Each generation faces unique debt management challenges. Younger consumers, especially, are carrying more debt than past generations, according to a recent Experian study. In recent years, both Gen Z and Millennials have taken on more debt, with average household debt steadily increasing since 2020. Demand for most types of loans increased more than usual in 2022, with the largest percentage increases for personal loans and credit card balances. But it’s not just Gen Z and Millennials who are managing debt. Last year, each generation witnessed an increase in overall debt except for the Silent Generation.
Creating a sound strategy to manage your debt allows you the flexibility for larger purchases, but most importantly, it can give you peace of mind. Todd Draak, VP Consumer Banking Regional Manager, provides insight on how to manage and pay off debt.
It’s important to understand the different types of debt before borrowing money. Evaluating the benefits, risks and considerations of each category can better equip you to manage your debt well.
Secured Debt | Unsecured Debt | |
Definition | A secured loan is tied to something of value, like a car, home or an investment. | Unsecured debt isn’t tied to a piece of collateral. |
Examples | MortgageAuto LoanHome Equity Loan and Home Equity Line of Credit (HELOC) | Credit CardStudent LoanPersonal Loan |
Benefits and Considerations | Usually easier for a consumer to obtain.Typically has lower interest rates.Can be a good way to build or rebuild credit. | An unsecured loan may come with higher interest rates and shorter payoff terms.Credit decisions typically are based on an individual’s credit history. |
Revolving credit means your monthly payment fluctuates based on your balance. For example, your credit card may have a $5,000 credit limit — you may choose to borrow against some, all or none of it. Examples of revolving credit include credit cards, personal lines of credit and Home Equity Lines of Credit (HELOCs). On the other hand, a fixed loan is set for a designated period and dollar amount, meaning the interest rate and principal stay the same each month. Examples include an auto loan for a vehicle or a fixed-rate mortgage loan for your home.
Not all debt is necessarily a “bad” thing. In fact, debt managed well can often help you achieve a greater goal or increase your net worth. For example, a mortgage can help you attain a home or investment property; a line of credit may be used to help you make home improvements; and student loans can help you achieve an education that can potentially lead to a higher-paying job.
Regardless of your financial goals, it’s important to stay in control of your debt with proactive financial strategies. Here are a few to consider:
Calculate your monthly net income (your take-home pay after deducting taxes, insurance, 401(k) and other payroll deductions).
Use an online app, like MyJFG, to track your spending. With MyFinance Manager, you can break down spending by category, understand your spending habits and adjust to stay on track. You can also link credit cards or accounts from Johnson Financial Group or other financial institutions to view your complete financial picture.
Missing or late payments could lead to more debt. Use a calendar to keep track of when bills are due, and set up automatic payments through a banking app. With Bill Pay through MyJFG, you can easily pay your bills online and schedule payments within minutes.
If your debt becomes unmanageable, consider how to create a debt repayment plan. Here are a few common approaches on how to prioritize your debt:
Use our simple debt consolidation calculator and talk to an experienced financial professional to determine if debt consolidation is right for you.
Whether you need help developing a detailed debt management plan or encouragement to just get started, our team of experienced financial professionals is here to understand your unique situation and provide tailored solutions. Contact an advisor today.
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