For Gen Y, Dreams and Money Often Clash
By Eva Norlyk Smith Ph.D.
April 6, 2012
My credit card debt isn't that bad yet, but I think it's going to get worse. I work only about 20 hours a week at an after-school program for kids. I love it, although the pay is awful — it's my first job out of college. My savings are almost gone and, last month, I had to pay rent ($600) with my credit card. This month, I'm going to have to do it again. I've been paying the minimum on my credit card bill each month, but not extra because I can't afford it with my car payment, food, gas and student loans.
My uncle just offered me a job that I know I'm going to hate, even though it pays much better. It's a full-time job; I have the option of working overtime if I want extra money. My dad says I should take it because he's freaking out over my credit card debt — he says that me being in debt is his biggest fear.
If money were no object, I'd keep my job and continue applying for better-paying ones in my field. So I've set a deadline of four months. If I'm still racking up the debt (and haven't found my dream job) by then, I'm going to take my uncle up on his offer. But by then, I'll be $2,400 more in the hole, so my dad is pressuring me to take the job with my uncle NOW. — Elaine
Boy, that's a tough one. Dreams pitted against the need to make a living is one of life's biggest quandaries. It's never fun to work in a job you don't like. On the other hand, taking out credit card debt is rarely a wise choice either. The choice is ultimately up to you, of course. I can only offer a few perspectives to help you decide.
In regards to the job opportunity, you are definitely a product of your generation. According to a recent MTV study called “No Collar Workers,” millennials (young adults in their high teens and 20s), prioritize loving what they do over making a lot of money. Half the millennials surveyed said they would “rather have no job than a job they hate,” and that they preferred “loving what I do” over big salaries and bonuses.
However, before you toss that job prospect out the window, keep in mind that things are not always what they seem. A job you don't like may seem terribly limiting, but sometimes there can be advantages to buckling down and doing something you don't like, especially if it is for a limited time and if it helps create a financial foundation for accomplishing other goals. It can also help give you broader work experience and the discipline to endure short-term discomfort, which will serve you in the future.
Plus, if you could take your uncle up on his offer, you could continue to look for your dream job while making enough money to pay the bills.
What about the other option — waiting four months to see if you can find a job and filling in the gaps with credit cards? Well, girlfriend, I hate to break it to you, but with that strategy, you're digging yourself into a hole that it will take you a while to get out of.
It's very easy to take on debt, but it's surprisingly hard to get out of. You don't say how high your credit card debt currently is, but let's presume that it's at $1,000. You would be adding another $2,400, for a total of $3,400. If you pay down the debt with $100 each month, it would take you four years to pay it off (assuming an average interest rate of 18 percent). You would also pay nearly $1,400 in interest.
If you were to pay just the minimum, it would take almost 13 years, and you'd end up paying roughly $8,600 in interest. To calculate the specific scenarios for your credit card debt, use this credit card calculator.
However the burden of paying off the credit card debt is only half the story. The way you are currently managing your credit (paying only the minimum and accumulating credit card debt) will also affect your credit score. And that could limit your financial options in numerous ways.
In short, taking on credit card debt is rarely a solution. It's just a problem disguised as a solution. With record unemployment rates among young adults, spending another four months looking for a job in your field could get you nowhere. In the end, you could still be forced to take a job you don't like and stick with it much longer than you'd like, just to be able to pay off your debt.
All in all, neither option looks that attractive. But why are you giving yourself just two options? If you really feel that taking the job with your uncle is a dead-end street, look at your current financial situation. Is there any way to make it more sustainable by matching expenses up with income?
As a third option, consider doing some hardcore budgeting. Look for ways to cut expenses or increase income. Yes, you will have to be ruthless in cutting back, and yes, you will have to make sacrifices you don't like one bit (like finding a cheaper place to live). You may have to take on another part-time job, spending 10 hours a week walking dogs, baby-sitting or doing anything that will help pay the bills.
Yet at least you would be setting yourself up with a proper foundation to pursue your long-term goals debt free and eventually, hopefully, land a job in your field. Whichever option you ultimately choose, be cautious not to paint yourself into a corner. It's rarely a good idea to pursue a course of action that will force you to make even harder choices down the road.