It’s not the Starbucks
If you have ever listened to any self-proclaimed financial guru talk about finances — especially millennial finances — then you already know the tactic used here starts, and is bookended, by shame. You’re shamed for your bad choices, shamed about your debt, shamed for yoga and brunch, and David Ramsey’s personal favorite, shamed for the latte you bought at Starbucks for EUR 3.00. Those are the reasons you don’t have savings, a house, and financial security.
How we’re talked to and talked about
Millennials don’t exactly have the best publicity. Most Western newspapers have taken great pleasure in writing fantastical stories about how we “are killing” certain industries. Everything from cable TV, to banks, the beer industry, and paper napkins (no… gasp) have been in the scope of millennial’s destruction.
We’re told we are lazy (because we don’t have the same workaholic priorities as our Boomer parents), that we are bad with money (especially if you’re a woman), and well, we’re all narcissists. But is it us? Are we the drama? Is it really our latte obsession that is keeping us from living the financial dream?
It’s not the latte keeping you down
In honor of International Coffee Day, here are some uncomfortable facts for people who like the feel-good blanket of tropes, versus looking at a wider problem and helping come up with solutions.
Yeah! Student loan debt
Nearly one-third of American students now goes into debt — almost $40,000 worth in 2020 — in the hopes of upward mobility through a degree. Collectively, students owe about $1.6 trillion USD according to the Federal Reserve Bank of New York. For context, the GDP of the UK in 2019 was $2.8 trillion USD. Before you even start that new cushy job you’re already in a pretty big hole.
You’ll pay me how much?
So, you’re strapped with debt from that bachelor’s degree and enter the workplace with the optimism that $40,000 will be paid off in no time. But nominal wages — the actual dollar amount you get paid by your employer — have stagnated and employers don’t actually need to offer higher wages to get and keep the workers they need. (We’ll see how this pans out with the Great Resignation.)
According to the Economic Policy Institute (EPI) — who take great pride in tracking nominal wages and coming up with clever graph titles like, ‘Mind the wage gap’ — have stated that, “nominal wage growth since the [Great Recession] recovery officially began in mid-2009 has been low and flat.”
To put this in perspective, “The nominal wage target that we we see above, of 3.5 to 4 percent is defined as nominal wage growth. This is consistent with the Federal Reserve’s 2 percent overall price inflation target, 1.5 to 2 percent productivity growth, and a stable labor share of income,” EPI explains. Or to put this another way, wages increase with productivity and have done so for quite a long time. However, according to a study by the Rand Corp. pulled by Fast Company, “ a full-time worker currently earning the national median wage of $50,000 would be making close to $100,000 now if the country’s economic growth had continued to be shared across the socioeconomic spectrum over the last 45 years the way it was in the decades after World War II.” So, that’s a reality check.
And not to be super pedantic, but millennials earn about 20% less than our Boomer parents even though we’re better educated, which dramatically slows long-term wealth building.
Everyone loves a good crisis
Not to be outdone by student loan debt and stagnant wages, the “hold my beer” (see, we aren't killing the beer industry) of two economic crises helped make life just a little bit tougher on us millennials.
Most of us either had just graduated, or had only been in the workforce for a few years when the 2008 financial crisis hit creating the worst economic downturn since the Great Depression. To make ends meet, some of us began using alternative financial services like payday lenders, pawn shops, and rent-to-own services, but this only had many of us go deeper into debt.
And then in 2020, the pandemic hit. While older millennials were somewhat spared, it was our younger millennials and Gen Z who felt the brunt of this recession through layoffs and cuts in pay. Mental health suffered across all generations and it really was those small perks in life that made it all a bit easier.
Why deprive yourself?
We’ve all, collectively really, suffered enough. And depriving yourself of the few things in life that bring you joy is not a good strategy for long-term wealth building.
So until the above gets solved — which is why electing officials who look out for your best interest is SO important — buy yourself the Starbucks, buy that gym class pass to stay sane and go to brunch with friends. Find financial advisors who think the same way as you — my personal favorite is Ellevest. Do everything ‘shameful’ that the financial gurus say you shouldn’t, until they can help come up with better solutions than the tropes on rotate.
