If you take a look around, there are some mixed reviews of Millennial financial habits all over the web. Some studies suggest that Millennials aren’t saving a dime, while others counter that Millennials are getting surprisingly good at saving.
Personally, I’m sick of hearing my generation (Millennials, or “Gen Y-ers”) get bashed for our lousy money habits. These naysayers are unable to see our accomplishments and potential as a generation, and that we may actually be ahead of the curve as far as money matters are concerned.
Despite the challenges that uniquely devastated Millennial personal finance and entry into the workplace, it’s my expectation that we are poised to be a powerhouse generation in terms of wealth creation over the long-term.
I believe in my generation because I believe that we have three distinct advantages over prior generations that are conducive to long-term wealth accumulation:
- A relatively powerful incentive to accumulate wealth rapidly
- A thorough, painful, but early financial education
- An instinctive grasp of 21st century business technology
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Advantage #1: The Millennial Incentive
I believe that the single most important value for Millennials like myself is freedom — specifically, freedom with respect to when, how, and how much to work.
Millennials aren’t interested in the corporate life. In fact, I’d venture to say that a lot of us aren’t interested in “getting rich” or “climbing the corporate ladder,” as was the dream of many in the previous generation. Instead, we want to focus on wishy-washy, lazy, entitled life. We call it “work-life balance.”
We value our time far more than our money. We want to experience life. That’s reflected in the changing job market, and in our earnings as a generation. Yes, money is obviously still the most important decision to us as a generation in terms of where to work, but flexibility is a close second place. Close enough where a $5,000 salary difference won’t quite cut it for that company that offers just two weeks’ vacation.
Any personal finance nerd will tell you that it’s never about the money. It’s about the freedom. It’s about F.U. Money. Millennials desperately want that freedom, and because that desire is bred so strongly in us as a generation, we have the mindset requisite of great investors.
We don’t want that money for spending on fancy new cars or big new houses; we want it so that we can experience a sunny summer Tuesday at 2:00 p.m. in the afternoon lounging in the park, not in some dusty cubicle cranking out spreadsheets. That’s what we’ll purchase. The cost of that isn’t an expense, it’s in fewer hours worked and resulting lower wages — what we finance nerds call opportunity cost.
Previous generations were content and even eager to work the same job for a 40-year career, getting up at 8 a.m. every day and returning home at 5:00 so as to earn the maximum salary possible. Millennials won’t put up with that. Not for 40 years. Not when the opportunities and experiences available to us grow exponentially with each passing year and new technological advance.
I refuse to submit to that fate. I’m afraid of that fate; I think that it’s where dreams go to die. That fate didn’t and doesn’t sound so bad to our parents or the Gen Xers who directly preceded us. But it terrifies and motivates us Millennials.
One of the few ways to lay that fear to rest is by taking control of our finances through the accumulation of personal wealth and passive cash flow. There’s a reason why books like Rich Dad, Poor Dad, The 4-Hour Workweek, etc. have exploded in popularity over the last decade. There’s a reason why BiggerPockets has grown so quickly.
We are doing our damndest as a generation to escape the cubicle fate. We want to bury the possibility of the cubicle forever, sustainably, by accumulating enough assets so as to never have to work again. That’s the ultimate reason to build wealth, and that’s the value that is so incredibly important to Millennials — far more so than it was to prior generations.
Advantage #2: The Millennial Education
We Millennials have the distinct “advantage” of entering the workforce in the worst economic circumstances this country has seen since the Great Depression.
To top that off, the single largest financial burden for many Millennials is their student debt. These immense personal debts, with no tangible assets to back them up, force Millennials to set aside vast portions of their paychecks towards loan repayment. The media shallowly ignores this burden with phrases like “Millennials aren’t saving a dime.” That’s atrocious commentary in my opinion.
Many of my peers signed up for their $100,000 in student loan debt at the ripe old age of 17 or 18. I’m sure we can all agree that that’s the right age to take out a loan in that amount, and that they were fully educated with years of study on the financial consequences of that decision…
In spite of being (in my opinion) shamefully taken advantage of by the American collegiate education system, my now 20-something peers are paying down their debts by behaving well financially. Folks are setting aside large chunks of their income towards debt reduction, and they are accomplishing the amazing transition from negative net worth to zero net worth. That’s far more of an achievement than starting from zero and accumulating wealth having started in the black.
