Young people are going deeper into debt

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Darth Wong
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Young people are going deeper into debt

Post by Darth Wong »

This comes from BankRate.Com:
BankRate.Com wrote: Younger Americans going deeper into debt
By Julie Sturgeon •

Gen Xers yearn to carve a new direction for society. Unfortunately, the direction appears to be straight into debt. Americans between the ages of 25 and 34 now boast the second-highest rate of bankruptcy, just behind the 35-44 group. The average credit card debt for this group increased by 55 percent between 1992 and 2001, with the average young adult household now spending approximately 24 percent of its income on debt payments.

Really want to worry? Take a peek at these findings from the "Generation Broke" report put out by social activist group Demos, using the Federal Reserve Board's survey of consumer finances:
  • Adults between the ages of 18 and 24 saw an even sharper rise in credit card debt from 1992 to 2001 -- 104 percent to be precise.
  • Among the youngest adult households with incomes below $50,000 (that's two-thirds of this demographic), nearly one in seven with credit card debt is in debt hardship.
  • This youngest segment spends close to 30 percent of its income on debt payments, double the percentage spent on average in 1992.
Tamara Draut, director of Demos' economic opportunity program and the lead author of Generation Broke, says the finding that surprised and concerned her was the fact that most 25- to 34-year-olds spend roughly a quarter of every dollar paying down debt.

"Most importantly, about half of this group still isn't in a homeownership situation," she says. In fact, the way the stats were calculated, it doesn't include rent, either. "That's a pretty shocking amount."

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It's hard to shock Judge John C. Ninfo II, chief judge of the U.S. Bankruptcy Court for the Western District of New York. He hears the stories behind the numbers: college students who run up the credit card bills each semester, then take out extra on their student loans to pay them off. They graduate with as much as $8,000 in debt from this shell game alone -- plus the last semester's financial flings. "Nobody warned me," is an everyday wail in his world.

Fed up with seeing the parade of youngsters filing in his jurisdiction, he launched an outreach program, Credit Abuse Resistance Education, in 2002 to connect judges, attorneys and trustees with high school and college students. CARE resembles the Scared Straight programs designed in the '70s to frighten would-be punks into keeping on the straight and narrow. So far, he's made inroads at 26 high schools and three colleges in the state, with more expressing an interest in signing up for the presentation.

Scare tactics don't impress experts such as Draut. Student loan debts have doubled to almost $20,000, she says. "When the car breaks down, there's no savings, so it goes on the credit card. Holiday trips home go on the credit card. All sorts of things end up there because young people have already committed more of their money than we did a generation ago," she points out.

As for those still on campus, many from lower-income families don't want to burden Mom and Dad, who have already mortgaged the house for tuition and housing, for daily living items. Charging a bagel with cream cheese is their misguided way of helping out, she says. Draut believes the solution begins with prioritizing the country's financial aid policy and expanding grant-based systems. She's also in favor of state legislation, like New York's, that regulates credit card marketing on state university campuses.

Similar proposals in Washington, D.C., during the past few years have failed.

This is quite shocking; I guess the "save for a rainy day" mentality of the Depression-era generation is well and truly buried. This does help explain why I see so many young people driving around in shiny new cars, though.
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Post by Techie-Micheal »

Fortunately I'm not one of those who says "charge it." I'm not in debt, I'm not going to be any time soon, even though I am in that age group. Why? Because I actually watch what I spend and how I spend it. I agree, plastic has become too much of a commodity, and teens and the early 20's age group appear to not have been taught how to budget appropriately. Either that, or they plain don't care, which is sad. It gives a bad name to the rest of us who actually work hard and save up, so we don't risk going in to debt. I was raised that debt should be avoided, if at all possible. If that means staying with my current car that doesn't have a whole lot wrong with it (which by the way, I don't even have a car ^_^) for a while longer, so be it. The "credit cards should be used for emergencies only" and the "if you can't afford it, don't buy it" mentality seems to be gone with the wind too.
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Re: Young people are going deeper into debt

Post by Anaximander Thales »

Darth Wong wrote: This is quite shocking; I guess the "save for a rainy day" mentality of the Depression-era generation is well and truly buried. This does help explain why I see so many young people driving around in shiny new cars, though.

It's really shocking? I don't see why. Take a look at all credit card ads. They target that very age range (18 - 35). What is shocking is that for several years after the .com bubble broke our economy stayed afloat off of that very credit card debt. Job loss and a lowering of income has added to these problems.

With the high rate of bankruptcy, our currently growing national debt and the possible privatization of health care and social security all of these people are looking at some very rough roads.
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Post by xdarkday »

I do the pay as I go method. If I have money ill save it for something or spend it if I’m not saving. Anytime I am offered to barrow money from anyone including family I say no. If I know I can’t have something I don’t get it and move on. I don’t drive a shiny "new" car but my car is shiny. I drive a fully restored 63' beetle (did all the work my self). I’m still a full time student in college so I am always broke, but it doesn’t bother me one but because I know I’m not in debt. I have lots of friends who are under the "red-line" for over three grand. The problem isn’t that the three grand is a lot, but if they didn’t have the money in the first place it’s almost impossible to pay it back off.
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Post by blockcipher »

I was in debt for about 2 years. But I pulled myself out real quick. Now all I have is a mortgage and car payment. Thats all you SHOULD have. But keep your credit score high. My wife and I have excellent credit, and I don't plan to ruin it anytime soon.

