Myth: “Millennials make poor financial decisions and do not save money.”
Fact: Actually, most of us are aware of our finances and that’s the reason we aren’t making large purchases.
Millennial incomes have been on the rise, and the post-graduation salary has risen nearly 25.4% to $51,000 since 2003. This statistically speaking, makes us the highest-paid and most-educated cohort in American history. What this number fails to tell us is that things are a lot more expensive now than they were back then. A dollar today, is definitely not the same as even a dollar yesterday. In fact, back in 1982 when the first batch of millennials were born, a dollar could buy you a two liter bottle of Coca Cola (tax included). Today, that same dollar now has the same buying power as $2.53, and that same two liter bottle, now costs $1.79 before tax.
Our inability to make purchases goes beyond the ever rising student loan debt. It’s our basic necessity expenses that are mostly on the rise. We are not talking about goat yoga or craft beer, but rather the things that one needs to survive. Since 1982, per the CPI Index, gas prices have risen 100%, food 149%, housing 150%, and health care 373%. So with all of these increases in pricing, $51,000 today equals about $20,300 in 1982 dollars, which as we all know, does not stretch very far today.
We’ve Got to Know When To Spend It
Since our personal dollars do not go far, we are a little bit more aware of our finances than the media gives us credit for. Contrary to popular belief, despite the tight financial situation, we are still spending money. We have creatively found ways to pinch our dollars so that we can still pay off our debts, but enjoy the infamous life-to-work balance.
We have become thrifty in the way that we spend. Instead of paying full price for the latest fashion items, many of us are shopping at the thrift shop or a discount retailer to purchase clothes. “Why are we going to pay full price, when it’s going to be 60% off in about six months?” In lieu of buying a home, we are renting. Costs for a home add up quickly, and it’s much easier when you can split the rent and utilities four ways like Kat does. As a substitute for owning a car, some of us have opted for alternative means of transportation. Whether it be public transportation, biking to work, or even Lyft, we are saving a ton of money not having to invest in maintenance, gas and car insurance.
Most Millennials Know the Secret to Survivin’
Millennials aren’t fans of risk: We aren’t investing like previous generations and that is due to living through what economists have labeled a great recession. In 2008, we were old enough to see and witness the lasting impact of a financial crisis and a good portion of us witnessed people we know who lost everything. We learned from that experience, and are not quite willing to put ourselves in that same position.
Budgeting Baby: With the pressure to save money, we are doing our best to live within our means. To prevent overspending, many millennials are aware of what we can and cannot spend because we have everything itemized so we know EXACTLY what we can spend after our bills are paid. Like Michelle has her monthly budget on an index card on her fridge, and Kat has hers on her Google Drive so that it can be accessed at all hours of the day.
We are banking for our retirement: Millennials are saving more than generations past. According to a study conducted by Bank of America Merrill Lynch, 82% of us are actively investing in our 401k. Thanks auto-enrollment! Comparatively, only 77% GenXers and 75% of Baby Boomers are investing in their retirement future…and they are a little bit closer to 65 than we are.
It’s not only about the avocado toast, it’s the experience: Honestly, Kat and Michelle do not know what avocado toast is, so we don’t get the hype. What we do know, however, is that making memories is important to us and we are investing in experiences, rather than items. Many of our friends are opting for music festivals, and European back packing trips because as cheesy as it sounds, memories last forever and those pair of Jimmy Choos may not.
One day we will buy a house, but not today: Home buying is not as easy as it once was pre-2008. Minimum capital requirements and what we want and what the bank is willing to pre-approve is far apart. And to be frank, the majority of us are not at that home buying age. The average home buyer profile is 32 years old, and the majority of us are still in our mid 20s, so we aren’t exactly looking to buy homes right now.
From the Writers: (In the Style of Kenny Rogers)
Michelle: You’ve got to know when to hold ‘em, know when to spend ‘em, know when to walk away from that shiny thing you want, and know when to run. You always check your bank account, when you’re sitting at the table. There’ll be time enough for spendin, when you’re finally retired.
Kat: Every millennial knows that the secret to survivin’, is knowin’ what how many dollars you have and how much you can truly spend. Cause when millennials are spendin’, it can make us all winners. And the best you can hope for is to buy a home one day.