Documentary: Millennials & Debt | No Room to Maneuver

[Music] you know they got university they give them credit cards are they candy you know take this credit card thousand dollars a try you know and I have got 20 credit cards just go all the banks turn up take a credit card you know they get your right in college right the banks get you rate the first day you walk in our frosh week there's five tables sitting there it's the big fire frame back twenty years ago you could get a part-time job or a full-time job during the summer save enough money pay your tuition now with the high cost of tuition you can't make enough money in the summer to do that so we were having a supplement with your with your credit cards or you're having to take on massive OSAP debts people have become more accepting of the idea that it's okay to carry debt it's become more societally acceptable and because people are growing up in an environment where it appears to be okay to have debt they're not as afraid of it and when you're not as afraid of it you're not as wary of what you're borrowing so when you're looking at a contract to sign for an installment loan from a payday loan company it's got a 49% interest rate on you're not scared to death of it but you should be at one time payday loans were very taboo things they popped up there were things that people knew not to have so I meet with an older person they generally say yeah I should never went to the payday loan places and I was wrong I didn't have it with the younger generation and I'm finding his it's acceptance this is just what them and their friends do [Music] for several years now economists have raised red flags Oh Justin what we hear stories every day about why people get into debt we do our Joe dead or study because we want to go beyond the anecdotes and figure out exactly what causes insolvency so in order to help our clients we gather a lot of information who they owe money to what they own what their budget looks like and we take all of that data we crunch the numbers and develop the profile of the average person who files insolvency that's what we call Joe debtor so in 2018 what we found is that the Millennials are now our largest area of concern last couple of years we've been focusing on seniors and single parent mums and there's still a very important segment of our survey but the Millennials are really causing us dramatic concerns because of the changes in their segments what we've seen is not only an increase in numbers that are filing but a change in the makeup of their debt the most common age we see for someone filing a consumer proposal or a bankruptcy is in their mid-40s at a gen Xer but it's Millennials who share of insolvency is rising the most since we first did this study in 2011 Millennials share of the workforce has gone up by 21 percent there are greater percentage of the workforce but since that time their share of insolvencies filed has gone up by a hundred and sixty two percent the average person that we see was about fifty thousand dollars the average millennial only it was about thirty six thousand dollars so you think they would be more able to deal with their situation but the truth is that they can Millennials are a generation buried in student loan debt thirty one percent of Millennials that I meet with have student loan debt student loans that are guaranteed by the government are only eliminated in a bankruptcy or a consumer proposal if you've been out of school for over seven years the day they graduate or some of them drop out you still owe the money even if you've dropped out of the course but once have graduated if they can't find employment again they're now starting to think well how do I take care of repaying all these debts and they haven't been out of school now long enough for the debt to be forgiven or for them to be eligible for some of the programs through the government to have the debt reduced so they've got a lot of student loan debt and they sometimes had to supplement their student loans with using their credit cards or lines of credit to finish the education if they couldn't get enough OSAP so they're used to debt from day one almost as soon as they leave the nest it's like it's like credit right so there's no period of living cash only or or living by cash flow owning like very few of them have experienced a five-year period where they just paid their bills on their income I vaguely recall tuition being around $3,000 I vaguely recall paying rent sharing an apartment with somebody where I believe we paid $300 each for a two-bedroom apartment and beyond that a few hundred dollars for books and then obviously the rest of the budget was beer but I I can't imagine she was go for that cheap now which then means they're using using payday loans or using credit cards using anything to just to get by on their day-to-day living expenses now anybody who's ever seen any of my interviews in the past knows that these payday loan people drive me absolutely nuts and I'm gonna tell you why so a Millennials average income it's about twenty five hundred dollars these are the people that became insolvent filed something with our firm they have an average of forty eight hundred dollars worth of payday loan debt so the idea behind a payday loan the way the law is written you're allowed to borrow up to 50 percent of your normal take-home pay so you get paid every two weeks if your income $2,400 a month like a millennial that means you should be able to borrow $600 well so the average millennial that we see owes $4,800 in payday loans that's almost well it is it's twice what their monthly income is so obviously the laws aren't working properly but more importantly you can't service $4,800 with a debt that you're supposed to repay in two weeks if you only make $1,200 every two weeks it's just not possible the idea behind a payday loan is you're borrowing a relatively small amount of money but you're required to pay back the entire amount in a very short period of time the interest rate so to speak themselves are sort of within the law but the fees that are charged in terms of carrying this debt are enormous in the context of how much money you're borrowing so you might borrow six hundred and fifty dollars and have to pay it back two weeks later and oh the payday company $800 to do it if that was an isolated incident that really shouldn't break anyone but the thing is you needed that money before you got paid and then when you get paid you're using potentially the majority of your paycheck to pay back the loan which for most people is gonna leave them broke again and so then the cycle starts where you're moving on to potentially a second payday loan or even moving into an installment bond through a payday lender which is a higher amount of money payback over a longer period of time but at an exorbitant interest rate that makes it almost impossible to effectively pay back I saw