Friday, November 3, 2017
The Situation for Millennials: Good and Bad
This week at Budget Boss has been all about Millennials and what they should be thinking about in terms of their finances. One thing I have encountered with many young people is a dismal view of their current economic climate. It is almost as if they are more perceptive than they are given credit for. It is no wonder that the age group of 18-34-year-olds is the first generation in modern history that will have a life worse off than their parents. Ah, but did our parents have fancy phones and electric cars? Well, I am sure if they did, they would be able to afford them with their gainful employment and lack of crippling debt. Our parents also left home at a young age, unlike our generation which is more likely to live with our parents than a spouse. That doesn’t even include the ones who live with both their parent’s and a spouse. No thank you! The story isn’t all doom and gloom; there is a bright side I promise. This post will aim to show the current situation for Millennials, good and bad. I feel you can better understand how to attack the future if you fully know the present, so here we go.
The Bad
Always give me the bad news first. There are several areas of concern for Millennials when it comes to their economic outlook. I will take a look at 3 of them and give some feedback on each.
Jobs
The job market has become quite different than it was for our parent’s generation. For example, I know people who didn’t graduate high school, got a full-time factory job and are getting ready to retire early with a healthy nest egg. That is almost impossible to do right now. Not to mention this person also had kids, good luck just getting by with kids these days. Back in previous generations, you could secure a long life job, have a pension when you retire, all the while making more than enough to get by. The days of the Defined Benefit Pension are almost extinct. Wages have stagnated and wage growth is lower now than it was back in the year 2000. Wages have fallen 43% since the year 2000, a troubling stat.
Economic Outlook for Millennials – World Economic Forum
Debt
The amount of debt being hurdled onto young people is staggering. According to CNBC, there is over 1.3 Trillion in student debt in the US, 37K per student. In Canada, we don’t fare much better with over 28 Billion in student debt, 27K per student according to VICE Money. It is no wonder that 77% of young people regret their student debt. Part of that obviously stems from the dismal job market and new graduates having a hard time finding meaningful work. The lack of jobs makes it difficult to service this debt which makes it necessary to live at home. This leads to a vicious cycle of poverty and despair.
The State of Student Debt in Canada – VICE Money
Accessibility to Assets
Having few prospects of meaningful work and being in debt makes it hard to acquire assets. Things like investments, real estate, and liquid cash seem out of reach for the Millennial. Barely able to get by, leads many young people unable to save. Couple that with heavy debt loads, and some young people are without any tangible assets even at 30 years old. Not having liquid cash or investments makes it tough for young people to buy a home. Added to that ever-tighter mortgage rules and regulations and you have a recipe for disaster. Also, the cost a home has risen 83% in the past decade making it even tougher. This makes the life of young people very precarious, a spot where any string of bad luck can make life dramatically worse for them.
Some Humbling Stats:
Average Age First Time Home Buyer: (Bank of Montreal)
Millennials: 36
Their Parents: 30
Cost of Tuition Undergraduate: (Ontario)
1993: $3,503/year
2016: $8,134/year
2019: $8,496/year (projected)
Historic Tuition Costs in Canada – Huffington Post
Average amount of personal debt: (not including mortgage)
Age 18-25: $8,343
Age 26-35: $17,064
The Good
It isn’t all bad news, there is a silver lining. I give Millennials a ton of credit. The vast majority of the ones I have met are very industrious, creative and driven. Here are 3 positives for Millennials:
Life Expectancy
This may sound like a weird accomplishment, but people are living longer than before, much longer. The average life expectancy for a female is now 84 and for a male is 80. Sorry guys! What this means is that prolonging starting your life is not as much of an issue because you more than likely will live a longer life. People are getting married later, beginning their careers later and buying a home later. It also means that you can continue working, even part-time, into your 60’s and even 70’s. I personally don’t think I will ever retire. So because we are healthier than ever before, we can expect a better quality of life for old age. That is a definite plus.
Life Expectancy on the Rise in Canada – CBC
Technology
There is an absurd fear that machines will take over all our jobs. I call it absurd because machines will take over some jobs, but create others. Millennials need to understand that they are the front line of the new wave of technology and they will reap the rewards if they play their cards right. Factory, warehouse, agriculture, manual labor jobs will be disappearing but computer technology, artificial intelligence, and digital media jobs will be on the rise. Plus there is a growing need for healthcare, mental health and addiction services jobs as our understanding of these fields get deeper. Millennials are the most advanced generation ever in terms of technology. I didn’t even grow up with a computer and for people 7 years younger than me it is all they know. That will help them stem the tide of a weary job market.
The Technology Industry is Canada’s Fastest Growing Sector – Mentor Works
Knowledge
There is a big difference between knowing what you are up against and not knowing. Couple intelligence with vision and you can navigate rough waters. Millennials are well aware of their situation. They see the writing on the wall. More so than any other generation, they know that it won’t be an easy ride. This is why I think it is important that young people take a vigilant, selfish approach to building their wealth. I say selfish not in a devious way. I mean selfish in the sense that they have to make sure they are on a solid track above all else and then work on helping others. There are no more full-ride pensions. There are no cushier lifelong jobs with full security. There are no more cheap houses, groceries, automobiles or any other essential. We live in an era where everything costs a lot but the good thing is, we know it. With smarts and determination, we can overcome these obstacles. I personally would rather have that then blind faith in a system that doesn’t have my back. The devil you know….
The Great Generational Divide: Boomers Vs. Millennials – Budget Boss
Millennials are in a precarious position but also an advantageous one. I have clients that are in their 70’s and 80’s who entered into retirement without any knowledge of how they did it. It all seemed to work out. That’s a good thing and I’m glad for them. For young people, complete knowledge of the path will be essential to get there. There is no more blind faith and no more “it’ll all work out.” You have to take action or it won’t work out and that is why there is so much fear. We can overcome that fear with a solid plan and a solid work ethic. We are better suited for conditions like these.
Thanks for tuning in this Millennials Week at Budget Boss. Join us next week when we discuss another great topic! If you want to get started creating a financial plan for your future, shoot me a message at joe@budgetboss.ca. Have a great weekend friends!
“You’re going to go through tough times – that’s life. But I say, ‘Nothing happens to you, it happens for you.’ See the positive in negative events.” – Joel Osteen
Email – joe@budgetboss.ca
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