Millennials are Being Pushed Off the Financial Cliff

It’s been well documented that millennials have been financially struggling, but Steven Rattner of the New York Times recently added to a bleak overall financial picture for millennials (18-34 year-olds), in an opinion piece that compiled a number of data points over time. And it’s some pretty legit bad stuff that shows that things aren’t quite what they used to be (and getting worse). Among the most striking data points:

1. Education levels have increased: education levels have increased for millennials. Those with bachelor’s degrees or higher have gone from 19.5% in 2000 to 22.3% in recent years. One would think this is a good data point – and it is – but it’s very bittersweet when the following is true…

2. Median earnings have declined: after decades of increases down to $33,833 in recent years from $36,716 in the year 2000 (in 2013 dollars). This, despite the increase in education levels.

3. Tuition costs are skyrocketing: the costs to enhance education beyond high school have gone up dramatically – up 234% since 1993, while inflation is only up 63%. In other words, our ROI for eduction has declined significantly.

4. Student loan debts have increased: and it’s digging us a hole. Among those with bachelor’s degrees, debt upon graduation has increased from 46% of the population in 1993 to 71% today, and the median bachelor’s graduate debt load has increased from $15,000 to $26,500, after adjusting for inflation.

5. Declining homeownership and rising rents: Rattner points out that home ownership has decreased (I don’t see this as a negative for a number of reasons), but adds the valid point that rents have increased from $1,000 (in 2014 dollars) to $1,152 since 1993.

6. Net worth: with all of these things combined, the median net worth has decreased from an already tiny $18,200 in 1995 to $10,400 today.

Not good. And the picture gets even worse when you add all of this to other data points that I have previously highlighted – millennials have a negative personal savings rate, the majority of millennial savings are in cash and not in investments that could be working for them, we won’t get inheritances, we’re overworked, we have crappy average credit scores (and employers are not hiring us because of it), pensions are dead and won’t be there to save our dismal retirement outlook, and we’re increasingly moving back home with our parents. Perhaps it’s time to speak to your doc about a Xanax prescription (on the bright side, you’re more likely to have insurance to cover that now at least).

millennial financesBy these measures, millennials are being pushed off of the financial cliff.

But why? Where did things go wrong? I think we can point to 3 things:

  1. globalization: of the economy, increased competition, and short-term thinking have gutted middle class wages.
  2. politics: we have a divisive 2-party political system that has valued policies that favor special interests and the elite more than policies that help the “median” (middle class). Political policymaking moves the averages and the averages have been moving in the wrong direction for the last two decades.
  3. helping ourselves: we haven’t done so well at this. Are we being pushed off the cliff or are we willingly jumping off to some extent?

How can we solve each of these?

  1. globalization: trade policy and foreign worker policy is big here and should be an emphasis, but unfortunately that will only slow a decline as there will always be a low-cost developing country somewhere that will be able to undercut on wages as technology and cheap oil has led to a truly global job market. Globalization is here to stay and it’s a race to the bottom on wages, so the best we can do is work with it effectively and efficiently and encourage growth of  the size of the pie for everyone.
  2. politics: I previously went into greater detail here, but we need to start getting furious about how money controls everything in politics and eliminate all but minor individual campaign contributions. We need to get out and vote in EVERY election (not just Presidential elections)! And we need to get more involved in the political system than we have previously been, and even start running for office. The absolute worst thing we can do is throw our hands in the air and let this malignant political status quo persist. This country needs to start properly investing in education, infrastructure, retirement planning, harvesting free sustainable resources more effectively, wage growth, and other creative solutions to big problems and pull money from other areas. That won’t happen unless we get out and demand it.
  3. helping ourselves: despite negative overall trending, there are thousands of things that we can individually exercise to improve our personal outlook.

Let’s expand on that last point, because I think it is where you and I and all of the millennials out there can individually take the most solace.

We should not attempt to follow in the footsteps of previous generations or those of our misguided peers. If we learn anything from these numbers, it should be that we simply can’t afford to follow those footsteps.

And you know what? That’s OK. Because some footsteps are not worth following.

  • we don’t need over-priced degrees
  • and we don’t need to assume the debt that others do to pay for it, because…
  • we can earn improve our education at our own pace
  • we can buy or rent smaller dwellings
  • we can move to more cost-efficient locations
  • we can improve our credit and decrease our debts
  • we can get rid of the 2 luxury cars in favor of one modest reliable one, or a bike
  • we can bike to work and self-power our commutes
  • we can cut down on dining and drinking out
  • we can cook more cost efficiently
  • we can reduce our energy consumption
  • we can cut our water consumption
  • we can switch to MVNO’s for our phone plans
  • we can cut cable
  • we can start cutting our own hair

… and so much more! Thousands of things more! We need to blaze our own paths.

Meanwhile, we can take gratitude in the abundance of everything that we do have. Yes, the numbers paint a bleaker picture for the millennial generation than the two that came before it and we should actively work to change that, but we are still left with significantly more at our disposal than the tens of thousands of generations that came before the last two. The birth lottery of time and place has been extremely kind to us. Things are only as bad as we choose to see them.


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