In the past, bankruptcy was a topic that was not talked about much. It was almost like a curse word. You were supposed to handle your finances responsibly, and you should not even be thinking about filing for bankruptcy.
That has changed with the younger generations. In the past, Boomers were able to earn decent wages and buy a home cheaply. That is not the case nowadays. Younger generations, such as Millennials and Generation Z, are realizing that earning enough money to buy a home is like a fantasy. The average home price is now at more than $420,000, with wages remaining stagnant. The minimum wage in Maryland is $15 an hour, or $31,200 a year. It’s hard for anyone to buy a house with such a low income.
Is Bankruptcy Acceptable or Shameful?
Because of these discrepancies in wages and costs, younger generations are more likely to have no shame when filing for bankruptcy. They tend to view bankruptcy as a more acceptable option to manage overwhelming debt. They do not find it as shameful as the older generations, who often see it as a significant negative mark on their credit and even as a sign of personal failure.
Younger people are more likely to see bankruptcy as a financial tool rather than a burden or curse. Younger generations have experienced more economic instability and higher levels of student debt, making bankruptcy seem like a more viable option to manage their finances. Increased access to financial information and education among younger generations may contribute to a more nuanced understanding of bankruptcy as a potential financial tool.
There has been an increase in bankruptcy assistance among Generation X and Millennials. There has been an increase of almost 25% in Gen X and a 40% surge among Millennials. Household debt has been rising, with younger generations seeing huge increases in auto loans, credit cards, and student loans. These balances are continuing to grow and bankruptcy may be the only recourse to protect themselves financially.
Millennials do not feel the sense of failure or shame that their parents or grandparents might have felt about debt. Instead of focusing on their feelings, this generation looks for solutions to their problems. They look for ways to handle their financial situation. For them, filing bankruptcy can be a path to financial freedom.
Overall, money and finances have so many psychological nuances for each of us as humans. Each of us has our own unique relationship with money. Money is very personal to some people, while others could not care less about it.
Bankruptcy is seen as a generational issue. There was a stigma associated with it in the past, but younger people are much more open to the idea nowadays.
Causes of Debt Across Generations
- Boomers: Primarily due to medical expenses, job loss, and mortgage debt. Many were hit hard by the 2008 financial crisis but had built-up assets.
- Millennials: A mix of student loan debt, credit card debt, and job instability. Many entered the workforce during or after the 2008 recession, leading to delayed homeownership and financial insecurity.
- Gen Z: High-interest debt (like buy-now-pay-later services), student loans, and gig economy job instability. They are more likely to accumulate debt through digital financial tools and subscription-based spending.
Impact on Future Financial Behavior
- Boomers: Become more conservative, avoiding debt and focusing on financial security.
- Millennials: Try to be financially responsible, but many remain skeptical about traditional financial systems and look for alternative investments like crypto and side businesses.
- Gen Z: Likely to take calculated risks, using bankruptcy as a learning experience rather than a major setback.
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