Millennials have a lot of student loans. So much so that the average Millennial carries $27,162 in student loan debt, and has a monthly payment of $317.
According to a survey by online loan marketplace LendingTree, these hefty student loans are hindering Millennials from saving their money for important financial decisions down the line. A full 53.27% cite that they are financially unable to travel, 44.74% admit they cannot buy a vehicle, and 38.7% are unable to save for retirement.
Research by LendingTree shows that the average salary for an employed Millennial is $48,146 annually. To put this into perspective, after tax deductions, insurance and Social Security payments are taken out, each Millennial is only bringing home $2,808 per month.
The study shows that the average student loan payment comprises almost 12% of a Millennial’s net monthly income. When the Millennials were asked how much their debt affects their everyday spending ability, almost one third answered “very much.”
Whats worse is that more than half — 55.9%– regret spending so much money on obtaining a secondary education. Most of the survey participants admit they should have gone to a more affordable school, followed by wishing they chose a more profitable area of study.
Sadly, 10.4% of these Millennials believe they shouldn’t have gone to school at all as they feel they are over educated for their current career path.
LendingTree also asked what Millennials would do with their finances if they had extra funds and no student loans. All in all, 53.98% of respondents said this money would go towards saving for emergencies, 41.76% would buy a home, and 31.68% would save for retirement.
However, those who have been saving up for retirement their entire working lives aren’t necessarily spending their money responsibly.
After years of hard work under their belts, the average American retires at 63. But new research completed by the the Employee Benefit Research Institute shows that all this new-found free time has retirees living a more lavish lifestyle than they can afford.
Research on EBRI.org shows that over half of all retirees spent more money within the first two years of retirement than what they had when they were working. In fact, 28% of families spent 120% of their yearly budgets within the first years of retirement. By the sixth year of retirement, a full 23.4% still continued these spending habits.
And it is spending like this that can pose a problem if these retirees actually want to stay retired as the retirees aren’t spending money on necessary life expenses. Only a very small majority of their household budget was spent on durable goods, and the rest was spent on luxury items they couldn’t necessarily afford.
For example, travel. Retirees are going on vacations more and more because it simply makes them happy. In fact, 37% of families — retirees included– say that vacations make them happiest, making this the top activity that makes families most happy. So it is clear that retirees will put their finances aside to create memories with their families.
So what should retirees do in order to prevent having to go back to work? Financial experts say that developing a spending plan — and sticking to it — is key. This can be broken into three separate goals.
First, each retiree needs to take time to digest what is happening to them during this sometimes overwhelming life change. “My first recommendation is to give yourself permission to not know what you want to do next,” says Malcolm Harris, CEO of the National Care Financial Group in Washington, D.C. explained to 10 NEWS. Give yourself a finite amount of time, say one year, and tell yourself: ‘I will only spend X amount of money.'”
Secondly, factor in lifestyle and income. It is important to keep a list of monthly expenses on hand to determine how much residual income is left over after each month.
Last but not least, expand your knowledge base. Attending a community college class will not only expand your mind, but will grow your social circle and negate the feeling of loneliness some retirees may experience.
