Millennial life isn’t all it’s cracked up to be, despite some beliefs to the contrary. These days, millennials are having plenty of trouble with credit card debt. Of those, one in ten of them says that they have carried this debt for more than five years. So why is it that this generation seems to be saddled with so much credit card debt? The answer to this may surprise you.
A Look at the Numbers
Of the millennials that struggle with credit card debt, about 54% of them owe less than $5,000. However, 24% of those polled say that they owe between $5,000 and $10,000 in credit card debt. The remaining portion of the group has an even more significant amount of credit card debt; nearly 5% of them say that their credit card debt has reached $30,000 or more, according to Business Insider.
However, millennials do take their credit card debt seriously, despite how the numbers look. Almost 70% of those who carry credit card debt say that it causes them some stress and for a few of them, it is significant stress, even if the amount of debt that they carry is relatively small. For example, of those who carry about $5,000 in credit card debt, about 55% – more than half – of those say that they feel stressed out about it. Anecdotally, when representatives from White Mountain Partners speak to our clients in this demographic, we receive similar reports.
How Did They Get Here?
One thing is certain about millennials that we at White Mountain Partners have seen. Millennials aren’t spending their money on the items that they have been stereotypically associated with, like avocado toast. For most of them, this debt didn’t result from bad spending habits.
Unfortunately, the reason why so many millennials have so much credit card debt is that they cannot afford the cost of living. In other words, they are using their credit cards to buy things like groceries, to put gas in their cars, and to take care of other everyday expenses, like utilities.
A recent CNBC article breaks down the numbers like this: Four in 10 of them attribute their debt ratios to their day-to-day living expenses, while another one in five, or 20% of them, say that their credit card debt has arisen from emergencies, like having to unexpectedly go to the emergency room or to make a major repair on an appliance or their vehicles.
Millennials’ Budget Breakdown
So what does that look like for them? A report in ApartmentTherapy.com suggests that on average millennials spend about $208 a day on housing (compared to other Americans who spend around $164 a day), nearly $11 a day on groceries and almost $10 a day on eating out in restaurants. They also spend $1.24 a day on their pets and $2.36 a day on their car insurance.
Here is the frightening thing about that $208 a day. If that’s true, then that means that their expenditures are over $6,000 a month: In order to live, they must have access to at least $75,000 a year in order to keep a roof over their heads.
A Forbes article also suggests that millennials stand out compared to other people in the other age demographics, because, in fact, for the most part, they prefer to live more frugally. These are the people that will look for more frugal options in, say, travel. For example, they will take trips that allow them to stay closer to home, or in some cases, they will stay home and just have a staycation.
Additionally, many millennials face the very real challenge of student loan debt. This debt has saddled them with additional expenses that people in other age demographics don’t deal with as much. Less of their income is available to pay for the day-to-day necessities that they need.
Final Thoughts on Millennial Credit Card Debt
It may be to say that millennials aren’t spending their money wisely. However, recent reports suggest that that just isn’t the case. Most millennials are actually debt-averse. The reason that they do have so much credit card debt is that they cannot afford to live. Normal expenses like housing, food, and other necessities take up a good portion of their income