I know what you are all thinking, “Great song!!” released by The Who in 1965 right on the cusp of Gen X and a true classic. When I think about my generation – Gen X, I think of records, VHS, Donkey Kong, microwave ovens, spiral perms and Hyper Colour T-shirts.
Growing up in the 70’s and 80’s I also vividly remember the recession. It hit in the late 80’s resulting in high unemployment, 17.00% mortgage rates and a falling property market. There is no denying that times were tough, really tough.
So what do the experts say about Gen X? Well, they often refer to us as the lost generation. Lost because more often than not, both parents were working to make ends meet. Long day care centres were full to the brim and many children (from very early ages) were coming home from school to an empty home. With the financial pressures placed on families divorce was also on the up so there were many single parent families.
Toady we are characterised as being incredibly sceptical with a ‘what’s in it for me’ attitude and some say that we had the worst music ever of which I totally disagree. On a positive note we were the best-educated generation at that time with 29% of us obtaining a bachelors degree or higher.
So what does all this mean for Gen X from a financial perspective? Well, the greatest issues facing Gen X is debt and as a result a lack of savings. According to a survey by RaboDirect, Australians aged 30-50 are the least financially secure and are struggling under a mountain of debt. When you also consider that Gen X makes up 40% of the Australian population this is a huge problem.
The survey found that one-third don’t have enough emergency money to last more than 2 months should they lose their income and one-third only just manage to make ends meet payday to payday. A whopping 40% say that their financial situation has worsened during the past year.
Why is this so? Why have we made such a mess of our finances? Experts say that we have quite simply overextended ourselves. A lack of control has resulted in over spending, 40% of Gen X’s said they would use their credit card to purchase an item they otherwise couldn’t afford. A similar amount also said that they would find it difficult to meet their current credit obligations. These competing financial priorities are making it impossible for us to balance our books plunging us further and further into debt.
With this in mind over the coming weeks I will be providing some useful tips and information to ensure that you don’t find yourself in the same predicament or, if you are there now, provide a lifeline to help you get out of it.
Today, I am going to start at the very beginning and talk about credit reports. Last month there were changes made to the way that our credit history is being recorded and reported that everyone needs to be aware of. The changes officially went live on the 12th March but the collection of data actually began in December 2012. The biggest change has to be that under the old regime banks were only required to report late payments that were more than 60 days late; this has now changed to 5 days. In practical terms this means that if you forget to pay your credit card and make the payment 6 days after the due date this will be recorded on your credit report as a payment default and will remain there for 2 years.
Now, when a lender does a credit check on you they will be able to see a lot more information than before. The additional information includes:
• Account open date and close dates
• Type of credit account such as a credit card or personal loan
• Credit limit. This is the maximum amount of credit available to you for an account. If you accept a credit limit increase the new credit limit could be included on your credit history.
• Monthly repayment history on credit accounts such as mortgages and credit cards. This will reflect whether you paid the minimum amount required on your financial commitments each month on time or not.
There has been a lot of talk about how this information may be used when assessing credit applications. It could be that if you have a number of late payments you may be offered a higher interest rate than someone that has a clean credit history. We will have to wait and see.
Here are some tips to ensure that your credit rating doesn’t suffer.
1. Pay your bills on time – If you tend to forget when your bills are due set up direct debits so that you never have to worry.
2. Keep credit to a minimum – Only apply for credit if you really need it.
3. If you are having some financial troubles talk to your lender. You will be surprised with how helpful they can be.
4. Know your credit history – you can get a free copy of your credit report from any credit-reporting agency. I recently got a copy of mine from Veda. Here is the link to the free report http://www.mycreditfile.com.au/home/free-credit-file.dot
This is just the first step to gaining control of your financial situation. Over the coming weeks I will be covering off on more useful tips so stay tuned for more.