somebody last week week before last with 15 payday loans that's not the most I've seen but she's recent and she had so 12 of them were actual traditional payday loans and three of them were these new installment loans and that's what they're doing now because when the government brought the changes in to try and restrict things with payday lending last summer the payday lenders just said okay we'll just lend them more so instead of actual payday loans we'll give them installment loans five thousand ten fifteen and that's all the ads you see now you don't see payday loans being advertised by payday lenders it's always installment loans now they have good marketing they they talked about the fact that they can help they don't talk about the fact there's that there they don't talk about their high interest rate they talked about these low payments they don't talk about the fact that's over five six seven years they hook people on that low payment because people are stressed and all they're thinking about is okay I need to make these credit card payments hey company XYZ is giving me $5,000 no question hostile I can use that hey my credit card at no 18% not thinking about the fact that now just signed on to a loan at 34% all they're looking at is monthly payment I've noticed also a lot of payday loan commercials that you see on TV very specifically I think targeted towards the millennial generation you see a lot of the actors that they use in their ads very young people and I was I was saying to my wife the other day we saw one of the commercials and it was almost like a parenting 101 commercial where the ad was all about you know we have two products we have a payday loan or we have a you know five ten thousand dollar credit line available which one will you choose they kind of reminded me about being a parent of a young child where you know if you want your kid to eat your vegetables it's difficult sometimes to say to the kid you've got to eat your vegetables whereas if you give them that choice of two bad options and say well you know which one are you gonna have today you're going to have the broccoli or the cauliflower they're more inclined to decide well I guess I'll have the broccoli today because I have to choose one of them and it reminded me this payday loan commercial of that aspect that you're kind of gearing the ad it's quite clever in a way that you're gearing the ad to say these are not great options but you know here's one option a payday loan or here's a credit line that has a 35% interest rate which one will you choose and I think a lot of people think well I guess if I had to choose I would choose that one because you're asking them to make that choice and I think the ads are very specifically targeted to that age range for that reason it's kind of disturbing because the Millennials are also on the other hand are very dead and finance savvy more than I was more than any of my buddies were like they know more about stuff to do with money and death mostly I think it's because of the the internet I mean they grew up with the Internet so they're just used to finding stuff out and researching things but that doesn't always help them because they're also more susceptible to online lending and things like that it's so easy right like payday loans that they can get a payday loan in five minutes online right so there's no barrier to like getting up out of your chair getting in your car driving somewhere sitting with somebody face-to-face right it's just it's impersonal and it's super easy right credit is fundamentally you know it's making up the difference it's making up the gap between the money that's coming in and my different obligations on a monthly basis if I don't have the money saved up I'm using credit to maintain some kind of balance and I mean banks our main bank stole then money in lots of different ways but they're more cautious about how they lend money compared to ten or fifteen years ago and so so if if the Millenial can't get a big line of credit and there's limits on their credit cards I mean not that those are good things to be doing but that's that's kind of a natural instinctive thing that people will do to maintain that balance but at some point if they still have that imbalance between their inflows and their own flows and they're tapped out on their credit what's the next thing that you do when you start to rely on these other lenders that will lend money to virtually anybody but had very very high interest there's this perception that Millennials don't use credit cards they don't have access to credit cards well it's not true for the last three years the amount Millennials owe on credit cards has been increasing and that was after it declined for a few years prior to that it's not big ticket items that they're using their credit cards for we see it's very common that they're using credit cards for everyday living expenses they're buying groceries they're paying for clothes that's where they get into trouble with the credit cards because they start using them to deal with I have to make a payment I have to do this I have to get rent done I have to buy food so that's the stopgap measure which gets them into the trouble that spirals out they never had a credit card that you had to pay off each month so for me at forty five years old I remember my first credit card was a $500 credit card that I got and you they'd offer and stopped working if you didn't pay off each month you never had access to it it stopped working were the young generation they have these big limits and all they ever have to pay is a minimum payment each month so for them it's a lot different in that side of it because it's so easy for them to carry on so that thought process isn't about paying it off so I'm gonna say 25 years ago people were still kind of afraid of being in debt I can tell you personally that in 1992 I was in university I had to struggle to get a five hundred dollar limit on a credit card it was not easy to take on debt when I was younger and that's changed so now we see people who are in their early 20s who've got a couple of credit cards maybe a payday or maybe not a payday loan they'll have cellphone contracts that have gotten out of hand and this will aged me obviously but 23 years ago you couldn't get a cell phone contract there really wasn't such a thing for most people and so you certainly couldn't go over on your data and you certainly couldn't make a have a bill that you couldn't pay looking at a Millennials monthly budget that rent their groceries - car payment all those sort of things they've got $2,400 a month to spend that's their average income and it leaves them with about $250 a month to pay towards their debts well you can't make the minimum required payments on $36,000 of the dead with $250 it's just not possible so of all the Millennials who file with us 88% of them are working at the time they file so it's not a