The Challenges Faced by Millennials
When it comes to money, it’s no real secret that the millennial generation tends to do things just a bit differently than the rest.
And they have good reason. They were born roughly between 1979 and 1994, and since that time, they’ve seen three decades of stagnant wages, a dot-com boom and bust, the Great Recession, and an income and net worth gap that’s at its highest levels in more than 90 years. So things that older folks took for granted – like finding an affordable college, affordable health care, a decent paying job with good benefits, and a nice starter home – are much more difficult to for them to find.
For many of those who went to college, their student loan debt takes up a sizable portion of their monthly income, leaving less for them to spend each month on other things. And with the rise of electronic payments for everyday purchases, the credit card debt they carry is higher than it was for previous generations. What’s interesting, though, is that a surprising number of them are able to live within their means – mostly by choosing not to make purchases that previous generations always did.
Two of the big ones are automobiles and homes.
While many people in the older set were never able to live without a car from the moment we got our drivers licenses, many Millennials have a different attitude. As basic expenses have risen, owning and maintaining a car is one of the things they’ve found to be easy to cut out. Millennial workplaces are often flexible enough to allow commuting benefits, public transportation, or simply the ability to work from home. Technology has allowed just about everyone to connect to someone else without having to be there in person. So, they’re owning fewer cars.
When it comes to home-buying, Millennials are really late to the game. Even with historically low interest rates, the barrier to entry to the real estate market has been really high for them. But as it turns out, a lot of them actually prefer to rent their homes than to buy them. One of the reasons for this has to do with their mobility. A recent Gallup poll found that 60% of Millennials are open to a new job opportunity, and with a change in job often comes a change of residence. As renters, they can much more easily find a place that suits them, and make a change when they need to. And since many of them lack a down payment for a home, renting simply makes a lot more sense for their situation.
And as it turns out, it’s not just Millennials who feel this way. As Baby Boomers have aged, many of them are finding that they don’t want the hassle of homeownership either.
At this point, you might be asking yourself how you may be able to use these trends to your potential financial advantage. It’s a great question, and it’s one we will address right here on next week’s edition of Lucia Capital Group Weekly.
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Rick Plum is a registered representative of, and offer securities through, Lucia Securities, LLC, a registered broker/dealer, member FINRA/SIPC. Advisory services offered through Lucia Capital Group, a registered investment advisor, and an affiliate of Lucia Securities, LLC. Registration with the SEC does not imply a certain level of skill or training.