Millennials can have their cake, and eat it too. However, Market Watch would have you think otherwise. In the article, This is why millennials can’t have nice things (or save any money), the author points out a lot of sobering statistics…
- The average Millennial spends over $2,300 more per year than older generations on key items such as groceries, gas, restaurants, coffee, and cell phone bills
- Millennials spend $233 per month on meals, versus $182 for older generations
- Millennials spend $161 per month on cell phone bills, versus $135 for older generations
You can tell that this guy is a journalist and not a finance guy. Lucky for you, I am a huge nerd! So let me start by saying “this is not that big of a deal.” Let me explain.
Assuming a generational gap of roughly 20 years, and an average inflation rate of 3% per year, Millennials SHOULD actually be spending about $328 per month on meals, not $233. Millennials SHOULD be spending about $290 per month on cell phone bills. And with advancements in technology, millennials ARE spending less on things like TV entertainment due to subscription services such as Netflix, Hulu, and Amazon Prime.
Once we take inflation into consideration, we (Millennials) are actually spending less money on a lot of standard household items. We may dine out more (according to the article, 54% of Millennials dine out three times per week). We may spend more on that morning coffee. However, that may all be nominal dollars. When we look at real dollars, the picture is not so grim.
What we do spend more money on…
What Millennials DO for sure spend more money on is debt. And this is where the picture gets grim for Millenials, who are having a harder time affording nice things than older generations.
Big ticket purchases such as a house, a car, a boat, and a college education are MUCH more expensive for Millennials today, than past generations. And a major reason for this is the increased liquidity and easy access to credit.
- Want a house? Take out a mortgage.
- Want a car? Get a loan.
- Want a boat? Go to the bank.
- Want a burger? Swipe your card.
- Want a college degree? Borrow the money and pay it back, even if you do not graduate.
Get the picture?
Credit is so widely available now that paying cash actually seems weird.
Millennials can have nice things. It just requires a little more planning.
Who cares if Millennials grab a $5 coffee on their way to work every day?
Who cares if Millennials dine out three times per week?
Who cares if Millennials spend more on cell phone technology?
The “latte factor” is a personal finance concept that needs to go to rest. I used to refer to it quite a bit myself, but then I realized that the latte factor is not the boogeyman it is all cracked up to be. The latte factor is not what separates the broke and the wealthy. Debt is. And the more people suck up to banks and credit card companies, the more money banks and credit card companies will suck up.
Please do not get me wrong.
If you are spending $5 per work day on coffee (which equates to $1,300 per year), yet you cannot seem to save a dime for retirement, then that is a problem.
If you are dining out three times per week (which equates to about $7,800 per year), yet you are only investing $1,000 per year towards retirement, have no emergency fund, and have $50,000 in student loans hanging around, then you have issues.
Personal finance is about balance. Don’t dine out every day at the expense of a prosperous future. Don’t mortgage your future by financing everything including that burger you had for lunch. Think before you swipe that credit card for a pack of gum. Avoid that $100,000 student loan debt for a worthless degree in under-water basket-weaving.
Millennials can still have nice things; they just need to be a little smarter about it. Budget! Save! Be frugal! Say “no” to credit. Do not be in such a rush to own a house!
Debt is a wolf in sheep’s clothing. It looks cute and cuddly, but it has a nasty bite.