card use has resulted in a mountain of debt, a lack of a working budget is part of the problem. Luckily, this problem is also easy to fix with the right level of determination. A budget, in its basic form, is a plan for how you’ll spend your money each month. To make one, just add up all of your expenses and subtract that amount from your income. Once you have a clearer picture of your total expenses and what spending areas you can cut down on, you can come up with a realistic number for what you can put towards paying off debt each month.
New money to settle old debts
Seeking out alternative methods of making money can also speed up the debt payment process. Alternative methods include taking side jobs on the internet or working overtime in order to raise more money. Investments are a long-haul plan, but they also pull in profits that can go to staving debts.
At the end of the day, steadily paying off any debt is better than doing nothing, so find what works for you and do that.
It seems that the shift occurring is as mental as it is cultural: people are no longer as interested in seeming like they “have it all” if it’s going to cost them their mental stability.