Is Talking Debt No Longer Taboo?

As the silence breaks, could the openness lead to a greater credit mess?

When it comes to making small talk almost any topic seems fair game – well, except that one four-letter word… debt. “Credit card debt may be taboo topic No. 1 for Americans,” says CreditCards.com, deduced from a poll they conducted in 2008. On the other hand, it looks like the stigma attached to having debt is making a disappearing act and Americans who were once tight lipped about their struggles  are increasingly becoming more open talking about it.

 
That’s according to a Life study of 2,000 Americans – 1,000 Baby Boomers (ages 49-67) and 1,000 Gen Xers (ages 35-48) by Allianz Life Insurance Company of North America, that finds as the stigma of having debt gradually disappears, largely because living with debt has become a way of life for both Gen Xers and Boomers.

“Over the last three decades, there has been a collective shift in how people view debt – it’s now perceived as a normal part of one’s financial experience and that has fundamentally altered the way people spend and save,” Katie Libbe, Allianz Life vice president of Consumer Insights says. “If Gen Xers continue to delay saving for retirement until they are completely out of debt, their nest egg is clearly going to suffer. For Gen Xers who are behind on saving, better debt management, with a focus on credit card spending, should be the first issue they address to get back on track.”

While it could be beneficial to talk openly about debt, being too comfortable with having debt could be disastrous for one’s financial goals. Allianz fears the increasing comfort could create a ‘cloudy future’ – particularly for Generation Xers who see debt as a necessary way of life.

In fact when asked which philosophy they prefer, Gen Xers chose “enjoy and live for today” while Boomers responded “save and plan for tomorrow.” It isn’t any wonder that Gen Xers are amassing more debt to fulfill their lifestyles are thus less prepared for retirement than even the Boomers before them.

Although both Boomers and Gen Xers admit to using credit cards as a survival tool it is Gen Xers who are most indebted. One in five Gen Xers believe that going into debt to handle day-to-day purchases is “just a fact of life” while only 14 percent of Boomers see it that way.

Considering their philosophy, it isn’t surprising that Gen Xers owe more than Boomers on every type of debt.

  • They owe an average of $8,000 in credit card debt while Boomers owe $6,000. Some even admit to carrying more than $10,000 in credit card debt.
  • On mortgages Gen Xers owe $144,000 while Boomers owe 90,000
  • As for non-mortgage debt, Gen Xers owe an average of $12,000 while Boomers owe $5,000
  • Fifteen percent of Gen Xers admit to owing money to their parents.

You may be inclined to think that these are folks on the lower income spectrum, but both Boomers and Gen Xers say, “Lots of smart, hardworking people who are careful with spending also have a lot of credit card debt.”

Why we struggle so much with debt

The answer lies in the way most people handle finances, so poor credit management typically bears the brunt of blame.

Both Gen Xers and Boomers fail to pay their credit card balances in full each month. Failure to pay off credit cards and paying late can lead to higher interest charges and added fees which can make it difficult to save. In fact according to the study, 23 percent of Gen Xers and 19 percent of Boomers believe “you can’t save for retirement until you pay off credit cards.”

This growing comfort with debt may also be having a greater effect on the retirement plans of Gen Xers.

Seventy-three percent of Boomers say they are clear about how much money they will need in retirement while only 52 percent of Gen Xers have that knowledge. Although twice as many Gen Xers as Boomers say they are either unsure about when they plan to retire or don’t plan to retire at all, the admission and prospects is disconcerting.

“Sharing our stories whether good or bad always has a lesson to be learned. An  increase openness for sharing debt stories – both the struggles and successes – should aim to help each other deal with and avoid debt. The danger is we become so tolerant that debt becomes woven in our culture and further perpetuates a cycle of financial instability for people,” April Lewis-Parks Consolidated Credit’s Director of Education and Public Relations. “The fact that Boomers seem to be the generation making strides in preparing for retirement is heartening since they are closer to retirement age. Luckily for Gen Xers they may have a just little more time to work on preparing for retirement and hopefully retiring debt free.”

In addition to creating a budget and spending plan, Parks says don’t be shy about seeking the counsel of a financial professional or help from a reputable financial company especially if you’re saddled by debt.

A good place to start is with Consolidated Credit’s debt management program. Dial now for free to speak with a certified credit counselor or request help online.