8 Harsh Financial Realities for Millennials & How to Overcome Them

BY JACOB MERKLEY

INTRODUCTION

Millennials…  Misunderstood.  Undervalued.  Often lazy.  (Or do they just understand how to harness the power and efficiency of technology?)

The Millennial generation is often slighted as being lackadaisical, entitled, and narcissistic (among other things).  While some of that is probably true in regards to the group as a whole, they still bring a unique set of talents to the table.

Arguably they have experienced more in their lifetimes already than generations previously.  They have seen the revolution of technology with the birth of the World Wide Web, along with the growing market of social media.

They have witnessed the bombings of the World Trade Centers and in Oklahoma City.  The first African-American president, and the first non-politician have been elected president during their lifetimes (many of which helped vote both into office.)

Generation Y has witnessed and participated in a lot of diverse things over the years.  That trend will only continue into the future.  This group of American’s are “coming of age” in some pretty harsh financial, economical, and social circumstances.

Yet, this fact doesn’t warrant a pass on their actions and how they view life.  If anything, it means that Millennials need to rise to the occasion.


GIVING CREDIT

This post is going to “piggy-back” off of the awesome post from Zero Hedge, titled: 7 Harsh Realities of Life Millennials Need to Understand.  That post brings up 7 great points that every Millennial should understand and get over.  

So let’s give credit where credit is due…that post was the inspiration for what is to follow.


8 HARSH FINANCIAL REALITIES FOR MILLENNIALS & HOW TO OVERCOME THEM

Perhaps the biggest complaint of Gen Yer’s is the financial situation that they find themselves.  Yet, the reality is that life is what you make of it.

Understanding, excepting, and then overcoming these harsh realities will enable you to be in control of what happens to you from here.

*THE ECONOMIC INNOVATION GROUP CONDUCTED A SURVEY IN JUNE OF 2016.  ALL OF THE STATISTICS IN THIS POST COME FROM THIS SURVEY, UNLESS SPECIFICALLY CITED.  THEY WILL BE INDICATED WITH THIS CITATION: (*).

HARSH REALITY #1 – GETTING A DEGREE DOESN’T AUTOMATICALLY WARRANT A SIX FIGURE SALARY

Two-thirds of Millennials believe that having a great education is important to getting ahead in life (*).  It’s probably safe to say that education can definitely pave a way to a brighter future.  But the key word is future.  Not tomorrow and not next week.  The future implies an entire career.

Studies definitely prove that those who have a college education earn more over their lifetime (Salary.com).  However, getting that piece of paper doesn’t automatically warrant you to earn a six figure salary the minute you sit down in your cubicle.

That may be hard to swallow for those who fall within one of the main negative Millennials stereotypes, that they want everything now…instant gratification.

If you think about it, would a company rather give the new guy a six figure salary or an employee that has been doing the job for 10 year or more?

HOW TO OVERCOME THIS

  • Improve your Resume while in college.  Get a part time job, and anywhere is better than no where.  Do an internship or two.  Be an active participant in programs, and extracurricular activities.
  • Be patient.  Work hard and do everything that you are asked to do.
  • Take advantage of moving locations to get a better job.  The higher you start, the faster you will get to six figures (usually).

HARSH REALITY #2 – SPEAKING OF THAT SIX FIGURE SALARY…IT MIGHT NOT BE ENOUGH.

Making six figures used to be a sign of success and wealth.  Times have changed.  Inflation happens.  A six figure salary doesn’t buy as much as it used to in the past.

The Bureau of Labor Statistics has a really cool Consumer Price Index Inflation Calculator.  If you mess with it for a bit, you’ll see that a $100,000 salary in 1980 would now be $291,000+ in 2016.

In other words, Millennials would need to make $291,000 to buy the same lifestyle that $100,000 did in 1980.

That fact is tough to swallow.  There are more things that we can buy, along with possibility of a better lifestyle than any other generation and time in history, yet we can’t buy as much because the amount we earn doesn’t go as far.

If you think it’s bad now, wait until inflation has done its thing for 40 more years (aka our retirement years)…

HOW TO OVERCOME THIS

  • Bottom-line – Your money won’t go as far, and that’s fine.  It just means you need to be more selective on what you buy and the type of lifestyle you choose to live.
  • Also, consider other ways to get to a higher salary that just the normal way ( go to college, then work up the ladder).
  • Consider working a second job, or starting a business on the side, or doing odd ball things to earn that extra money you want to fund your lifestyle.

HARSH REALITY #3 – …WHICH ALSO MEANS ONE INCOME FAMILIES MIGHT BECOME EXTINCT.

Remember back 20, 30, 40 years.  It was really common for one parent to go to work (typically the dad), and the other parent to stay at home with the kids.  This was the “traditional” home.

This traditional home worked for a lot of years.  There are no “sexist” implications here.  The reality is that is was absolutely feasible to live off of one income twenty years ago.

Not so much anymore.  It’s still doable.  There are plenty who do it.  But those that do live a much more basic, conservative lifestyle.  They don’t spend as much, but also don’t have as nice of a lifestyle.

This reality stinks for a lot of people.  A lot of couples would like to have one parent to be able to stay at home and help raise the kids.

This might just be something we all have to get over and deal with.

HOW TO OVERCOME THIS

  • It’s possible that you don’t overcome this one…maybe you don’t even want to.  Having two incomes can buy a lot more lifestyle than one.
  • For those who want to have a parent stay at home, you just have to find a way to cut down on your living expenses and also increase your earnings.  Bottom-line.

HARSH REALITY #4 – MASSIVE AMOUNTS OF STUDENT LOANS MAY CRUSH YOUR FINANCIAL FUTURE.

