Depending on who you ask, Millennials are the unluckiest generation. Many of us graduated into a tight labor market thanks to the Great Recession with mountains of student loan debt, only to face more financial struggles in the post-pandemic world. Money has been a defining concern for this group of people, making the dream of owning a home seem unobtainable, and it’s left us with a future that’s anything but certain.
But are Millennials really that unique? Every generation has their struggles, and Gen Z could argue that they’ve got things worse. They’re also graduating into an unstable job market with larger mountains of student loan debt and a more challenging housing market. So, the next generation is likely to continue to watch the middle class shrink, resulting in many people earning less than expected.
This means there’s a new generation of poor people coming; a group that has traits of its own. While it doesn’t necessarily mean these people will be in poverty, they’ll pick up habits that force them to live paycheck-to-paycheck. Traits that have typically defined the middle class — things like career objectives, home ownership, and savings — will start to feel like an American dream that never turns into a reality.
I write this from the perspective of a Millennial who dealt with my own generation’s struggles. I‘m in a decent place, but only because I’ve addressed habits that limited my financial strength. These are things older generations couldn’t prepare me for, and I’ve seen other people get caught in a cycle that keeps them poor. Their instability can easily be replicated by Gen Z if they absorb the traits that cause financial strain.
Student Loan Debt Is a Given
With each passing year, the percentage of young adults who have a college degree grows. Simultaneously, they’re graduating with an increasing amount of student loan debt. So, when young Americans enroll in school, they’re also resigning to a fate that includes loan repayments ($31,100 per Bachelor’s degree, on average).
While this number continues to grow, people born in the late 90s and early 00s have never known a world where people weren’t repaying mountains of debt. So, they likely go to school and take out huge loans because that’s just what you do. This has become an expectation in post-college life, and it’s hard to build wealth when a huge chunk of your paycheck is going toward a loan repayments.
They Own Nothing
It’s hard to stop living paycheck-to-paycheck when each month brings a wave of monthly bills and charges. Of course, there are bills like cellular and internet, but it feels like every service — even the necessary ones— have monthly membership fees attached. Subscribing to Netflix or Spotify is one thing, but the days of owning Microsoft Word or playing video games off of the disc are gone. And these small fees quickly add up.
Then, there’s the growing cost of rent. Gen Z is expected to spend more money on rent than any other generation, which shouldn’t be a surprise when year-over-year rent increase percentages can be in the double digits. On top of that, many people choose to lease a car, which offers transportation, but get costly over time. After all of these monthly fees and necessities, Gen Z has a meager 1.9% of the income available for fun, recreation, and savings.
They’re Unrealistic with Their Spending
If you spend more than you’re saving, you’re going to fall into debt. While this concept is easy to understand, it’s hard to avoid when you don’t stick to a budget.
Many young people know they buy coffee, spend money on alcohol, or take Ubers instead of walking. If this fits your budget, then that’s fine (though probably not the best investment). However, many people underestimate the amount they’re spending on these luxuries. So, it quickly consumes all of their discretionary income, prevents them from saving, and allows debt to persist.
They Follow the Wrong Advice
When people need money, they often do things they wouldn’t do otherwise. A lot of people aspire to earn a living while being their own bosses, but this can waste a lot of time, yield few returns, and sometimes be costly.
What does this look like? It can be the person who gets involved with the MLM, your friend who starts selling sketchy influencer products, or the person who swears crypto is going to make them rich. These are get rich quick schemes in a modern package, and in the end, they just cost time that could be put toward better investments. And take it from the Millennials, the need to “hustle” all the time only leads to burnout in the end.
They Can’t Invest in Their Future
If you want to build a better financial future, you can’t always live in the present. The thought process sounds simple until you get those monthly student loan payments, rent charges, and credit card bills. That makes the present seem a whole lot more important than the future, until the future becomes the present.
It’s definitely better to stay afloat than fall into debt, but this will only make it easier to continue living paycheck-to-paycheck. But, once you’re in a position where you can stay afloat, it’s easy to get comfortable. At this point, many people pay their bills and spend the rest, never contributing substantial amounts to savings or retirement.
They Have Under $1,000 in Savings
When each month brings a tidal wave of expenses, it’s easy to understand why building a savings account isn’t a priority, or even feasible. But, when an emergency occurs, only 42% of Gen Z have enough saved to cover a $1,000 expense — and that’s slightly higher than the 41% of Millennials who are able to afford that amount.
Such an emergency isn’t that uncommon, so what happens when it occurs? Without savings, it likely goes onto a credit card, collects interest, and a new cycle of debt begins.
Their Parents Are Plan B
If people aren’t building their savings, and they don’t have a lot of assets, what are they going to do if they run into tough times? They’ll rely on other people.
If they’re lucky, they’ll have their parents to bail them out. But, not everyone is so fortunate. Hopefully they have generous friends who can serve as a plan B. Even though that’s not a great solution, having a plan, any plan, is better than nothing at all.
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