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If you have taken long to think about the best indicator that will prompt you to trigger off your credit card debts, then remember that it isn’t dependent on your income or the total amount of debt that you owe! Rather it mostly depends on the way you plan to trigger off your debts. Researchers, Michaela Pagel and Theresa Kuchler published the works in their latest working paper by the National Bureau of Economic Research.
More than 520 customers were chosen as a sample in between the months of September 2014 and 2016 and it was made sure that all of them linked their checking accounts, received bi-weekly paychecks and appeared to link all credit card accounts. After they signed up for ReadyForZero, the customers made a plan on the total reduction that they wished to make on their debt every month. This turned out to be the biggest predictor of how much they’ll be able to pay down. However, the American consumers have got a long way to go as the Americans collectively owe a mammoth amount, that of $1 trillion in the form of credit card debt.
People still give more priority to their short term wants
Even after the consumers were provided with such improved odds, they still fell short of achieving their goals. On an average, every individual was just able to reduce their debt by 25-30% of the dollars that they planned to pay off. It was seen that the consumers got impatient and they wished to fulfill their short term goals which they gave more priority over paying off their debts. If you ask about this to the behavioral economists, they will name this as present bias which including giving more priority to short-term wants rather than on long-term wants.
This is not the first study which concluded that the commitment to repay debt is a vital ingredient which lets you actually do it. Majority of the people are more likely to pay off their credit card bills when they get a called where an automated voice asks them to commit themselves to paying back the debt within a short time span, like 24-72 hours. This was found out by the researchers who studied this in the Boston University’s Questrom School of Business.
Millennial women are lagging behind men with their finances
Both the millennial men and women are gradually giving more priority to their family and household but there is a sharp difference in the way in which they plan to achieve a goal. Men usually tend to give more value to money and they are given more pressure about offering money to the family. For the women, it’s just flexibility and time. Their long term goal is to just have that balance between life and work.
One more divide for women and men is parenthood. More than half of the millennial parents are of the opinion that having kids has got a positive impact on the advancement of their career. This half is mostly the male generation. It is not that having kids will always have a positive impact as 25% of the female millennials reported that their career advancements were halted due to the fact that they had kids.
Therefore, as the American consumers are all drowning in debt in all forms, it is high time that they take up immediate actions to bid goodbye to debt and live debt free.