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Thread: Young people and debt

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    Cyburbian michaelskis's avatar
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    Young people and debt

    Yesterday on the front page of USA today, a report about how this generation is becoming known as the Debt Generation because of the excessive amounts of debt that are taken on.

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    Nearly two-thirds carry some debt, and those with debt have taken on more in the past five years, according to an analysis of the credit records of 3 million twentysomethings that Experian, the credit-reporting agency, did for USA TODAY. Their late payments are rising, and they're more likely to be late than other Americans are.

    Nearly half of twentysomethings have stopped paying a debt, forcing lenders to "charge off" the debt and sell it to a collection agency, or had cars repossessed or sought bankruptcy protection.

    High debt loads are causing anxiety, too. A poll of twentysomethings by USA TODAY and the National Endowment for Financial Education (NEFE) found 60% feel they're facing tougher financial pressures than young people did in previous generations. And 30% say they worry frequently about their debt.
    I believe that part of it is a social acceptance of immature need for instant gratification. In the dorms everyone wants to have the “Best Stuff” so they will charge up there credit cards to by home theater systems and flat screen plasma TV’s, yet they don’t have the cash to go out to McDonalds.

    What are your thoughts about this increasing problem. How much debt is too much debt? If you are in this age group, do you have a lot of debt? How can society change to prevent further debt issues? If you are older, were you in debt at this age? How did you, or did you get out of debt?
    "A long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable outcry in defense of custom. Time makes more converts than reason." - Thomas Paine Common Sense.

  2. #2
    Cyburbian jmello's avatar
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    Quote Originally posted by michaelskis View post
    I believe that part of it is a social acceptance of immature need for instant gratification. In the dorms everyone wants to have the “Best Stuff” so they will charge up there credit cards to by home theater systems and flat screen plasma TV’s, yet they don’t have the cash to go out to McDonalds.
    It also stems from being spoiled by parents, as many "middle class" American children are today. When I went away to university (after a year at CC), I brought nothing more than clothes, a ten year old B&W 13" TV, a hot plate and a few cups of ramen. I didn't need, nor did I feel that I deserved a new car, TV or designer clothes. My roommate had an old Apple and that was about it.

    Today, freshman in college have BRAND NEW Honda accords and $200 IPODs. Ridiculous.

    I think we are at the height of consumerism today. My hope is that the pendulum will swing back and we will raise our children to be much more appreciative and financially responsible than we were.

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    Cyburbia Administrator Dan's avatar
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    Quote Originally posted by michaelskis View post
    What are your thoughts about this increasing problem. How much debt is too much debt? If you are in this age group, do you have a lot of debt? How can society change to prevent further debt issues? If you are older, were you in debt at this age? How did you, or did you get out of debt?
    Through my 20s, aside from college loans, I was in and out of debt - mostly small credit card bills that I hated paying. I'd always pay them off in full whenever I got my tax refund, but I didn't like carrying the debt to begin with.

    Now, I've gone cold turkey on my credit cards. I use them only for emergencies and the rare small purchase to keep the accounts active, and pay them off in full. I have no debt except for a mortgage. I try to save up for major purchases; if I can't pay for it with my debit card, I'll wait another month.

    My advice - no matter how tempting it might seem, do NOT use credit cards for day-to-day purchases like gasoline, clothing, restaurants and the like. That's where most of my old debt came from - not buying large-screen televisions and the like. Use them for emergencies, and pay them off ASAP, even if it means getting a second job to do so.

    Off-topic:
    I just added another $30 per biweekly pay period to my deferred comp retirement fund. Every time I get a raise, I increase the contribution to deferred comp. Come next April, I'll add another $30 or $40 every other week.

  4. #4
    Cyburbian Plus PlannerGirl's avatar
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    I think its a complex problem, you have college loans that strap a person right out of school with big time payments after 6 months. There is the I want this NOW problem and the market as a whole pushing credit cards and click ads everywhere a kid goes. We tell ourselves and our kids that they are the "best" or whatever day in and day out so they expect that from every part of life. Never mind they don't earn it.
    "They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." Ben Franklin

    Remember this motto to live by: "Life should NOT be a journey to the grave with the intention of arriving safely in an attractive well preserved body, but rather to skid in sideways, chocolate in one hand, martini in the other, body thoroughly used up, totally worn out and screaming 'WOO- HOO what a ride!'"

