I turned 32 this year, which means I’m one of the older Millennials. The last of Generation Y has just graduated this spring; they have never known life without YouTube or a smartphone, which I only bought reluctantly during my first year in NYC. (“Why do I need one? My flip phone works just fine,” I complained to my then-boyfriend. “Trust me, you’ll be able to send emails anywhere,” he answered. Oh, the Pandora’s box!) On the oldest end of our demographic, some of us have already bought and sold their first homes, gotten married, and have stable careers.
But wide though the age range of our cohort, Millennials on the whole have less wealth and less job security than previous generations going back decades. Millennials have 300% more student debt than our parents, the Baby Boomers. One in 5 Millennials live below poverty line. And almost half of us—defined as 18-34 in this survey—have $0 in savings. And this isn’t because we’re “entitled” or lazy: many of us are working 2, 3, even 4 jobs just to pay the bills.
If you are a Millennial and this comes as shocking and unbelievable, that might be because you have achieved a level of financial success that’s rare in our group. 1 in 6 Millennials have a savings of $100,000 or more, which appears to reflect the trend of growing inequality throughout society in general. Wealth is becoming ever more concentrated in the top percentile, and our “wokeness” isn’t making us a more equitable generation. For most of us, these stats merely confirm what we have already experienced first-hand or through our peers.
I’m fortunate enough to have a creative career that affords me the lifestyle I want. While I don’t have a robber-baronesque wealth stashed away, I am in the process of buying my first home as a single person, which is a point of pride. But my relationship to money, and by extension my entire adult life, have been defined by graduating at the very nadir of the financial crisis. I was one of the Millennials who have $0 in savings (well, my checking account once held just $50, but who’s counting?). Even among my friends, I notice a vast improvement in financial security and relaxed attitude from people who graduated just a few years earlier than I did (say, 2005-2007) and those who came a little after (2012-now). By contrast, coming out the gates in 2009 was a traumatic experience. For more horror stories on being born in the wrong year, check out this mega-viral HuffPost article. (You may need your swooning chair for it.)
Ten years later, however, I have found that money mistakes (or wrong timing) can be overcome. Here is what I learned about making the most of your money and building your equity, no matter what your starting line.
- Plan your budget: Set aside your essentials (housing, utilities) and loan payments, if any, and work backwards. What you have left is how much you can spend for food and fun—make sure you set aside some for monthly savings. This number is going to depend on your income—don’t be overwhelmed by advice saying you have to save 1/3 of your income each month, if doing so isn’t possible. Baby steps.
- Download an investing app: So, this admittedly hasn’t been very successful for me, because I’ve tried 3 (Scottrade, Ellevest, Merill Edge) and found all of them not intuitive to use for a lay investor. But not all investing apps / sites are created the same, and finding one that fits your style and knowledge-level will be key. My friend recommends Robin Hood, a commission-free investing app, and says that it is supremely easy and has been profitable.
- Trade tips with friends and family: Money is a dirty word for many of us, and I also feel cautious talking about it. But with close friends and family, I am open about seeking advice and offering tips where I may even be more knowledgeable. While my friend told me about Robin Hood, I told her about the advantages of buying over renting, which brings me to…
- Calculate whether you should be renting or buying: The upside of buying is that you get your mortgage principal payments back when you sell your property. For example, let’s say you buy a $250,000 home at 10% down and borrow $225,000. Then 5 years later, you sell the property at $300,000. During the 5 years, let’s say you have paid off $20,000 principal (not interest). Then you will get back $300,000 – ($225,000 – $20,000) = $95,000. From putting $25,000 down, you walk out with $95,000 in cash in five years, which is a really great investment rate. However, buying might not be advantageous if you’re not confident that the housing prices will go up—and also, you incur closing costs and brokerage fees in the tens of thousands for your transaction. Maintaining your own home tends to come with higher monthly costs (exterior, interior, insurance, landscaping, water, sewer, list goes on). In fact, nearly 2/3 of Americans live in places where renting is cheaper than buying a home. So grab a pen and paper and get calculating.
- Set your own goals: I read recently that by the time you are 30, you should have your annual salary saved up, increasing each year until you have 7 times your salary in savings by retirement age. Although I appreciate the sense of planning, that isn’t my idea of a good time, for so many reasons. When I hit retirement age 35 years down the road, the world will be a vastly different place. If all the climate crisis predictions come to pass, our world in 2054 will be extremely unstable—our notion of “work hard until play golf and travel” retirement will not be relevant at that point. Rather than saving for a paradigm past, I would rather set shorter-term goals and plans, focusing on making the most impact and experiencing most joy while there is still light, to paraphrase John Muir. So think, how much money do you need, now and in the future, to live the way you wish to live? This might still come out to be “save 7 times my salary for my retirement,” or it could be something vastly different like “save the next 5 years to be able to travel full-time,” or “save 30% of my income to be able to start a new business in the next 2 years.” What does wealth and financial security mean for you? That picture doesn’t have to look like anyone else’s.
What do you think of our Generation Broke problem?