I'm not suprised that people go into debt, they go "why work for it, when I can buy it now".

I dunno :D
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Post by Pit »

For those intending to go to university (like myself), debt is not optional. ;_; On the other hand, I am mostly a thrifty bastard and my family are generous, so I hope to not end up sleeping under a stack of my maxed-out credit cards.
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Post by TehBooster »

Pit wrote: For those intending to go to university (like myself), debt is not optional. ;_;

Indeed. ;_; this is also why I don't have a credit card, and my car was paid for in cash :D (used car mind you :P)
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Post by drathbun »

Debt is a scary thing, because it is so easy to get into and so difficult to get out of. It's like crack, only legal. :-) My wife and I got way over our heads early in our marriage. It took 18 months of dedicated saving to pay everything off. Once we did, we've never looked back. It's the one of the best things that a parent can do... show their kids financial responsibility.
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Post by smithy_dll »

I owe the government several thousands of dollars (via tax, when I've got a Job with an income over a minium threshold) for my University education,

Of couse that rule was thought up by the nice people who got free university education 30 years ago :x
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Post by Kanuck »

While it must be nice to have parents who can bail you out of every situation and help you out every step of the way, I have no such luck. My Christmas gifts, for instance, consisted of socks and underwear, and that is all; clearly anything I want in life I'm going to be paying for myself.

Let's not make any assumptions about this debt situation then. I'm 19 years old, have a credit card with a $2600 limit that is presently holding no balance, and an $8000 line of credit that has a balance of $4000 and growing. I don't have a job; it wouldn't be much use to jump at the first minimum wage opportunity that presents itself, because the costs of getting to/from a job and other related costs eat up a good portion of the crappy wages. I was making $8/hour at my last job, which is a pretty good starting wage in this province; alas, it was a seasonal position, and after travel expenses, meals and clothing to wear to work (it was retail and hence we had to wear the brand we were selling), I don't even think I broke even by the end of my employment there.

Do I like being $4000 in debt? No. Have I made some iffy choices that, in retrospect, I may not have made? Yes. But I'm certainly not living extravagantly. My computer is four years old and counting, I don't spend ridiculous sums of money on frivolous things. Simply put, it's a more expensive world that we're living in. Minimum wages haven't risen to match. As a result, the age group that's expected to spend just as much money as the 25–34s, but makes no more money than the average sixteen year old kid, feels the pinch the most.

Don't bother debating this with me, as I'll just bitterly point to my $4000 debt and my unemployed status and ask you to kindly shut up. :)
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Post by Kanuck »

blockcipher wrote: But keep your credit score high. My wife and I have excellent credit, and I don't plan to ruin it anytime soon.

That's very important to remember, and a lot of people overlook the fact that it's rather easy to establish good credit. I did it the day I turned 18. I'd had a cell phone for two years under my dad's name, so on my 18th birthday I had him call and explain I'd paid every bill myself for two years, and wanted the account transferred to my name. Then they spoke to me, asked a couple simple questions, took my social insurance number, and tada, I had my own cell phone account.

I'm also the primary holder of my credit card and line of credit accounts. My Dad had to co-sign both, but they still contribute to my credit rating; recently I decided to switch cell phone companies, because I've been moving a lot lately and want to keep the same number wherever I do go. They approved me over the phone instantly, and said my credit was spotless.

It's a useful lesson; just pay the bills.
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Post by libertate »

Kanuck, what do you do when the bill comes at the end of the month if you have no income and $4K debt?
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Post by FF8Jake` »

Kanuck wrote: Don't bother debating this with me, as I'll just bitterly point to my $4000 debt and my unemployed status and ask you to kindly shut up. :)
I'm 19, i've got $25,000 in debt, between land and transportation, which together is around $500 a month. I currently make $7hr @ 40hr per week, and I can take it fine. I supply all my food, clothing, gas, etc. If you can't handle a payment on a credit card balance of $4,000, you need to take a hard look at your spending habits. :)
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Post by Ksilebo »

At one point, the max I was in debt was about $2500. Its down to about 1k now, but as Jake suggests, there is no reason why you can't manage it. Granted, I was active duty military and had an income, but even now its not a problem.

The only way it becomes a problem is if you're a retard and somehow mismanage having a credit card, and go nuts on a spending spree.
Last edited by Ksilebo on Thu Jan 20, 2005 1:33 am, edited 1 time in total.
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Post by maiself »

Always aware with your spending..

For my phone bills, electricity - I use to get some money on internet to pay all that bills.. Not much (around $100-$200) but it help me a lot.

on other expenses.. I use my normal income (foods, entertainment etc)

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