  5. #5
    Isn't that why you go to college - to put off having nice stuff???
    Part of the irresponsibility is that these kids never have (or had) jobs, because their parents baby them and fall back on the misnomer that their "school" is their job. In the rare cases where kids have full-ride acedemic scholarships this is semi-acceptable. Other than that, a majority of college kids need to work their asses off and help pay for their schooling. I remember working all summer to save up $3k to only spend it on half of a semester - the other half I would take out in personal loans from the bank. I worked during the semester to pay off the personal loans. Never had a credit card until I got out of school, and actually didn't need one. Back then - in the late 90's - they had these things called checkbooks and cash.
    Was it tough? - yes
    Was money tight? - Heck yes
    Did it make me appreciate money and its value? - oh heck yes.
    5 years of engineering school and $25k of debt (for an $80k education) later, I don't regret one bit of it. I only have 4 years left to pay on that sucker - then I'm FREE, FREE I SAY....
    You have to learn to do without to appreciate having things. Having things given to you all your life just devalues those items, whereas working for them makes you treasure them.
    Who's gonna re-invent the wheel today?

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    Cyburbian michaelskis's avatar
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    I can understand a Mortgage because saving up $200K for a house is an impossible task until your totally debt free. However I don’t think most recent college grads could imaging no credit card debt, no car loan payments, and no school loans. All wish are very possible.

    I admit that I will have college loans for little while, however with my current track, I will be completely debt free (Other than the Condo) before the Fiancée and I start having kids in three years. At which time we will sell our condo (Which we already have a good amount of equity in) and buy an larger historic house that was converted into multiple units with the intention of slowly renovating it back into a single family house since we both want a bunch of kids.

    I was lucky that my parents taught me that I should avoid debt and credit cards. I wish I listened to them in College, but now I know better and I will teach my kids that debt is like being kicked in the head by an entire football team.
    "A long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable outcry in defense of custom. Time makes more converts than reason." - Thomas Paine Common Sense.

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    Chairman of the bored Maister's avatar
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    Quote Originally posted by michaelskis View post
    I was lucky that my parents taught me that I should avoid debt and credit cards. I wish I listened to them in College, but now I know better and I will teach my kids that debt is like being kicked in the head by an entire football team.
    The burned hand teaches best.
    People will miss that it once meant something to be Southern or Midwestern. It doesn't mean much now, except for the climate. The question, “Where are you from?” doesn't lead to anything odd or interesting. They live somewhere near a Gap store, and what else do you need to know? - Garrison Keillor

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    Cyburbian Seabishop's avatar
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    If anyone would like to help remedy the problem of young families in debt I will accept personal checks and money orders. Thank you.

  9. #9
    My college years were spent in relative poverty, relying on work-study and part time jobs to pay for my pin money. I had loans which I eventually paid off, but still, when you're fresh out of school and working and trying to keep your head above water, that monthly payment makes a difference.

    In all fairness, I only went to college for 2 years so the loan payments I was saddled with were not that bad. But I still had to live extremely frugally. I paid more in rent for a crappy studio apartment so I could walk to work, thus avoiding having to own a car. I walked everywhere or took the T. The most expensive item I owned for a long time was a really nice futon and frame. Other pieces came by way of yard sales and bin diving, and perhaps a neighbor in another flat moving out and giving away a table or chair.

    I didn't get my first credit card until I had been working for a while, and then it was for the department store where I did most of my shopping. I use a debit card for things over $10.00, or purchases that don't demand cash. I try not to carry cash on me, as I find myself being pulled into the nearest bookstore like metal to a magnet.

