So often these days we hear from young people – Millennials – about how much harder they have it than did the previous generations. Houses are more expensive, wages are stagnant and student debt is soaring. I am definitely guilty of subscribing to this train of thought at times, whether it be while assessing my own situation or just observing the world in general. But how much of it is really true? Do millenials really have it that bad? Or are they just a generation of entitled brats who would rather focus on the few disadvantages they have over previous generations rather than the endless forms of proverbial legs up their generation possesses? Well, consider the following.
Cost of Housing.
One of the main complaints by Millennials is the cost of living. In particular, the cost of housing. The average cost of a ‘starter home’ in Los Angeles, for example, is about $600,000 USD. And it’s true that housing is more expensive these days, but it turns out that the reason for this is the size of houses has increased greatly, along with the price. The average house in 1973 in America was 1660 sqare feet, whereas in 2015 it was 2687. an increase of 62%! Per person, we have increased from 507 to 971 sq. ft , an even greater increase of 91%!
The price in 1973 was about $108/square foot, while in 2015 it is about $120. 93% of houses have Air Conditioners in 2015, whereas in less than half of people in the early 1970s. Our standard (and size) of living has increased, and so has the cost of it. Especially as populations increase, it’s no wonder we have to pay more for our increased ‘needs’*!
In addition, we can buy that space at historically low interest rates. the babyboomer generation ( i.e. Babyboomers) would have probably complained about mortgage rates, especially if they knew how low interest would be in the future – for millennials. Even as interest rates now begin to rise, a common rate in Canada is about 4.5%, which would have absolutely floored our parents.
Sure, the cost of buying a house is currently out of control, particularly in large, ‘desirable’ centers. But many young people have also gained a lot of equity very quickly in some of those markets on their way up. Also, as we know, markets tend to correct themselves over time (Google: ‘2008’ next time you have a moment).
Also, if you’re paying outrageous rent or mortgage rates to live in a city to the point that you’re too broke to both enjoy the city and all that it has to offer and save and invest any of your income leaving you with little hope of any retirement, let alone an early one, well, that’s your fault. If ‘getting ahead’ in the city seems ‘impossible’, you can always move outside of the most expensive cities in history and consider something a little more reasonable. You can still live a completely fulfilling life and actually be able to save and invest some of your income so that you can reach Financial Independence much earlier than your parents did. Remember, in trying to reach Financial Independence as early as possible, you’re trying to do what most others don’t. So make a practice of doing what most others don’t! That’s what it is going to take for you to get there.
We hear a lot about stagnant wages, and in some ways that is true. Well, here’s a newsflash for everyone: according to David Stein in his Podcast Money For the Rest of Us, Millenials make more than did the baby boomers**. Also, more of us work full-time jobs. 57% of Millennials are employed full-time, while only 46% of people worked full-time in 1975, owing largely to the growing proportion of women entering the workforce since then. The unemployment rate is also lower now that it was in the 70s.
The real problem is our spending habits, and we’ve talked a lot about that already. With increased income we should be saving more money than our parents did, yet we are actually slipping further and further and further in debt. It’s hard to blame anyone else for that without being childish about it.
There has never been a more educated generation in history. 1975, 23% of the population had completed a post-secondary education, while today it is 37%.
So yes, student debt is increasing. The average debt today is about $30,000 in the USA, ranging from about $19,000 in Utah to $36,000 in Northeaster States. If you’re looking at graduating with a lot more debt than that, consider how likely you are to find a high-paying job quickly. For someone who knows they want to be an Engineer, for example, and there is a clear educational path on how to gain those qualifications, they undoubtedly will benefit from receiving that education. However, I believe that what also occurs fairly often is that young people sleepwalk into their undergraduate degrees, often before they are even 20, and because they’re not fully invested in it they don’t extract all of the value that they could from the experience. You can’t put the cart before the horse. You can’t go spend tens or hundreds of thousands of dollars on education for the sake of education or for the sake of continuing to hang out with your friends, if you don’t yet know why you’re doing the education. Education is an investment, and unless you wish to waste your initial investment, you need to consider the likely return-on-investment in a calculating way. This can be hard to practice, as there is familial and societal pressures and expectations, and, true to the nature of our monkey mind, we take the stance that if everyone else is doing it, what’s the harm. A lot of the money that our parents squirreled away from the time where good jobs were plentiful got handed over to universities so that their children (us) could pursue often aimless (not useless) degrees such as liberal arts. And the universities and colleges have made a lot of money.
Ultimately change starts within each and every one of us. If you want to change the world, change yourself. This can be applied to many things: can’t stand pollution? Consume and waste less. Can’t stand your relationships? Look yourself in the mirror and ask yourself what your role has been in the challenges. Can’t stand your job? Try being thankful for the income and the chance to squirrel away money for Financial Independence instead of loathing every minute.
Of course, life also requires us to take action at times and to make changes like ending relationships or quitting jobs, but a lot of change can come from within as well. By changing our perspectives. This is one of the general themes of my blog is that you can change the way you perceive, and thus, experience anything, including spending, saving and investing.
Millennials are certainly a little hampered by what is referred to as the Choice Paradox, something that our parents didn’t have to deal with. And this idea that we can be anything and do anything – or that we are ‘special’ – has actually led us to a weird place emotionally and psychologically, where constant comparison to others is the norm (and these days there are the tools of social media that make this far too easy to do). This consistently takes us out of the present moment, and results in a fleeting but constant notion of despair, which we collectively seem to try to patch with purchases, made all-so-much easier by Millennial tools like Amazon and EBay. And so here we find ourselves.
We are our own worst enemy, and ultimately the challenges we face have little to do with the world around us and more to do with the way we perceive the world and choose to adapt to and operate within it. I choose to operate as if the world is my oyster and that opportunities are plentiful, because ultimately, it’s all in our heads.
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As I alluded to, this Article was inspired by David Stein’s Podcast Money for the Rest of Us. Episode 168. Many of the statistics were sourced from this episode.
*’needs’ being purely perceived and not actual needs, of course.
**Yes, including adjustment for inflation.