Young people's wealth is increasing, but they still live and consume in the here and now. Many people feel they have no choice.
The net worth of Americans ages 18 to 39 soared 80% from the beginning of 2019 to the third quarter of last year, exceeding the net worth of older generations, according to research from the New York Fed.
But much of the profit comes from investments that have risen along with the stock market, with little translated into disposable income. According to Pew Research, while many Millennials (ages 28-43, according to Pew Research) and many of their Gen Z cousins (ages 12-27) earn higher salaries, they They're still funneling that cash toward more expensive everyday expenses. From necessities like rent to luxuries like leisure travel.
We want to enjoy life, but we're always waiting for the shoe to drop.
“We are a generation caught between a rock and a hard place,” said Hala Easmael, 32, a pharmacy technician in Philadelphia. After coming of age during two recessions, a pandemic, and crippling student loan debt, her peers say, “We want to enjoy life, but we're always waiting for the shoe to drop.” she said.
Ismael earned a master's degree in biochemistry and biomedical science in 2020 and took a job as an epidemiologist in New Jersey, earning about $100,000 a year. However, two years into her job, with inflation rates at the time hovering near 40-year highs, she completed her Ph.D. in Pharmacy in hopes of increasing her income prospects. I quit my girlfriend's job to get my degree.
She saves money on rent by living with her parents, but also interns at Walgreens, works part-time as a nanny and hospital pharmacy technician, and earns a reduced salary of $70,000 on a full academic scholarship. I can't make up for it.
“You're never going to be okay with just one job,” said Easmael, who still contributes at least 3 percent of her wages to her 401(k), even though her savings have “reduced significantly.” he said.
In a CNBC survey of 18- to 34-year-olds last month, 42% said they earned more than a year ago, while 27% said they earned less. However, almost half said they would not be able to cover more than one month's worth of expenses if they lost their job, and only 11% would be able to cover a year's worth of expenses. According to the latest Bankrate report, only 32% of Gen Z and 37% of Millennials are satisfied with their emergency savings, while Gen X only improved slightly (38%). I feel that it is not.
Despite the financial pressures, Ysmael still spends $300 to $400 a month on fashion after losing 100 pounds, reinforcing her belief that “looking good means feeling good.”
Experts say many young people are making similar calculations themselves about when and how to spend and save.
“People who've had to put off things they want to do, the idea of taking on risks to ultimately make those things happen is at this point,” said Kevin Mahoney, a millennial-focused certification. It is possible that they have.”Financial Planner in Washington DC
This kind of thinking is not limited to young people. 'Revenge spending' driven by FOMO, stimulus and accumulated savings has been a huge success, driving post-pandemic recovery, with consumer spending continuing to outperform expectations despite rising prices .
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But even as the economy slows in the years following coronavirus lockdowns, younger Americans continue to outspend older generations on things like travel, recreation and dining out. As of last summer, non-essential spending for the average Gen Z or Millennial generation had fallen by more than $400 a month, compared to about $250 for Gen was less than $200.
This has led to a flurry of headlines about “catastrophic spending” in which consumers (mostly young people) go out on a shopping spree to assuage fears caused by economic, environmental, and geopolitical impacts beyond their control. I'm here. In response, TikTokers have been scolding everyone from warning each other about using up their paychecks on luxury items to encouraging “loud budgeting,” where you decline invitations to spend money and tell your friends why. voices are rising.
However, Lou Crowder thinks: “You can go to a dark place and stay there. I try to live in the moment.”
Tight finances kept the 34-year-old Houston resident from taking a cruise to Ensenada, Mexico, with friends last fall and opening a credit card to finance it. There wasn't.
“As an entrepreneur, it’s a little bit easier to take a leap of faith because you have to do it all the time,” Crowder said. Crowder works in digital marketing for websites and content creators, and previously ran an online men's underwear store. Last year, he got his commercial driver's license, so he has the option of taking up trucking to increase his income.
You can go to a dark place and stay there. I try to live in the moment. Like, I believe I'm already wealthy.
According to TransUnion, millennials' share of bank card balances will surpass baby boomers for the first time in 2023. Part of the reason is that, like consumers before them, younger consumers are building and leveraging more credit as they age. But Michele Ranelli, vice president and head of U.S. research and consulting at TransUnion, said the combination of high inflation and high interest rates is likely to be more severe as these policies are being carried out in a much different climate. He said it means delivering results.
“Those two things come together to make it even more difficult for young people today than it was three years ago,” she said. “They can't use the card as a utility. They use it thinking they can use it today and pay it back in about three months” – after she collects interest.
Delinquencies on balances more than 90 days past due increased 2.6% across all age groups from the fourth quarter of 2022 to the same period last year, the highest level in a decade, according to TransUnion research.
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Even high-income young people say spending a large portion of their growing income on immediate expenses makes it difficult to plan ahead.
Mohit Singla, 33, became a senior director at a biotech company in September and received a 20% salary increase, bringing the couple's combined annual income to nearly $500,000. But after having a baby in December, the rent on their two-bedroom apartment in Jersey City, N.J., jumped from $3,700 three years ago to $5,500.
“If the economic situation had been different,” they would have bought a house and perhaps a car, Singla said. He said “it's still possible, but it doesn't make sense” because mortgage rates are rising.
In a September Redfin survey, about 18% of Millennials and 12% of Gen Z said they thought they would never own a home. The biggest reason was affordability. The median home sale price is up 30% since the beginning of 2019, and the savings some people would have put toward a down payment are now being spent elsewhere.
Everything feels like a splurge.
The luxury that Singla and his wife stick to is fine dining, and they try to spend less than $200 on a fine meal every other week.
Despite rising wealth, economic pessimism among young people is causing many to spend their money in ways that make them happy in the moment, says Kyla, author of In This Economy? Mr. Scanlon said. How money and markets actually work. ”
“People are just so exhausted that when you ask me to think five to 10 years from now, I can barely think about tomorrow,” she said. In a survey conducted last month by Intuit, she said two-thirds of Gen Zers were unsure if they could afford to retire, and nearly three-quarters were hesitant to set long-term goals.
As a millennial, Singla is less certain about what steps to take. “If we had to quit our jobs and take a break or take a vacation, we felt safe that we could do it,” he said. Now, “everything feels like a splurge.”
Crowder doesn't think he's reveling in nihilistic joy. He wants to be better at budgeting, he said, but he plans to be satisfied even after the financial hardships of the pandemic. This is something that many other black Americans have experienced as well.
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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 a month to $1,000 a month, she moved elsewhere and he went off to explore another city, he said. .
The Biden administration has pushed to narrow racial disparities in employment, home ownership, and other areas. However, researchers at the New York Fed found that average real wealth for Black Americans across all age groups has not yet recovered to 2019 levels — wealth growth for whites has slowed to a crawl for Black and Hispanic Americans. This is despite the fact that they are 30 and 9 points higher than humans, respectively. Early 2019 and the third quarter of last year.
But Crowder remains optimistic. He pays about $140 a week for his one room in an eight-bedroom house, which he found listed on PadSplit, keeping his cost of living low. Although his credit score is low and his savings have dwindled to $1,000 in recent years, his total debt is only about $1,200, which he pays entirely on credit cards, he said.
“I already believe I'm wealthy,” he said.