  10. #10
    Cyburbian Jen's avatar
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    don't even mention the new mortgage

    And watch out for those credit cards, very predatory practices. Especially when you are on the run from higher rates. Always read the fine print. That 0% apr may only be for 3 or 6 months and then your rate may be 12, 18 or 24% and they charge a transfer fee, sometimes they do not cap that fee! ANd they pay off your low apr balances first and let your higher apr's accrue interest during that time.

    We just finished construction, I did not want to wait for nice flooring or the exact window treatments I wanted so we carded it and carded it.

    Now I am on the shuffle to avoid finance charges. I have paid less than $50 in cc finance charges my whole life.. Not about to start now,so I am shuffling balances to better offers. This means at the same time no more purchases on going on the cards (Christmas this year will be slim) and I am hammering beating strangling that debt. Minimum payment? As if! try $250 $500! That hurts me, but it hurts the cc company more.

    Its been hard not dipping in the college fund or an old IRA, want to keep saving, but that debt is getting paid off first.



    I feel better now

  11. #11
    Cyburbian boiker's avatar
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    Quote Originally posted by michaelskis View post
    I believe that part of it is a social acceptance of immature need for instant gratification. In the dorms everyone wants to have the “Best Stuff” so they will charge up there credit cards to by home theater systems and flat screen plasma TV’s, yet they don’t have the cash to go out to McDonalds.
    I think it's a misunderstanding by twentysomethings of the seriousness of credit. Credit cards weren't so easily accessible until the mid-90s at colleges. Consumer Education classess could have never prepared us for the birage of applications and easy money.

    I don't believe it's just keeping up with the jones', i don't belive it's all spoiled kids. I believe many of them have never had easy access to money before and it's incredible easy to spend it on what you've always desired once you get it.
    Dude, I'm cheesing so hard right now.

  12. #12
    When kids are being told that student loans are an "investment in their future," then what's a little more debt going to matter?

    The problem is that the investment in their future is worthless, and they won't make enough money to cover the debt until many years later.

  13. #13

    Tip O' the Day

    Quote Originally posted by Jen View post
    We just finished construction, I did not want to wait for nice flooring or the exact window treatments I wanted so we carded it and carded it.
    Now I am on the shuffle to avoid finance charges.

    I feel better now
    Try to do home improvements (although it sounds like you are building a whole house) near Tax-Return time, that way you won't rack up huge bills, and you can pay it off with your return (assuming you get one). You are making you house nicer and gaining equity - double bonus.
    We did our bathroom this year with tax return $- I tore up the old lineolium, laid down sub-floor, painted, bordered, installed new light bar, installed new "big button" light/fan switches, replaced the large mirror and re-painted our 2 vanities over the double-sink, bought new brushed nickel fixtures, then got some deals on faucets off ebay (that I installed), and wholla - new bathroom makeover for $800. $400 of it was flooring done by someone else, but not too bad overall really.
    Last edited by ssnyderjr; 21 Nov 2006 at 9:53 AM.
    Who's gonna re-invent the wheel today?

  14. #14
    Cyburbian boiker's avatar
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    Quote Originally posted by ssnyderjr View post
    Try to do home improvements (although it sounds like you are building a whole house) near Tax-Return time, that way you won't rack up huge bills, and you can pay it off with your return (assuming you get one). You are making you house nicer and gaining equity - double bonus.
    We did our bathroom this year with tax return $- I tore up the old lineolium, laid down sub-floor, painted, bordered, installed new light bar, bought new brushed nickel fixtures, then got some deals on faucets off ebay (that I installed), and wholla - new bathroom makeover for $800. $400 of it was flooring done by someone else, but not too bad overall really.
    what? no marble tile? no new whirpool tub? no new multi-head shower? if you didn't 20k on the bathroom makeover, your throwing your money away says HGTV. (well, they didn't say that. But all their designer/house selling shows imply that)
    Dude, I'm cheesing so hard right now.

  15. #15
    Unfrozen Caveman Planner mendelman's avatar
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    Our debt really is only our school debt, which is substantial.

