The Millennial’s Rocky Path to Financial Stability
Today’s young people are facing a severe financial crisis. With the high cost of living and a tight job market, many millennial’s are struggling to pay off student loan debt, let alone put any money toward savings. Further complicating the financial plight of this generation are the remaining consequences of the Great Recession making the millennial’s path to financial stability a rocky one.
Financial Challenges Millennial’s Face
As a result of burdensome student loans, the high cost of living, and their current struggles related to the financial crisis, millennial’s are facing financial difficulties that older generations didn’t have to face.
- The average salary for today’s millennial workers is 20 percent lower than the average wage of a baby boomer at the same place in life.
- The cost of living is steadily rising and outpacing household incomes. For example, an average home just 20 years ago cost $194,800, and a new home today costs $402,400, a 35 percent increase. The average household income is at least five percent lower than it should be to keep pace.
- The net worth of individuals between the ages of 18 and 35 has decreased by 34 percent since 1996.
- The most significant debt loan on average millennial’s comes from student loans.
- The cost of college has doubled since the 1980s, but the resulting wages after college haven’t kept pace.
Despite these burdens and their financial setbacks, many millennial’s have worked out practical methods for approaching their retirement and preparation for emergencies.
Solution One: Budgeting
Budgeting is a skill that many Americans appreciate but don’t strengthen. The majority of people write out budgets or keep a mental budget, but relatively few track their spending and savings. Millennial’s, on the other hand, are much better at sticking to their budgets. According to financial planners, this generation is often described as disciplined or highly disciplined when it comes to their finances.
Solution Two: Limit Spending
That discipline naturally affects how millennial’s spend their money. Many younger individuals are cautious about making purchases. Their concern about financial risk-taking means they are more concerned about the potential for future financial crises, so when there are signs of trouble on the horizon, they are likely to tighten their belts and cut back their spending. This is affecting when millennial’s commit to marriage and family. It costs a lot to raise children today, especially with childcare factored into the equation.
Solution Three: Reduce Debt
Many millennial’s associate becoming free of debt with financial success. The debts millennial’s do carry include student loans, mortgages, and car loans. A large percentage of millennial’s don’t carry credit card loans, and other loans are typically less than $5,000. As a result, they are renting longer than previous generations, getting married later in life, and, as stated above, waiting longer to start having children.
Solution Four: Focus on Savings
According to a study conducted in 2018, millennial’s are also more likely to save aggressively for their retirement and emergencies. Unfortunately, the rate of money going into savings is necessarily low. Many millennial’s have to reach out to their parents to afford basic necessities, including groceries, rent, gas, and insurance.
Solution Five: Strengthen Thrifty Living Skills
Without a lot of money and with massive debts, how can millennial’s build up their savings? The first step, of course, is to create and stick to a budget – which many millennial’s are doing successfully. A second step is becoming thrifty. Millennial’s are more likely to “treat themselves” regularly, so it may require a mindset shift to put some of their spare change into savings rather than a special treat. Here are some tips for becoming thrifty in practical ways:
- Ask employers about working from home as many days as possible to cut down commute expenses.
- Carpool to work with other employees. Ride a bike or walk to work.
- Pack lunches instead of eating out. Carry coffee from home rather than stopping to buy one on the way to work.
- Look for low-cost evening entertainment, such as reduced cost movies versus full-price tickets, or community events that don’t cost anything.
- Plan dinners at home with friends to reduce the costs of eating out.
- Shop for secondhand items, from clothing to dishware, and more.
- Talk to banks about financial tools. For example, Guyana Bank for Trade and Industry Limited, a well-established leader in Guyana, offers customized financial services, such as online banking and investment support, as well as a blog with financial education.
As thrifty habits are developed, it becomes easier to recognize other ways to cut down in just about every area of life. A third way to cut spending and increase spending is to review financial statements regularly. It’s all too easy to forget about subscriptions that come out automatically. Millennial’s may end up paying for services they aren’t using anymore.
Getting on the Path to Financial Stability
Millennial’s, and anyone else experiencing financial difficulties, can work their way out of debt and into a secure savings plan. It will probably mean cutting back more than previous generations have done. Still, with determination and a focus on freedom from debt, many millennial’s can find the path to financial stability.