High housing costs have led to 47% of millennials saying they struggle to afford a home and 42% admitting to having difficulty affording groceries. Overall, this generation’s finances could be better; many do not see things improving soon. Close to half of respondents report feeling hopeless about their financial situation.
Many factors are at play, including income, debt, dwindling savings and poor financial choices.
Current income isn’t enough
Close to 75% of millennial women and 70% of all those surveyed say they struggle to make ends meet with their current salary. The average income for millennials surveyed is $74,106, roughly $35 an hour. To live comfortably, they say a salary of $119,406 is required. Close to one-third regret not choosing a career with higher earnings potential.
Debt is piling up
Debt is a significant issue for millennials, with 90% carrying non-mortgage debt. Here is a breakdown of debt by category and the percentage of those surveyed who have it:
- Credit card debt: 57%
- Auto loans: 43%
- Medical debt: 30%
- Student loan debt: 25%
Respondents have, on average, close to $8,500 in credit card debt, and 22% owe at least $15,000. The average student loan debt is $56,538, and 16% report owing more than $150,000.
Unaffordable housing
Housing is a significant sticking point for millennials who currently own real estate and those who do not. For those with a home, 84% report putting more than 20% of their monthly income towards housing bills, with 33% reporting spending half or more on this expense.
Fifty-two percent of current homeowners say they could not afford their home if they were trying to buy it today. Of non-homeowners, half think they will never be able to purchase a home, an increase of 20% from a year ago.
It’s more than the high home-buying price that stops these millennials. Fifty-nine percent point to their debt as a significant factor delaying them from saving for a home.
While savings is running dry
Millennials are tapping into their savings to survive, and their savings are dwindling. In the past year, their savings have decreased roughly 13% or $6,500 to $42,948.
What needs to be more accurate about the savings balance is that 44% report being unable to afford a $500 out-of-pocket expense. It is unclear if they could not afford this bill with their current income and not tapping into savings. What is clear is the downward trend will continue, as stubbornly high prices and debt repayment make saving money difficult. The data shows that 22% are not saving anything in an emergency fund.
Almost all millennials have financial regrets
When struggling to make ends meet, it is natural to have regrets about life choices. The survey reports that 96% of millennials have regrets, with 51% saying not saving enough money is the biggest. Close to a third report regrets not investing sooner and going into debt in the first place.
The positive outcome of this is there is still hope. Millennials are between 25 and 40 years old, so they have plenty of time to invest, see their money grow, and pay off their debts.
A path to prosperity
With all the gloom around the financial situation of millennials, there is a path to wealth. The first is to track income and expenses, ideally using a free budget template or app. A budget would go a long way, as 59% report dining out weekly, 56% buy coffee daily, and 44% make impulse purchases.
By first understanding their spending habits, they can adjust to prioritize paying bills, debt, and saving money.
At the same time, millennials should begin to work on increasing their income to create more cushion between money coming in and going out. While a new job is an option, a much simpler solution is to improve upon skills needed in their current line of work.
An Excel user could learn macros, pivot tables and other advanced formulas to become more efficient. They could then present this time efficiency to their manager in hopes of a pay increase. At worst, they have additional skills to list on their resume when searching for another job.
A change in mindset
One other critical change millennials need to make is with their mindset. Half of millennial women and 43% of millennial men surveyed report feeling hopeless about their financial situation. When there is no hope or a scarcity mindset, it isn’t easy to improve your financial situation.
A positive outlook, or growth mindset, is a critical tool millennials can use to improve their finances. If they believe they can be debt-free, earn a higher salary, or save $100K, they are more likely to achieve it. The good news is that some already know this. Twenty-nine percent say they are better off than a year ago, and 42% say they are doing better than five years ago.
As this generation enters the traditional high-earning years, there is hope that they can improve their financial future.
This article was produced by Money Smart Guides and syndicated by Wealth of Geeks.
