Monthly Archives: March 2016

I’m Tired of Hearing How Bad Millennials Have It

I’m a millennial myself so I feel like I’m qualified to discuss this subject (and with a financial independence twist of course). I do a horrendous job of not following the news. I always catch myself on the websites of numerous online business news companies seeing what is going on. Many bloggers have written about how horrible following the media is on a day to day basis, and I totally agree, but it doesn’t mean I do a good job of blocking it out. The sad reality is that doom and gloom headlines equal clicks and views.

Lately, and I think this is partially due to it being election season, the hot topic has been Millennials. Every channel you flip to or online news article you read is how bad Millennials have it. They live at home with their parents. They are drowning in debt. They are the first generation in the U.S. worse off than their parents. They can’t afford a home. They can’t find their dream job. They are working at Starbucks. The list goes on and on.

Now are some Millennials having a tough go at it? Of course they are, I’m sure of it. But Millennials as a whole? I don’t think so.

Let’s start with education. I graduated undergrad with about $30k of student loans. Was this more than my parents had? Yes, but that’s because they didn’t go to college! College wasn’t a “given” for our parents. Statistically speaking less than 50% of high school graduates headed off to college in 1975 (due to a variety of reasons such as war), whereas this number is about 65% today. When I was in high school I had a course to college mapped out for my by my teachers and counselor. Take these AP classes. Play a sport. Get involved in an extracurricular activity. I followed their lead and next thing you know, I was off to my school of choice with a partial scholarship.

Investing and Retirement
Our pal Jack Bogle didn’t create the index fund until 1976. If our parents wanted to invest some dough in equities, they had to do it through a broker and pick stocks, or buy expensive mutual funds with load fees and commissions. Now we have extremely cheap (or free) online brokerage accounts. I set up my Vanguard account in minutes and with a click of a button I can invest money whenever I want.

The 401k was created in about 1981 when some random guy noticed a loop-hole in the Internal Revenue Code. Before that it was much harder for workers to shield earnings from income taxes. Now you might be saying “well my parents have a pension!” Pensions are great if you have them but they are also handcuffs tying you to your employer. People notice that our parents spend decades with the same employer, that’s because people are taught to be slaves to their pensions since this will help them through their golden years. When in reality in most cases, you would of been better off socking money away in a 401k and IRA and retiring on your own terms.

Home Buying
30 year mortgage interest rates were above 10% from late 1978 to until almost 1991! Today you can get a 30 year fixed for about 3.75%. Maybe these low interest rates are inflating home values, but could you image taking out a mortgage at 12%?!? Also this community has also blogged about how owning a home is becoming less of the “American Dream.” Us millennials are okay with renting, and would rather spend money on travel and experiences instead. I may be an outlier but if I never own a home, I would be A.O.K. with that.

Unemployment currently sits below 5% which is below historical averages. The internet allows us to search for jobs all over the country and globe at the click of a button. Our parents relied on the classifieds and maybe a trade magazine when job searching (well they never really did this because they are tied to their pensions), and we can see open jobs in our field in Seattle, Boston, or Richmond instantly and submit our resume with a click. For those who are employed, inflation adjusted gas prices are below the historical average, easing the burden of commuting.

Health and Technology
This doesn’t even need an explanation. We have the internet, our parents didn’t, and the medical breakthroughs that have happened in the past 30 years have us living way longer than our parents and grandparents. Certain diseases which were death sentences 40 years ago, are easily curable today. I’m going to have to agree with our friend Warren Buffett who recently said “The babies being born in America today are the luckiest crop in history.” I don’t believe we have it bad at all!

Do you have it worse off than your parents? Is being a millennial the pits?

Lifestyle Inflation Talks

Not everyday does something happen in my personal or professional life where I can talk about personal finance and the related topics which we so freely discuss online in this community. So obviously when the opportunity presented itself when I was riding in my boss’s car, I hopped all over it.

I know that my boss makes multiple hundreds of thousands of dollars a year. It’s no secret in my profession. He owns a large home within commuting distance to Manhattan, and also a summer home which I visited during this trip which I’m discussing. I being nosey, Zillowed the address afterwards and was pretty shocked at how much he paid. Let’s just be honest and say you don’t get much bang for your buck when buying a beach home within driving distance to NYC.

After our trip, he gave me a ride back to the train station so I could get back to Manhattan. During the car rise we started talking about money, relationships, and how they intertwine. First thing we discussed is buying a home. My boss made a statement that millennials don’t want to purchase homes. My response was my normal rant about how a primary residence is NOT an investment. He actually agreed! And then noted that he has made money on both of his home sales in the past, but his current primary residence he has lost his shirt on and may never recuperate the costs. Basically he bought a dumpy house in a really nice neighborhood and basically had to scrap it and build again. I was pretty impressed as most people aren’t willing to share their money mistakes and admit that their primary residence is not an investment.

Next topic of conversation was relationships. He had just purchased his wife a new SUV (she stays at home) of the $40 thousand American made variety. Well they were riding with another couple one weekend, and they were in that couples’ $70 thousand foreign made SUV. My boss went on to discuss that after that night, he could sense that his wife was disappointed about her cheaper SUV after riding in luxury. I think it stung him a little because he had just shelled out 40 G’s on his wife’s car, which she now seemed to not like as much.

After the car conversation, he transitioned into explaining that he doesn’t actually live in the real world and it’s actually a little bubble. He must for his wife not to like a $40 thousand SUV and actually expect to have something more expensive. He lives in an upscale neighborhood, and he knows everyone has to make lots of money to afford homes in the area. On top of the homes that hover around low seven figures, $70 thousand cars aren’t even really a big deal. He kind of questioned how he found himself in his current situation. He was not born into this life, not by a long shot. From my observations, it’s pretty simple to figure out how he got there. He grew up lower class, wished and hoped to make it rich, busted his ass, and now he’s found himself upper class. Sad thing is… I don’t think it is as sweet as he first imagined.

I could definitely relate (to an extent). From the time I was a kid through probably 25 years old, I aspired to live a life just like this guy. Make the big bucks, have two houses, and nice cars. My first “big boy” car purchase when I was 22 was a Cadillac for Pete’s sake. But then here I am in a car with the person I wanted to be for so long, and he was basically admitting it wasn’t all it’s cracked up to be.

So as you can imagine, I really enjoyed this car ride. My boss could easily retire in the next few years if he didn’t let the lifestyle inflation effect him in his bubble which he and his family lives. But I bet he’ll continue to grind, work long hours, and stress to keep up the lifestyle. He’s now got a wife and kids who are used to the life, and I bet would not be easily convinced otherwise. Honestly I don’t think he could even convince himself to “turn it off” even though he notices how crazy it all is. To each his own, but as I bet you can guess – I don’t think it’s worth it. At least not for me.

Have you ever found yourself in a riveting personal finance question with a boss or coworker? How did you handle it?