problem that they don't have a job the problem is they tend to be working at a series of part-time jobs they're doing contract work their income is sporadic and so it's very hard when you have unstable income to be planning for the future you end up using debt to survive and that's what ends up causing some serious problems the economy has been what it has been for the last several years there's jobs out there but not necessarily long-term the long-term employment or jobs that are going to pay a lot of money so they're getting in there they're making minimum wage or a couple blocks above that but that's barely covering a class by the time they pay rent their cell phone their car insurance their car payments life expenses they have very little left over money yeah it's several jobs part-time they're interns it's not they're not working in their field that 2 or 3 years of experience under their belt employers it's kind of you are kind of hunting for your work all the time like no stability so like you know the stability that was afforded my parents generation or even mine is just not there like they don't think that way right and so they expect to be a debt and just for example I had one client who was some wanted to work in graphic design and had a pretty extensive educationally at least to my eyes and had one six-month contract for graphic design a few years ago but but had otherwise been working jobs that were in factories and that kind of thing again on contracts willing to work and do almost anything but having a really hard time finding a job that actually fit what he was trained for job market cost of living the way the way housing prices have ballooned out of control over the last 15-20 years there's a lot of factors that I think of putting Millennials at a risk of having long-term financial stability and truly hope it comes back like nobody you know nobody should ideally be living with financial uncertainty but there's always these risk factors that can that can cause that unfortunately the price of housing is substantially higher than it was several years ago so one of the challenges that the other person is facing is how to even get to a point where you can put a down payment together to buy them let alone how are you gonna pay for it once you get into it with an average take-home pay of about $2,400 a month Millennials don't have enough income to meet all of their living expenses and their debt payments and it's particularly a problem in big cities where the cost of living has gone up rent is very high it's very difficult to survive and unlike Gen Xers or baby boomers who perhaps owned a house that's gone up in value and they can refinance the house to cover their debts Millennials don't have assets so they're doubly bound by lower income and not having the assets and as a result we are seeing more and more Millennials resorting to a consumer proposal or a bankruptcy they simply don't have any room to maneuver they're out of options now one of the reasons that the demographics are changing slightly is that the Generation Xers the baby boomers that have houses have been accessing the equity in their houses to repay their debt so the average Canadian household has more debt now than they've ever had in the past but the folks with houses which is easily a third 40% of the population have been tapping into that equity to carry them through this crisis the problem that we're seeing now and this has got nothing to do with Millennials is it interest rates have started to rise and so I predict that in the next year the number of clients that we see with houses is going to go up dramatically well that's exactly you're more likely to have a senior Gen X with the house than you are with a millennial because they haven't had to chat the time to get that income save that downpayment get that history get that job to be able to afford the bigger the bigger debt stuff like cars boats homes if there may be a Gen X or maybe their timing is right where they could get into a home before the prices ballooned out of control and they benefited from that growth in the value where now they have significant equity in their home where if they have a bit of like a debt problem because their timing is right they've got equity built up just because the values went up it's on they did anything special they can go to the bank and they can tap into some of that equity to consolidate their debts whereas if you missed that time if you're just a little bit younger right if you're just a little bit younger and your your millennial compared to a Gen X or you didn't hit the timing right so you don't have the money to get into a house and now you have a debt problem you try to talk to your bank about refinancing but you don't have the property where the bank sees that it's a reasonable risk to lend you that money so if you don't have that property and you're not gonna get a consolidation lend every small interest rate so it's like there's these different factors that I feel like the the Millennials are there in bit of a tough spot the challenge for Millennials to get into the home market is of course the price of housing has gotten ridiculous there are no starter homes for people anymore and it's impossible to save that downpayment if you're trying to service all these debts so again the Millennial gets out of school they've got $15,000 for the student loan debt so already they're behind the 8-ball that's got to be dealt with before they can start saving then they're setting up their new home so there all sorts of purchases you got to make furniture pots and pans and all that sort of stuff cost money and so you've got this $36,000 for the debt and no ability to pay at them so buying a house it's just not possible for most of them what I think I'm hearing from a lot of people who are younger is that they feel like that they're in a trap of debt and a cycle of precarious employment that they don't see a way out of so they're carrying student loans which can be quite hefty they are carrying credit card debt things like payday loans or installment loans their pay is barely covering their living expenses and they're not seeing the sort of expectation of income increasing over time that the people in generations before that might have been able to see [Music] [Music] [Music]

Channel: Hoyes Michalos

Views: 439,982

Keywords: Documentary, millennials, debt, no room to maneuver, hoyes michalos, millennials and debt, insolvencies, canadian debt, Canadian consumer debt, consumer debt, consumer, bankruptcy, consumer proposal, consumer debt in canada, debt-to-income ratio, study, documentary storytelling, news, news reporting, payday loans, payday, required by law, law, restructure debt, personal bankruptcy, tv shows - topic, full documentary, Canada, insolvency, insolvency canada, millennial, debt crisis

Id: 53GiUoEeIvA

Length: 21min 44sec (1304 seconds)

Published: Wed Mar 20 2019