17 January 2020
28 year old Sharan would fit check a lot of boxes on the stereotypical millennial checklist. A penchant for eating out from quality food joints, a habit of catching his favorite matches from the neighbourhood sports pub, and a strong desire to flaunt the latest smartphone or take quarterly vacations – Sharan clearly loves to live life to the fullest, like many others his age. He landed a respectable job at a promising startup right after college, and shares much of his organisation’s aspirations and impatience for growth.
But again, like many of his peers, this era of instant gratification comes with some side effects. With wages not rising precisely in tandem with living costs, and the significantly larger consumerist sentiment in this generation, millennials seem to carry the highest amounts of debt amongst all generations. A boom in internet adoption, coupled with the consequent easy availability of credit, have only fuelled their ambitions. Whenever Sharan running is short on cash, which happens more often than he’d like, all he does is flip out his smartphone, and a few taps later, he has a loan amount coming to his bank account directly.
For a generation that prioritises expenses over savings, this is a common occurrence.
This brings us to an important question – what are the consequences of such an approach to finances? Does this end well? What do they mean for the evolution of the fintech industry, and more importantly – for the millennial generation? Are today’s youth simply broke millennials, or smart borrowers who take advantage of credit to head closer to their goals?
With a tendency to spend on experiences in the present and live life to the fullest, it may be a reasonable assumption to say millennials are headed deep into debt traps, with little in savings to assist them. With multiple surveys and studies suggest that the youth of today are increasingly skipping large expenses such as homes and cars, their expenses are likely channelled into improving living standards and discretionary purchases. Such a model may not leave room for a monetary safety net, making millennials vulnerable to financial emergencies. Plus, there’s no shortage of instant loan apps, credit cards and other options. Getting quick personal loans is now truly ‘quick’ thanks to instant loan portals, unlike the slightly expedited, but still week-long process at traditional banks. The EMIs are truly low-cost as well, and flexible repayments only add to their appeal. So do millennials borrow more than they are able to repay, ending up with little or no savings?
But perhaps the solution to these worries lies once again in instant access to credit. Instant loan portals, while they may fund short term splurges, also prove critical in times of need. Whether it’s a medical emergency, a last minute shortage in rent payment, or an unforeseen expenses on a friend’s wedding, many millennials are increasingly relying on portals like EarlySalary to tide them through.
The key to finding yourself on the ‘smart borrower’ side of the spectrum, and not a ‘broke millennial’, lies in deploying wise financial strategies and sticking by them. Credit can be immensely useful if leveraged as a means to goals and objectives, while maintaining control over your spending patterns. Millennials can start by:
Instead of looking up the random stray financial tip on the internet, or advice from peers, educating yourself broadly on financial management is a more comprehensive and complete approach to building financial stability. Understanding exactly how to budget, optimise savings etc will form the foundation of your financial journey over the long run, enabling you to leverage debt for the right reasons.
Debt comes in all forms, and some of them can be better than others. For example, taking an instant cash loan from EarlySalary comes with low interest rates, flexible repayments, and near-instant access. On the other hand, credit card debt can feature prohibitively high interest rates, and even impact your credit score in case of delayed payments. Another category – traditional loans, are neither cheap, nor quick. Someone with excessive credit card debt, therefore, would do well to refinance it by heading to EarlySalary for a personal loan.
A financial plan is a tool, not an end in itself. At the end of the day, it works to serve whatever specific goals you hold dear. Naturally then, it is critical to have clarity on what these goals are, and building a plan that is customised to these ambitions. Whether it’s owning a home by 40, or travelling to your dream destination in the next 5 years, each goal brings with itself unique challenges and debt strategy requirements.
Other well known smart credit strategies may include following the 50/30/23 rule (50% for needs, 30% for wants, and 20% for savings), steering clear off credit card debt, and more.
Where do you lie on the millennial financial spectrum? Let us know!