    We do use our credit cards for alot of purchases, but we pay off the balance every month. I have a long commute to work and I prefer to use the credit card for pruchasing gas - faster and simple, I don't have to have so much cash on hand all the time.

    We rent a nice 2-bd apartment in a walkable area, and don't have a car payment.

    I think we are doing really good with credit and debt management.
    I'm sorry. Is my bias showing?

    The ends can justify the means.

  16. #16
    moderator in moderation Suburb Repairman's avatar
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    THis is a huge problem. I worked as a resident advisor for three years at the university, which was part of my effort to avoid college debt. I got deal closely with a little over 600 students during that time. It was frightening to see how they flung that credit card around with abandon. I knew one guy that at age 20, already had about $15,000 in credit card & payment (financing through Best Buy, etc.) debt. But he did have a pretty sweet 42" plasma TV in his dorm room . In a sad twist of irony, he was also a finance major. He did not graduate.

    In about six months our only debt will be a mortgage. That mortgage is a 15-year and the total financed is one-third of what we could have handled. Of course we're planning to do a major renovation, but we're saving up to pay cash for it in about two years. I think everyone already knows from previous threads that I'm a nut about retirement savings and a Dave Ramsey minion . I guess when it comes to finances, think of me as the bleeding-heart version of M'skis!

    I only use my credit card for emergencies when I can't tap my money market account fast enough and for large purchases that I've already saved the money up for so I can get my 2% return. I've never carried a balance on a credit card.

    "Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

    - Herman Göring at the Nuremburg trials (thoughts on democracy)

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    Cyburbian zman's avatar
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    I believe a lot of it is instant gratification. I see this with others around me.
    I too got bit by the credit card bug in college, twice, and then when I got out of school (and made more money to pay them off) I spent more on the cards.
    Now we're learning and turning things around for ourselves. My little trip to the NW cost too much and has me looking into better money management. Once you start thinking about these things, you get kind of excited.

    What disgusts me about credit card buying is that when you use it for something small, you still are financing that purchase. Buying vs. Financing is what gets me. Those terms really help in the decision to NOT BUY.
    You get all squeezed up inside/Like the days were carved in stone/You get all wired up inside/And it's bad to be alone

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    Super Moderator kjel's avatar
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    I'm in the hole $15K in undergrad student loans which isn't too bad since my former job paid for the bulk of my education in exchange for working for them for a period of time. Now as a grad student that debt is racking up a little more quickly and if I get the same aid package next year then I will have a combined total of $35K in student loans for 3 degrees. I have a mortgage on the house but it's a low fixed rate and equity is building nicely. I drive a 10 year old used car and will never buy a car where I have a monthly payment again! I have one credit card with a $300 limit which is used for emergency only. I operate on the principle that if I don't have the cash to buy it, I don't really need it.

    I've learned all this the hard way since my parents were not very good examples in this regard. My 13 year old is far more educated about personal financial matters than I ever was. She has a budget which she manages very well and is always asking what she can do to earn more money.
    "He defended the cause of the poor and needy, and so all went well. Is that not what it means to know me?" Jeremiah 22:16

  19. #19
    Cyburbian imaplanner's avatar
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    I have to use the credit card to buy groceries on occasion. But I always pay it off in full very quickly thereafter. Thats the problem with living month to month and having a spouse who was out of work for a while (which we did not count on).

    I have known some people who had to rack up significant credit card debt due to medical emergencies.

    While a significant part of the problem is wanting "instant gratification" or beiong spoiled when they were children - there are instances of young people racking up debt because they have no other option.

  20. #20
    Cyburbian jordanb's avatar
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    Quote Originally posted by jaws View post
    When kids are being told that student loans are an "investment in their future," then what's a little more debt going to matter?

    The problem is that the investment in their future is worthless, and they won't make enough money to cover the debt until many years later.
    Hear hear.

    I'm (finally) graduating college now, after grinding my way through for five years of working all day and staying up all night doing schoolwork.

    I carry balances occasionally on my single credit card, but the total interest I pay only adds up to $20-30 per year. Often those balances have come from paying for groceries when it is several weeks until the next paycheck and I have no money left. I say that's worth it.

