Almost half of the millennials are living under financial stress due to growing expenses, sky-high aspirations, and limited income. This is making the young Indians fall back on different debt options available in front of them, such as credit cards, Buy Now Pay Later services and app-based loan services. It is equally concerning not only for the individuals who are indebted but also for the economy as a whole.
While there is nothing wrong with getting a loan, the intention behind availing the loan and the purpose determines your financial well-being. It has often been seen that millennials get debt-trapped due to excessive use of these credit facilities, which hampers their finances and growth. So, if you are feeling debt trapped, here are certain tips for you to become debt-free and build your finances for the future.
Evaluate the purpose of availing a loan
If you want to get out of debt, then you need to prioritize. In the case of millennials and Gen Z, it has been observed that the loans they take are often to meet their daily needs or finance things which are not necessary or urgent. So, before availing of a loan to buy something, ask yourself, do you need that? If not, then do not go for it. Also, if you are using BNPL services to bridge your cash crunch, it can turn into a habit and finally lead you to a debt trap. In life, there always seems to be an endless list of things we desire. It would help if you prioritized which are beneficial for you.
Create a budget and stick to it
This may be the most traditional way of managing debt, but it works for all. Significant percentage of millenials live from one paycheck to another due to the lack of budget, or even if they have one, they do not stick to the same. This is where advance salary loan apps, or instant loan apps, come in to help you through the remainder of the month. However, are they helping you or pushing you into debt? The best way to not fall for this, and even if you have fallen, then to get out, you need to evaluate how much you earn and your expenditures. Once you have these two figures in front of you, check which all expenses are irrelevant or unnecessary and cut them down. Set a monthly budget and try to stick to it. It’s important to have a contingency fund in case of emergencies where you may require additional funds.
Pay off the small debts
BNPL services charges between Rs. 100 to Rs. 500 (approx.) for late payment each payment cycle. So, if you miss repayment of two cycles, you may have to pay Rs. 1000 extra. Similarly, instant loan apps charge huge interest rates, and also their late payment charges are exceptionally high.
Millennials often end up using these services to manage daily expenses and then continue to use them as it becomes like a vicious cycle. To cut this off, you need to pay off all the debts that you have taken from these services and then uninstall these applications from your mobile. You can use your bonus amount to pay this debt off or any incentives that you have received and if you can save up from your regular salary and pay off these debts, nothing can be better than that.
Pay off credit card bill
Similarly, pay off your credit card bill as soon as possible, as credit card services charge a bomb in the name of late payment fees, and interest on your bill keeps on adding, which only increases the debt amount.
A debt-free life is important not only for your financial well-being but also for your mental well-being. While it may seem difficult initially to prepare a budget, stick to it, delete all the credit apps, don’t use them, or restrict yourself from buying things you want to buy. You can get the benefits of the same in the long run.
