(STACKER) – Entering adulthood is proving to be expensive for Generation Z, or those people born between 1997 and 2012. Just as the members of this generation are embarking on their careers, they’re also building up a hefty pile of debt — everything from mortgages to student loans, car loans, and credit cards. And that debt can quickly start to balloon out of control.
In fact, Gen Zers aged 18 to 26 saw their overall debt burden soar 179% between 2021 and 2023, according to a recent study by LendingTree. That was the biggest change of any generation during that period, topping increases of 88% for millennials and 26% for Gen X. Meanwhile, baby boomers saw their debt burdens decrease nearly 16% in that timeframe.
But it’s not simply a case of young people spending recklessly — there are bigger issues at play. Moneywise explains what’s really going on and how to get back on track if you’re snowed under, too.
What’s behind the growing debt for Gen Zers?
As with any social trend, there are a number of reasons Gen Z is now grappling with a hefty deft load. But the cost of living can’t be overlooked: It has become increasingly expensive to live in these inflationary days, and younger generations don’t have decades of savings to fall back on to get through.
Which may account for why the most typical type of debt Gen Zers carry is on their credit cards — a reality for nearly 77% of people in this generation, according to the report from LendingTree. Gen Z appears to deploy credit cards for spending large and small, as their card balances have climbed 174% over the past two years, data from LendingTree shows.
And then there’s the auto loans: Many young adults also need to purchase a car for getting to work and general transportation. But car prices have increased over the past two years, according to Consumer Reports, and that’s seen auto loan balances climb 59% over that time period, to an average of nearly $9,900.
Student loans also play a part, with nearly 35% of Gen Zers holding an outstanding balance. And higher education has grown more expensive over the years, which has then translated into a 135% increase in their student loan balances over the past two years.
Many Gen Zers also lean on personal loans to get set up in life, including paying for improvements on the homes they’re starting to buy (which of course adds mortgage balances to the pile of debt too) and other general expenses that start cropping up in adulthood. Gen Z personal loan balances jumped 207% in the last two years to an average balance of more than $1,900, according to the LendingTree report.
With all the odds stacked up against them, many Gen Zers may find it’s easy to get into debt, while getting out of it can feel next to impossible. Here’s how to get back in the black whatever generation you’re from.
Control your spending
One of the most straightforward ways to control your debt is to control your spending, be it on small things (a daily coffee) or big-ticket items (opting not to buy a new car if your current car runs perfectly well or can be repaired for a reasonable price). It may help to look at all your spending for the last month and figure out where you can cut back. Although you can’t necessarily count on this happening, you may be able to negotiate price reductions with your phone, Internet, TV, and energy providers, which will reduce your monthly spending.
Creating a budget — and more importantly, sticking to it — is one of the best ways to keep your spending on track. Doing so can not only help you to reduce your debt, it’ll also help you to boost your savings and meet your long-term financial goals.
Increase your income
Another way to reduce your debt is by finding ways to boost your income. If there’s a way for you to make more money — either at your current job or by picking up some work on the side — that extra cash will obviously give you more resources to pay down your debt and save more money.
You could also earn some extra cash by selling items online, renting out some space (a room or even a parking spot) or getting a housemate to split some of your housing costs. If you’re open to getting creative, there are all kinds of ways to make money these days.
Create a debt paydown strategy
Think strategically about dealing with your debt. If you have the option, paying off your debt with the highest interest rates first can usually save you lots in interest. The average credit card rate is now 24.37%, according to LendingTree.
If credit card debt is a problem for you, you might consider calling the card company to ask for a lower interest rate. In fact, 76% of people who asked for a lower interest rate on their credit card in the past year were granted one, according to a recent LendingTree survey. Creditors for your other loans also may be willing to reduce your interest rate, so it may be worth your time to simply ask.
Finally, if you’re dealing with multiple different monthly payments, debt consolidation can make that easier. Banks, credit unions and online lenders offer debt consolidation loans. These loans consolidate your unsecured debt — such as credit cards and medical bills — into a single loan with a fixed monthly payment. This strategy can make sense if the interest rate on your debt consolidation loan is lower than the combined rate on the loans to be consolidated. You’ll save on interest payments and potentially erase your debts sooner with a debt consolidation loan. And instead of making payments to multiple creditors each month, you’ll only make one — to pay off the new loan.