Even though millennials are better educated compared to previous generations, they have peculiar spending habits that perplexed many people. They also reached certain milestones in life at a slower pace compared to other generations.
For instance, they get married at a later point in life compared to previous generations. They also take longer to form their households and often live with their parents longer. But certain circumstances played a significant role in the financial situation of millennials. They also played a factor in the money habits of this generation.
Here are the different aspects of the financial situation of millennials.
Financial Struggles of Millennials
It should be stressed that many millennials are struggling due to the debt they incurred while studying. While some millennials are keen on having their daily cup of gourmet coffee, many have to deal with paying off their college loans, which has a significant effect on their finances.
Even though millennials aim to find their dream job and buy a house, they should hurdle their financial situation before they can achieve their goals. It’s also important to understand that salaries have not increased at the same pace as inflation. Due to this, millennials find it challenging to meet their financial obligations even if they are already working right after college.
Their low-paying jobs coupled with their financial obligations have made it difficult for millennials to settle down at the same age as their parents.
Income of Millennials
Even though there’s a general notion that millennials spend a lot on clothes and gadgets, their debt is due to the student loans that they got to get their college degree. Due to this, they have lower levels of homeownership compared to previous generations.
Their annual income level is also lower compared to their student debt. In this situation, millennials have to allocate a considerable percentage of their income to pay off their student loans before they consider buying a house or setting aside money for savings.
Despite this situation, millennials consider themselves financially stable when they can pay off their monthly bills. In this situation, it takes a longer time before millennials can benefit from their college degree. Until they can pay off all their loans, millennials should focus on saving as much as they can to prepare for their future.
Investment Philosophy of Millennials
Millennials are keen on using their instincts when they make investments. This philosophy was the result of the market crash in 2008 and the economic fallout that followed it. They have a global mindset while taking into account social responsibility.
Since millennials are tech-savvy, they use online and mobile technology to manage their financial investments. Due to this, they do not rely too much on financial professionals when they make their investments.
But some millennials prefer to work with financial professionals. These millennials belong to the more affluent class in society. They prefer to deal with professionals to help them with their investments.
Working with reliable fiduciary financial advisors allows them to make informed decisions about their investments. These professionals provide sound financial advice while managing their assets and liabilities. They also have the responsibility of putting the best interests of their clients ahead of everything. To ensure their clients are aware of the status of their investments, these professionals provide regular reports to them.
Millennials and Retirement
The pandemic saw an increasing concern among millennials about their retirement. Their concern comes after they went through several economic downturns. The generation also saw salaries not moving despite increasing inflation levels.
They are also in favor of increasing pension contributions to prepare for their retirements. Despite this, millennials have a lot of work ahead of them. They should not rely on Social Security for their retirement.
Millennials have to diversify their income streams and create a passive income source. These sources of income allow them to have the funds they need for their retirement. It also gives them a source of funds in case something similar to the pandemic happens in the future.
Millennial Approach to Housing
For the moment, millennials are putting off their plans of buying a house. They focus on paying off their loans rather than spending money on a mortgage. And even though the government lowered interest rates during the pandemic, many millennials could not afford to buy a house.
And as home prices went up, owning a house became more challenging for the generation. And one of the reasons why they find it challenging to buy a house is that they live in regions where home prices are beyond their reach.
Millennials are facing numerous financial obstacles due to the numerous financial crises that they experienced over the past few decades.