Millennials, Gen Z getting used to living on a financial cliff

Young people are growing in wealth, but they still live and spend in the here and now. Many feel they have no choice.

Net Worth of Americans 18-39 80% increased A study by the Federal Reserve Bank of New York from early 2019 to the third quarter of last year shows that rates for older generations are lagging behind.

But most of the profits are from him investments that rise with the stock marketetc and is mostly not converted into disposable income. And many millennials (ages 28-43, According to Pew Research) — and many of their Gen Z peers (ages 12-27) — earn more, which they still spend on more expensive everyday expenses, such as basic expenses like rent. luxuries such as leisure travel.

“We are a generation stuck between a rock and a hard place,” said Hala Easmael, a 32-year-old pharmacy technician in Philadelphia. After her cohort came of age between two recessions, a pandemic and crushing student loan debt, she said, “we want to enjoy our lives, but we’re always waiting for the shoe to drop.”

Easmael earned his master’s degree in biochemistry and biomedical sciences in 2020 and landed a job as an epidemiologist in New Jersey, earning about $100,000 a year. But after two years in the job and inflation hitting a 40-year high, he quit to pursue a doctorate in pharmacy, hoping to improve his earnings prospects.

Although she saves on rent by living with her parents, her full academic scholarship doesn’t cover the $70,000 salary she earned working part-time as a nanny and hospital pharmacy tech while interning at Walgreens.

Easmael said that even though his savings have “declined dramatically,” he still puts at least 3% of his salary into his 401(k) wallet.

In CNBC survey Last month, 42% of 18- to 34-year-olds said they earned more than a year ago, while 27% said they earned less. However, nearly half said they couldn’t afford more than a month’s worth of expenses if they were unemployed, and only 11% said they could for a year. Only 32% of millennials and 37% of millennials agree to save for emergencies. recent Bankrate report found, although their Gen X counterparts felt slightly better (38%).

Despite her financial pressures, Easmael still spends $300 to $400 a month on fashion, after losing 100 kilograms reinforced her belief that “when you look good, you feel good.”

Many young adults make their own similar calculations about how and when to spend versus saving, experts say.

“People who have had to put off things they want to do can have a mindset at this point that they’re willing to take risks to finally make some of these things happen,” says Kevin Mahoney, a millennial-focused certified. Financial planner in Washington

This mentality is not unique to young people. FOMO-driven “revenge spending,” stimulus checks and accumulated savings have helped fuel the post-pandemic recovery and Consumer spending beat expectations despite the high prices.

But several years after the Covid lockdowns, spending by young Americans on things like travel, leisure and dining outpaces their older peers, even as the economy slows. As of last summer, Gen Zers, or millennials, were on average paying more than $400 a month for non-essentials, about $250 for Gen Xers and less than $200 for baby boomers. Morning Consult report found.

Hence the buzz of headlines around “suffering costs”, It is claimed that consumers (mostly young people). leave the store to relieve the discomfort from economic, environmental and geopolitical forces beyond his control. In response, a chorus of rebukes rose from TikTokers warning each other against burning paychecks for extravagance to encouraging others “high budgeting” — turning down invitations to spend money and telling friends why.

But as Rue Crowder sees it, “if you go to a dark place, you can stay there. I try to live in the present.”

Tight finances didn’t stop the 34-year-old Houston native from joining friends on a cruise to Ensenada, Mexico last fall, or opening a credit card to finance it.

“As an entrepreneur, it makes the leap of faith a little easier because you always have to,” said Crowder, who does digital marketing for websites and content creators and previously owned an online men’s underwear store. He got his commercial driver’s license last year, so he’ll have the opportunity to start trucking to supplement his earnings.

Millennials’ share of bank card balances will overtake baby boomers for the first time in 2023, according to TransUnion. That’s partly because younger consumers, like those before them, build and use more credit as they age. The combination of high inflation and high rates means they’re doing it in a completely different climate and with far more drastic consequences, said Michelle Raneri, US vice president and head of research and consulting at TransUnion.

“These two things together make it harder for young people today than they were three years ago,” he said. “They cannot use the card as a utility. They’re using it thinking they’re going to use it today and I’ll pay it off in three months” – after collecting interest charges.

Arrears for balances more than 90 days past due increased by 2.6% across all age groups From the fourth quarter of 2022 to the same period last year, TransUnion found the highest level in ten years.

Even high-earning young adults say spending most of their increased income on near-term expenses makes it difficult to plan ahead.

Mohit Singla, 33, became CEO at the biotech firm in September with a 20% pay raise that brought his and his wife’s combined annual income closer to $500,000. But a new baby arrived in December, and the rent on their two-bedroom in Jersey City, New Jersey, jumped from $3,700 three years ago to $5,500.

“If the economy had been different, they would have bought a house and maybe a car,” Singla said. With “We still can, but it doesn’t make sense.” high mmortgage rateshe said.

About 18% of Millennials and 12% of Gen Zers said September Redfin survey they believe that they will never own a house. The main reason was cheapness. Average home sale prices 30% higher Compared to early 2019, the savings some would have put toward down payments are now being spent elsewhere.

It’s a delicious meal that Singla and his wife agree to keep every weekend without spending more than $200 on an upscale meal.

Despite their wealth, young people’s financial pessimism is prompting many to spend in ways that make them happy now, says Kyla Scanlon, author. “In this Economy? How money and markets really work.”

“People are just exhausted, and so if you ask them to think five to 10 years into the future, I can hardly think about tomorrow,” he said. In Intuit survey last month, two-thirds of Gen Zers said they weren’t sure they’d ever be able to retire, and nearly three-quarters were hesitant to set long-term goals.

Singla, a millennial, is no longer feeling confident about what steps to take. “If I needed to quit my job and take a break or take a vacation, I felt comfortable that we could do that,” she said. Now, “everything feels like a void.”

Crowder, for his part, doesn’t see himself in nihilistic entertainment. He wants to get better at budgeting, but he said he’s determined to stay content after the financial hardships during the pandemic — something many other Black Americans have experienced.

Before moving to Houston, Crowder slept in the living room of his mother’s two-bedroom apartment in the Nashville area. When her landlord announced plans to renovate and raise the rent from $600 to $1,000 a month, she moved, and she began exploring another city, she said.

There is the Biden administration forced to narrow racial gaps in employment, home ownership and other events. But the average real wealth of black Americans across all age groups, has not yet returned to 2019 levelsNew York Fed researchers found that between early 2019 and the third quarter of last year, white wealth growth outpaced that of Black and Hispanic Americans by 30 and 9 percentage points, respectively.

Crowder remains optimistic. He pays about $140 a week for a room in an eight-bedroom house listed on PadSplit, keeping living expenses down. He said his credit score is low and his savings have dwindled to $1,000 in the past few years, but he only has about $1,200 in debt, all on credit cards.

“I believe I’m already rich,” he said.