Millennials, Amirite? Starting Out Today Is Way Harder

Being financially stable as a millennial is no small feat but it's doable. Here are four tips to help you buck the stereotype and become more economically savvy.

I came into the employment world on the tail of the recession of the early 1980s—and while the economy was recovering, the advertising that supports print publications is often late to respond to shifts. Jobs were tight, but I still got in.

Now think about what lies ahead for the next generation—those starting out in the past decade. Compared with them, baby boomers like my wife, Jeanne, and me, for all our problems and mistakes, had it easy when it comes to economic opportunity and the ability to build a secure financial future. Many of today’s young people emerged from college in the middle of one of the most ruinous economic downturns in U.S. history, and with the kind of college debt that past generations didn’t have to deal with, into a world of narrowed possibilities.

The thought hit me hard in mid-2016 when I was listening to a talk by Patti Smith, the singer and punk poet, for staffers of The New York Times. Her passionate music was an important part of my 20s (and 30s, and 40s, and 50s, to be honest), and it was wonderful to hear her speak. But one thing she said left me sad and troubled.

She said that kids write to her today and they want to do what she did: they want to head up to New York with five dollars in their pockets, find a cheap apartment, and live the life of an artist and poet. She said that she has to tell them, “You can’t do that anymore. New York has changed.” If she were starting out today, she couldn’t do what she had done back then.

She’s right. It’s now a city for those with money to burn. And New York is not the only city that’s become a playground for the richest. San Francisco? Good luck. Heck, even Austin is too expensive for the slacker lifestyle I loved in the ’70s. Los Tacos is long gone.

Do today’s young people starting out have the same opportunities we had? Of course not. Jeanne and I feel fortunate to have grown up when we did, when we could live on our own in dirt-cheap apartments and buy that avocado with sofa-cushion change. When we moved to New York City, we weren’t living Patti Smith’s Bohemian lifestyle, thanks to my having gotten that job at Newsweek. But we had friends who were scraping by with low-paying jobs and living in ratty old apartments in Alphabet City and played in rock and roll bands. It was harder, but still possible.

We didn’t have as much economic opportunity as our parents did. But we seem to have dodged a bullet, compared with the millennials, the large population of young people born between about 1980 and 2000, and the Generation X (and Y) that came after our baby boomer generation.

The prospects for the younger generations to outstrip their parents in earning power has diminished greatly over time. According to the economist Raj Chetty and his colleagues, if you were born in 1940, you had a 92 percent chance of earning more than your parents had. Born in 1960? You’re down to 62 percent. If you were born in 1980, the odds that you are out-earning your folks are just 50-50.7. These figures are not guesswork: they are drawn from millions of tax records over the decades. You can only wonder how the numbers will look for millennials.

David Leonhardt, who won a Pulitzer Prize for his economics columns in The New York Times, called the data “deeply alarming,” and said, “It’s a portrait of an economy that disappoints a huge number of people who have heard that they live in a country where life gets better, only to experience something quite different.” He rightly tied these grim figures to Americans’ distrust of so many institutions—the federal government, corporations, the news media, and others— as well as the roiling election season and the victory of Donald Trump. Leonhardt closes his excellent article with optimism: “If the American dream could survive the Depression, and then thrive in a way few people imagined, it can survive our current troubles.”

I hope he’s right. In the meantime, the kids are not all right.  One-fifth of young people in their 20s and early 30s live with their parents, writes Adam Davidson in the terrifying 2014 article “It’s Official: The Boomerang Kids Won’t Leave.” A generation ago, that number was closer to one in 10. By 2016, the numbers looked even worse: The real estate website Trulia estimated in 2016 that 40 percent of young Americans between the ages of 18 and 34 were living with their parents—  the highest percentage in 75 years. It’s as if the postwar boom never happened. Young people are more likely to be living with the folks than with a romantic partner, according to the Pew Research Center.

Of course, it’s wrong to assume that a young person living with parents has failed: many of them are making a sound financial decision about how to save money while starting a career, especially if they are also burdened with student debt. Stiff rents and lagging income growth make the old bedroom a rational option, once the soccer trophies have been boxed up and moved to the attic. But the boomerang trend also means that some of the better engines of the economy, including home construction and sales, are weakened. And the sheer size of these numbers is troubling.

Despite the challenges that have been previously described, there are signs that things might be looking up for this young crowd. The Federal Reserve of New York published a report in January 2016 showing that the annual income of recent college graduates has jumped to $43,000, the highest in more than a decade.

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Bucking the Stereotype: How to Become a Financially Savvy Millennial

Whether or not you have a job with a pension, you can do what we did, but smarter. These four deceptively simple steps will set twentysomethings on the path to financial stability.

1. Save more; spend less. I don’t want to sound like a scold, but these are the years to develop strong habits of saving. This will help you avoid debt and interest charges on purchases, and will provide you with a cushion against emergencies. Financial writers offer plenty of tips intended to help you save, but the best way is simply to begin. Set up automatic deposits from each paycheck in a savings account separate from whatever retirement funds you build. There are many, many books and websites offering tips and tricks about living within your means, but the bottom line is common sense: avoid extravagance. Think about the things you buy, and why you are buying them. Ask yourself if you need them. Don’t deprive yourself, but a little mindfulness goes a long way.

2. If you have credit cards, pay them down. If you don’t, you’ll be spending money to pay off interest, and you could probably rack up late-payment fees as well. It’s like having a big hole in your pocket. If you have cards with benefits like airline miles and rebates, keeping a zero balance means you get the benefits without giving the credit card company so much money that it makes the benefits no bargain. As the Federal Reserve Bank of Boston put it, “Paying off credit card debt has a riskless return that averages around 14 percent, which no other asset class can match.”

3. Set up a 401K or an IRA. Saving is a habit that you can build. So start saving for retirement just as soon as you can, especially if you have an employer that matches your 401(k) plan. Free money! Find out about your payroll plan at work. If you are self-employed, look into the options offered by your state government. A few years of savings early on can add hundreds of thousands of dollars to your retirement fund over the decades. You don’t have to start with 10 percent; you can open your 401(k) with a smaller percentage of your income and add a percentage point a year until you build up to 10 percent, or better. When you get a raise, put part of it toward retirement; if you never got it, you’ll never miss it.

4. Pick your funds wisely. There’s no need to get fancy starting out. Make simple mutual fund choices, and don’t invest in more complex financial instruments like annuities or exchange-traded funds until you’ve given yourself time to study up.




From This Is the Year I Put My Financial Life in Order by John Schwartz. Copyright © 2018 by John Schwartz. Reprinted by permission of Avery Books, an imprint of Penguin Books, a division of Penguin Random House, LLC.



Photo Credit: Shutterstock


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