Is keeping up with the Joneses fueling millennial debt?

June 29, 2018 : Teresa L. Clark

Competing against peers to elevate social status and provide material proof of wealth is often referred to as “keeping up with the Joneses,” which is a phrase that became popular in the early-1900s. Now, a little more than 100 years later, millennials (and others) continue the tradition of using their peers as a measuring stick for status and wealth, and it could be increasing their debt. But, is all debt equal?

“When talking about debt, it is important to remember the two basic kinds: good and bad,” said Jackie Perlman, principal tax research analyst at The Tax Institute at H&R Block. “Debt can be good if used for long-term investments or meeting important goals like getting an education or buying a house. However, debt used for consumption, especially to give the appearance of affluence, can last longer than the asset that was debt-financed. Also, even a ‘good’ debt is a problem if the borrower cannot pay it back in a timely fashion.”

Another factor that gives a more complete picture of the benefits or consequences of a debt is the tax implications. Some people will reap tax benefits from debt that has a tax advantage, like student loans, mortgages and home equity loans used for house improvement. Other debts lack a tax advantage and include personal debt, auto loans and home equity loans not used for home improvement, though those may be necessary and sound loans to take out in the overall financial picture.

Since World War II, household debt has increased by a factor of six. For any generation to teach their children about something that changed substantially from the previous generation to the next, is a big challenge; how can they give good advice on something they’ve never experienced? And, the increasing types of debt that could be acquired also may be the reason why so many people say no one taught them how to manage their money; the landscape was everchanging.

“Debt now is different than it used to be, because people were paid more and were able to pay off debt more quickly. Maybe millennials weren’t taught very well about saving money,” said Daina, a 34-year-old who lives in Lawrence, Kansas, and works in health care.

By looking at good debt and bad debt from a millennial perspective, let’s explore some ways to understand the differences and even find ways to make some bad debt…less bad.

A type of good debt millennials typically have is student loans, even if they usually start out too high for comfort.

“It was another bill to deal with and it kind of stresses you out at first, especially when you have your first job and you haven’t figured out your budget,” said Trenton, a 23-year-old from Tulsa who works in sales. “During college I learned quite a bit about finances, and with that knowledge I think I’m better off with money management than most of my generation – I’m pretty stingy with my money.”

These and other types of good debt tend to be in larger amounts than bad debt (student loan debt averages $39,400 for the Class of 2017) and have lower interest rates. When payments are made on time, they can help the borrower build good credit. Also, beyond the long-term financial benefit of a college education, there’s also a tax benefit to make the repayments a little easier to make: up to $2,500 of the interest paid on student loans is tax-deductible, even if the taxpayer doesn’t itemize. But, getting in the habit of paying them can be a challenge.

On the other hand, there is bad debt and that includes credit cards, some of which have annual percent rates as high as the mid-20s. Some good news here is that millennials tend to have little credit card debt: the average credit card debt carried by millennials ages 18 to 24 is $709.79. Maybe some are trying to use the approach Trenton takes with his credit card.

“I’ve had my credit card for four years and have really built up my credit. I use it on everything and just pay it off monthly with my debit card. Plus, cash back is basically free money,” Trenton said.

So maybe it all depends on which Joneses millennials are trying to keep up with that determines their financial health; picking role models like Trenton and Daina can help when it comes to spending and having savings goals.

“In five years, I want to be more financially stable, not living in an apartment but in my own house, and working at the same job,” Daina said.

For more information on taxes for millennials and about how debt can impact tax outlook, contact a local H&R Block tax professional. To find the nearest H&R Block tax office, visit or call 800-HRBLOCK.

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Teresa L. Clark


Teresa L. Clark came to H&R Block in January 2010 after working as a civil servant for more than 13 years. Since that first tax season she has written blog posts and talking points, edited content of all shapes and sizes, facilitated media interviews for the experts in The Tax Institute at H&R Block and supported the DIY team. Clark has a master's degree in integrated marketing communications from the University of Kansas and is a member of the Honor Society of Phi Kappa Phi.

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