    So in general I would be pretty debt free. I have no car payments, no mortgage, and my credit card is not much of a burden.

    Except that I now have $20,000 in debt from school. That's from working my way through at a state school. It's considered a really small amount of debt. It will still take me years to pay it off. It's also debt against which I can not seek bankrupcy protection, and it's debt for which I really don't have much to show. The idea of "intellectual capital" and "future investment" being pretty bullshit, especially when the degree is from a state school that is entirely without pedigree.
    Reality does not conform to your ideology.
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  21. #21
    Cyburbian Joe Iliff's avatar
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    I've struggled with debt, but currently feel that I have a aggressive but practical plan to attack it and get rid of it. And once it's gone, it's not coming back.

    I once described paying minimum payments on debt as feeding a beast, just enough food often enough to keep it from eating you. Paying more on debts to pay them off is killing the beast. Once it's dead, the bread you earn is yours to keep.

    QUESTION: Looking out 30-40 years from now, when today's youngster will be middle aged parents and voters, will their experience with personal debt affect their voting pattern on issues like the US national debt? Will those who are struggling with it today in their personal life be less likely to accept public debt by the US government?
    JOE ILIFF
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  22. #22
    Cyburbian
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    Quote Originally posted by imaplanner View post
    I have known some people who had to rack up significant credit card debt due to medical emergencies.
    Plus some vehicle repairs...and the tough decision on surgery for the dog...then the furnace craps out...suddenly you find yourself struggling I did much better when I was young than now.

  23. #23
    Cyburbian boiker's avatar
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    Quote Originally posted by savemattoon View post
    Plus some vehicle repairs...and the tough decision on surgery for the dog...then the furnace craps out...suddenly you find yourself struggling I did much better when I was young than now.
    Are you getting my mail?
    Dude, I'm cheesing so hard right now.

  24. #24
    Cyburbian Budgie's avatar
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    I'm about a year away from getting caught up with the debt my ex layed on me after our divorce. She grew up getting just about anything she wanted, when she wanted it and this carried over to our family. Her spending habits were a point of contention, but was far from being the biggest problem in our marriage.

    We were in college when we got married and the credit card marketing was like a blizzard. Hook into them when they are poor and will use credit often and make them pay for it the rest of their working days. Just be sure to get them on the hook for 29%
    "And all this terrible change had come about because he had ceased to believe himself and had taken to believing others. " - Leo Tolstoy

  25. #25
    Cyburbian Mud Princess's avatar
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    Quote Originally posted by BeansandCod View post
    My college years were spent in relative poverty, relying on work-study and part time jobs to pay for my pin money. I had loans which I eventually paid off, but still, when you're fresh out of school and working and trying to keep your head above water, that monthly payment makes a difference.
    That was me, too. During my college years, I was always broke and had to take out every loan available just to cover tuition, books, and living expenses... and this was while attending a state university. My biggest extravagance was beer and junk food at the on-campus pub (back when the drinking age was 18). I didn't own a car; I traveled everywhere by bus or train (OK, I finally broke down and bought a used car for $500 when I went to graduate school). I've never understood the whole Florida-Spring Break phenomenon. I certainly didn't have the money for something like that when I was in college, and neither did most of my friends.

    I remember requesting a reduction in my $110/month student loan repayments after college, when I made $4.15 an hour in retail. That $110/month was a lot of money to me then!

    I did take a consumer education course in high school, but I credit my grandmother for teaching me a lot of what I know about money, the value of savings and avoiding debt. We generally pay off our one credit card every month, and try to save for big purchases or house projects.

    I think society has become so materialistic as a matter of course. Witness the lines of people waiting outside Best Buy for a week to get the latest Ninendo game (or whatever the latest electronic toy is - I wouldn't know)... the acceptance of cell phones, iPods, PDAs, and other gadgets as "must-have," everyday items... the continued development of McMansions with $20,000 chandeliers, 5 garages and jacuzzis in 4 bathrooms. Blech.

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