Debt by Generation: Who is Worse Off?

Consumer debt hit a fresh record high to start 2020, even as credit card balances declined while Americans adjusted to the Coronavirus pandemic.

Household debt balances through March totaled $14.3 trillion, a 1.1% increase from the previous quarter and now $1.6 trillion clear of the previous nominal high of $12.7 trillion in the third quarter of 2008 during the financial crisis, according to New York Federal Reserve.

Here, TLC Loans breaks down debt by generation and what you can do to get your personal finances back on track.

Gen-Z (Ages 18-20): Average credit score 634

A generation of Americans who were entering adolescence when the financial crisis struck is showing little fear of debt.

This group is just establishing credit but is off to a good start. They have an average of just 1.44 credit cards per person, less than half the U.S. average, and a typical credit card balance of $2,047, less than a third of the national average. Yet they seem to be taking on more student loan debt than prior generations at their age as college tuition costs continue to ratchet higher.

Gen-Z’s openness to debt could impact its accumulation of wealth, leaving many worse off than previous generations. Millennials know this well. Last year, they had 2.9 per cent of the nation’s household wealth, Federal Reserve data show. Some 16 years earlier, similarly aged Americans — those roughly between the ages of 23 and 38 — had nearly double that share…

Millennials (Ages 21-34): Average credit score 638

Millennials are facing an ongoing affordability crisis. Numerous factors are to blame, including student-loan debt, the lingering impact of the Great Recession, and increased living costs. Those who took on student-loan debt have faced what one researcher called a “millennial Catch-22”: You need a college degree to get a good job, but degrees are so expensive that you’ll likely go into debt, which will set you behind in other ways.

Many graduated from college during or shortly after the Great Recession, which ended in 2009. That forced many to take lower-paying jobs, setting back their careers. But they’re digging out. Their average credit score climbed four points from 2016 — the most of any generation — to 638 and they shaved their overall average debt by 8% to $222,000.

Gen-X (Ages 35-49): Average credit score: 658

Generation-X lead the way with the most debt.

On average, Gen Xers have racked up $36,000 in personal debt, excluding home mortgages, according to Northwestern Mutual’s 2019 Planning & Progress Study. The findings are based on a survey conducted by The Harris Poll of over 2,000 U.S. adults.

Looking at the total debt that the average Gen-Xer is carrying, mortgages are the biggest percentage of the load, followed by credit card bills and education loans, according to the survey.

What’s more, they may be less likely than others to do something about the debt they’re acrrying: Just 16% of Gen Xers say that they included financial planning in their new year goals, according to a recent survey from Allianz Life. That’s compared with 27% of millennials.

Baby Boomers (Ages 50-70): Average credit score: 703

Baby boomers are regarded as hard-working individuals who value relationships and positivity above all else. There are 73.4 million baby boomers in the U.S. that are close to or already in their retirement years.

The housing bubble burst in the late 2000s took a major hit on baby boomers. Prior to that, Boomers were already facing issues with lack of savings and high amounts of debt. Being unprepared for retirement and having a lack of funds to pay off debts forced many in this generation to continue working. They continue in hopes of paying down debt and building up whatever they can for their retirement.

Silent Generation (Ages 70+): Average credit score: 729

There are many among the so-called silent generation, those born before World War II, who are still paying off mortgages and credit cards. Their average mortgage debt is surprisingly high for their age at $156,705 but other debts are low, as is their late payment frequency of just 0.12%. Their average credit score of 729 is the highest.

Silent generation people, 90 percent of whom are retired, are carrying debt later into life. So over half of them still have debt.

Getting Out of Debt

As you can see, every generation is facing debt challenges, accelerated by the current COVID-19 pandemic. So what can you do to alleviate some of this financial burden? Fortunately, some strategies exist that can make paying off debt faster — and a whole lot less painful. If you’re ready to get out of debt, consider these tried-and-true methods:

1. Pay more than the minimum payment.

One way to expedite debt reduction involves paying more than the minimum payment on your credit cards and loans each month. This strategy works well since every penny you pay over your minimum monthly payment goes directly toward the principal of your loan.

The more you can pay each month, the faster your debts will disappear. Just make sure your lenders don’t charge a prepayment penalty before you try this strategy.

2. Consolidate debt with a personal loan

If you have a lot of debt at a high interest rate, the best way to get out of debt is probably debt consolidation with a personal loan. This strategy involves applying for a personal loan with a lower fixed interest rate and paying off all your existing debts with the loan proceeds. From there, you can focus on repaying all your debt with a single personal loan that has a much lower APR.

Personal loans tend to work well for debt consolidation and debt repayment since they come with fixed interest rates, fixed monthly payments and fixed repayment periods. As a result, you’ll know exactly how much you’ll owe each month and exactly how long your debt will take to pay off.

3. Pick Up a Side-Hustle

If you’re tight on funds each month and can’t seem to earn enough money to pay extra toward your debt, it may be time to ramp up your earnings in whatever way you can. Babysitting, dog walking, cleaning, selling your old clothes; If you find a way to earn more money, make sure all the extra cash you bring home is used to pay off your debts. If you wind up spending it, you won’t be any better off.

4. Ask for lower interest rates on your credit cards — and negotiate other bills.

If your credit card interest rates are so high it feels almost impossible to make headway on your balances, it’s worth calling your card issuer to negotiate. Believe it or not, asking for lower interest rates is actually quite commonplace. And if you have a solid history of paying your bills on time, there’s a good possibility of getting a lower interest rate.

Always remember, the worst anyone can say is no. And the less you pay for your fixed expenses, the more money you can throw at your debts.


Personal Loans from TLC

TLC Loans is a consumer installment lender offering a personal loan online in the states of Illinois, Missouri, South Carolina, Utah, and Wisconsin. We specialize in helping people seeking a personal loan who are turned away by traditional banks. Get a personal loan today from Total Loan Company, LLC because an installment loan is better than a payday loan.

TLC Loans is a highly rated lender and the TLC team has a long history of working in the consumer finance industry. Most of all we understand the challenges facing our customers and their families. We know there are times where you may need an installment loan to get you through a tough financial time. TLC is here to help!

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