Debt & Frugality

As Didi says in the novel (Findependence Day), “There’s no point climbing the Tower of Wealth when you’re still mired in the basement of debt.” If you owe credit-card debt still charging an usurous 20% per annum, forget about building wealth: focus on eliminating that debt. And once done, focus on paying off your mortgage. As Theo says in the novel, “The foundation of financial independence is a paid-for house.”

Millennials have savings rate of negative 2%

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The Wall Street Journal reports in Young Face a Savings Deficit that the under-35 generation (millennials) have stopped saving, so much so they have a negative savings rate: minus 2%. Moody’s Analytics says those aged 35 to 44 have a positive savings rate of 3%, while the 45-to-54 cohort have a 6% savings rate. The older you are, the higher the savings rate: it’s 13% for those 55 or over, which seems to be in the realm of being adequate enough to establish a modicum of financial independence ( as we say here at FinancialIndependenceHub.com, “while you’re still young enough to enjoy it.”)

In the linked subscriber-only piece (sorry!), the WSJ says the personal finances of millennials have become “increasingly precarious despite five years of economic growth and job creation.”

Back in 2009, the savings rate reached 5.2% for those under 35, the WSJ says, briefly surpassing the savings rate of those 35 to 44.  But today the median millennial has a net worth of US$10,400, down from US$18,200 for Generation X.

Student loans are also problematic: the median student debt for borrowers under 35 has risen to US$17,200 from US$6,100 in 1995.

How To Reach Your Findependence

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J. Douglas Hoyes along with Jonathan Chevreau explore how to use guerrilla frugality to eliminate debt and become financially independent. Read the blog article and hear the podcast.