With their loans paid down, America will suddenly find a large group of educated Millennials who already prioritize freedom and who have just recovered from a decade long struggle with crippling debt. Guess who’s unlikely to go take out a $30,000 car loan, or buy the fancy house on the hill for $1 million? Guess who never, ever wants to be in that position again? And guess who has developed a healthy decade long habit of setting aside large chunks of income to build net worth (in the form of debt payments)?
Millennials learned painful financial lessons back to back to back. The Financial Crisis. Student Debt. The Great Recession. But we learned those lessons early. We learned them in our 20s, unlike prior generations whose most painful lesson was the tech bubble in the early 2000s, a far less serious slap on the wrist than the more important crash of the late 2000s through the present. We’ve got plenty of time to pay down our debts, to remember how horrible bad debt truly is, and we are prepared for the worst economically; it’s all we’ve ever known.
Advantage #3: The Millennial Business Economy
I have almost no memory of a world without internet. That’s unique to my generation in today’s business world. Financial and business concepts that seem normal to the previous generations are laughably antiquated to Millennials.
I travel via Uber, schedule appointments online, exchange money instantly via my cell phone, learn about any topic that I’m interested in instantly and for free, and I communicate accurately, efficiently, and deeply with my peers through photos, text messages, and other mobile applications.
I don’t read maps, look up words in a dictionary, change my own oil, sew, or drive a stick shift. Some people call this a “struggle with life skills 101,” but I truly couldn’t care less what they think. I see those skills as just as outdated as tending the horses, plowing a field, or hunting game. I’ll keep acing “21st Century 101,” thanks.
The world is changing, and for me, that’s the standard. It’s obvious that mobile banking has already won, but yesterday’s generation just can’t keep up quite as fast as we can. Many older folks are unaware of the ability to instantly pay others via apps like Venmo. Parents, aunts and uncles aren’t using Uber instead of taxis yet, despite the obvious advantages.
It’s simply amazing how far behind powerful businesses, like my mortgage orgination company, are. Dude, paper mail isn’t days slower, it’s decades behind. And so are the companies and businesses that still use it as a primary means of communication.
I’m not saying that Baby Boomers and Gen Xers aren’t able to adapt. It’s that they aren’t demanding and expecting rapid progress in these areas of business. The older generations see mobile banking as a great new feature to be adopted as a new business tool. Millennials like myself can’t understand why our money has to wait three business days to “settle” in our bank account. What the hell is that about? Are you kidding me? Banks that “settle” funds are already behind. By years.
This mindset is a powerful advantage. We aren’t just happy to have an added convenience. We’re frustrated by the fact that things aren’t already better than they are and seek out the better product constantly. It’s a subtle, yet extraordinarily powerful difference in mindset over time. I think it’s simply better business. And I think that this mentality is to our advantage.
Millennials are not perfect with money. We struggle in a lot of ways and have buried ourselves in a deep hole financially as a generation. We’ve had a rough start to our adult working lives as far as the economy and our personal net worth are concerned.
But that rough start makes us stronger. It makes us more flexible, and it makes us more conservative financially. Add to that tough start our powerful, deep motivations to accumulate wealth, and you have a generation that is uniquely positioned to change the world. And let’s not forget about our innate ability to understand the changing business landscape.
The opportunities for my generation of Millennials are huge. I think that they are even greater than they were for the generations that preceded us. Far from being financially backwards, irresponsible, and lazy, I think that Millennials are an extremely adaptive group, focused on freedom above all else. And I think that the hole that we’ve dug ourselves into is simply a deep, rock solid foundation for enormous financial success over the long run.
My money is on my generation. But only time will tell.
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What do you think? Are Millennials in a great position to build substantial wealth, or will their financial problems continue to plague them?
Let me know your agreements or disagreements with my assessment below!