In the United States, student loans now rank #2 on total debt, only below house debt (Fast Web).  That number is $1.35 trillion, as of 2016 (Lend EDU).  And yes that is trillion with a “T”.

Wow…shocking.

52% of all students have or will have taken on student loan debt (*).

This reality, that debt may crush your financial future, will likely come true for people who finance stupid degrees that they just can’t use, or they just can’t make much money with it after college.

Regardless if the future job makes much money or not, everyone that signs that loan document without truly thinking about the future may end up getting crushed by their debts.

Remember, it only make sense to take on student loans if it will help bring about and provide a future economic benefit.

Let’s be smart here people!  Debt can ruin your financial future.  Debt is hard to get out of.  And it can take a long time too.

Think really really hard before your sign that paper.

HOW TO OVERCOME THIS

  • Only take out student debt if you have to.
  • Pick a degree that has a track record of putting students on a good financial path after college.
  • If you decide to do a degree that won’t provide much income afterwards, pay for it with cash.

HARSH REALITY #5 – IF YOU LIVE IN AMERICA, YOU ARE ALREADY IN THE 1%

This is actually one of the points that Zero Hedge made in their post, but it’s a topic that fits perfectly in line with our post.

If you live in America and at least $10,000 a year (most do), then you are wealthier than 84 percent of the world.  If you improve that number to $50,000 a year, then you make more than 99 percent of the world (Oregon Live).

In September 2015 the median household income was $55,775 (United States Census Bureau).  That puts the entire nation as a whole inside the one percent number.

Truly those who have minimum wage jobs here are making a lot more than others around the world.  All of us, are living “cushy” lives.

HOW TO OVERCOME THIS

  • Be more understanding.  Just because the wealthy make more money than you doesn’t mean that they don’t deserve it.  They worked hard, they took risks and subsequently they deserve to have what they have.
  • Realize that you’ll be OK financially.  Even if you don’t ever make $500,000 a year, you can still have a great life.
  • Be humble.  We really have a lot to be thankful for.  Just visit another country and you’ll come to that realization.

HARSH REALITY #6 – SOCIAL SECURITY WON’T BE ENOUGH FOR RETIREMENT (IF IT’S AVAILABLE AT ALL)

Check out this statistic… 74 percent of Millennials are worried that Social Security won’t be there when they retire (*).  They might be right… and Medicare might not be there either, for that matter.

This country is in some massive debt.  At some point, programs like Social Security will have to be minimized, or gotten rid of completely.

Even if Social Security and Medicare are there when the Millennials retire, the amount received will be restricted.  In addition, the amount that is received won’t go as far and buy as much as it does for today’s retirees (see Harsh Reality #2).

HOW TO OVERCOME THIS

  • Make an assumption that you won’t be able to get Social Security.  Plan for your retirement yourself.
  • Also plan ahead for medical costs, since Medicare may not be there either.  Start putting money away in a savings account specific for medical costs, or even get a High Deductible Health Plan so that you can start a Health Savings Account.

HARSH REALITY #7 – YOU AREN’T GOING TO BE READY FOR RETIREMENT; UNLESS…

According to a survey, 70 percent of millennials expect to spend less than $36,000 a year in retirement (Generational Kinetics).

This is a startling statistic when you consider that in 2013 the average expenditure for people aged 65 to 74 (retirement age) right now was over $46,000 a year (Bureau of Labor Statistics).

THIS IS A PROBLEM!

Based on the survey above, at least 70% of Millennials have a false sense of reality when it comes to retirement.  A false reality of how much they’ll need, as well as a false reality that they can start saving for this life event later.

You won’t be ready…unless you start TODAY.  When this reality sets in, learn more about jumping into the retirement planning scene.

Besides…who wants to live on beans and rice just to get by in their retirement…that doesn’t sound like the “golden years”…

HOW TO OVERCOME THIS

  • Plan, plan, plan.
  • Let’s say it once more for good measure… Plan ahead.  Don’t get behind the curve on this…you will regret it later.
  • Get it in your head that retirement is more expensive than you think (because it is).

HARSH REALITY #8 – LOWER FUTURE EARNINGS & LESS JOBS FOR THE NEXT 10-20 YEARS

Baby Boomers are working longer into their older years than any other working group in history.  This is largely due to advancements in health.  People just live longer these days.   Another part of this is because the Baby Boomers are workaholics.  They just like working.

At least 27% of baby boomers said they would “keep working as long as possible”, according to a 2015 Federal Reserve study (Federal Reserve).

This is going to be a problem for Millennials.  This will result in less jobs.  Baby Boomers have been working longer, so in a lot of respects they are better employees.  That means that they are worth more, and companies want to keep them on board.

In addition, with Baby Boomers working longer, the future earnings for Millennials will be less, or at least for the next 10-20 years.  Once the demand for these top positions open up, more and more Millennials will be able to grab them, naturally increasing their earnings.

HOW TO OVERCOME THIS

  • Make yourself as marketable as possible, and in any way possible.
  • Work harder than your coworkers.  If you can prove that you are worth more, by being efficient and a good employee, an employer will pay you more (regardless of age).

CONCLUSION

What Millennials want is a good life, focused on improving their financial situation and lifestyle.  While it is entirely possible for Millennials to have a great financial life, its going to be hard.

These are eight harsh financial realities that all Millennials face.  It’s definitely a mountain to climb.  But knowing about it will help you to put your head up, shoulders back, and go to work.  Even though you are facing grim financial circumstances, you can still live the life you want.

Learning how to overcome these harsh financial realities will help you financially survive in our world today.  Give yourself power over life by overcoming these harsh financial realities!

Managing money is a key skill that puts YOU in control…and once you have that control, then you truly have POWER OVER LIFE!

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