Saturday 29 April 2023

Millennials & Gen Z: Young And In Debt. Why? | Thoughts and my position as a Millennial

Very good documentaries and programmes from CNA, covering local context which I think many can relate to. I also liked the food delivery episode that talked about delivery drivers, how the algorithm works and they are subjected to many things beyond their control.

A recent episode I saw was about Buy Now, Pay Later where they had a few individuals on the show to share their spending habits and how they are coping with the finances especially in the face of inflation right now.

When you have income coming in and get used to spending freely, you kinda take it for granted after awhile

From the first individual, she does have good meals and take ride-hailing services frequently. She does also feel that the ride-hailing services are taking up a huge portion of her spending and wants to cut it down but it is not as easy especially when she has got used to it.

She indulge herself with at least one good restaurant visit per week with her friends. Additionally, she is also renting her own place so expenses does add up with these spending that is being done. To add things worse, her dog fell sick recently and almost wiped out all her savings. To cut her spending, it will definitely involve some sacrifices on her end like what she mentioned, having to wake up early to travel using public transport. She does reduce expenses by getting second hand items or by swapping items with her friends to try new things.

The next individual has a student loan, upcoming mortgage and wedding expenses. She is aware of the unnecessary spending that makes her unable to save especially with make-up and skincare products. She does not seem to have the habit on saving and main thing is the charging of items to credit cards and BNPL which makes spending seem so smooth so she spends almost all her take home pay.

Buy Now, Pay Later (BNPL)

The rise of BNPL companies have sky rocketed in recent times especially when you see their advertising. I remembered I walked into Sephora with my friend once and a certain BNPL company was offering some discount if you downloaded the app and split your payments.

My friend who was paying for something did that instinctively as she was able to and why not for the discount. But from there, if she was not careful with her spending and found the splitting of bills very convenient, she might be sucked into using it and excessively buying and chalking up huge bills. Of course, if she is able to pay it off then that’s great and a good way to snag the bargains that the BNPL companies are offering.

There are advantages if you know how you can use BNPL to your advantage and I think there has been quite a bit of coverage on BNPL like here, here and here. So in the CNA show, the second lady using BNPL seems to be quite stuck in the habit of using it excessively and splitting it up especially when she has commitments on the side like a student loan which is also being paid with a credit card and she misses payments on some occasions.

In the US

USA is a country that influences the world through the many things as they are a super power. The BNPL as well as credit card industry there is huge as the general population rely on credit for big ticket items and especially so during the pandemic when people lost their jobs but needed to pay for daily necessities. The US population generally does not have a huge saving buffer hence an emergency can land them in trouble where they will then have to rely on credit cards to pay the bills.

In this video, it talks about how millennials in their 30s have taken on debt at a rapid rate since the pandemic. This group also have taken on debts higher than any other generation.

They interviewed a 31 year old lady who has 2 children and lives just outside of Miami. She shared that she now has 3 more credit cards as compared to the start of the pandemic and has maxed them out but have cleared her debts for 2 of the cards . She is now limiting her spending by not going out and not buying anything if possible.

It is a vicious cycle once you rely on credit cards to pay your bills and not paying the bills in full as the interest rates for credit card debts is so high, you would be struggling to plug the hole as the debt increases.

Evaluate and spend within your means if possible

If we were to look at the individuals in the Singapore context of the CNA show, they are mostly spending on their wants, ride-hailing services and make up products, so if they can take the time to evaluate their spending and reduce slowly on the things that are not a need, they should be able to reduce their expenditure by quite a bit and save more.

Of course, not every millennial is in debt or not managing their money well, I believe there is a good proportion of millennials who are doing well financially and managed their finances. With Seedly and The Woke Salaryman with other financial education blogs and platforms, I believe Singaporeans are aware of financial management but spending habits can sometimes be tough to change.

Always try not to inflate your lifestyle unless you are already at a minimum lifestyle haha, but it is always good to start saving and starting young is great because habits usually stays and if you can maintain good habits from the beginning, it will help as time pass. It’s good to also form a circle of friends who do not spend frivolously, a good support of friends can help your wallet.

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