Why 70% Of Millennials Are Financially SCREWED

What's up, Graham? It's guys here. So, unfortunately, I have some good news and I have some bad news. Now, normally I would ask which one you would want to hear first, but because I'm all alone, just talking to a camera, obviously I'll just assume that we should get the bad news out of the way first.

This is what it comes down to: a new survey just came out that found that 70% of Millennials are now living paycheck to paycheck in 2021. If you think, “Okay well, GR, that's just because you're not making enough money and they have student loan debt to pay, duh,” you would be very, very, very wrong. In fact, that exact same survey also found that 60% of Millennials earning above $100,000 a year were also living paycheck to paycheck, indicating that there's a serious problem in terms of how that money is being managed and where it's going that needs to be addressed.

However, the good news here is that by looking through the survey and analyzing the average Millennial spending habits, we could identify precisely where 70% of Millennials are making a huge mistake, how they're wasting money without even knowing it, and how they could quickly turn things around so that they're not just another headline statistic on Business Insider.

But before we start, did you know that 90% of viewers don't smash the like button? With your help, you can be so much more than just a statistic and smash that like button because it helps out my channel tremendously.

In order to break this down and get to the root cause of the issue, we have to get some of these broad statistics out of the way. Like I mentioned, this study discovered that a whopping 70% of Millennials are living paycheck to paycheck in 2021, which is significantly higher than any other generation. They say the aspects of living paycheck to paycheck is a much better indicator of economic needs and wants just as much, if not more, than income or wealth.

Right now, there's simply not enough money left over to be saved, indicating that there is a serious problem. For instance, Bloomberg reported that Millennials are significantly further behind in almost every single financial milestone—owning less wealth, taking on more debt, earning a smaller amount, delaying home ownership, and refusing to invest. As a result, 61% of Millennials now expect to work through retirement, and much of this is assumed to be the result of the Great Financial Crisis of 2009, which stunted Millennials' ability to save money during the first few most pivotal years of their career.

Until today, Millennials own just 5% of all U.S. wealth. However, a lack of income might not be the entire problem here. Even though the median income for Millennials was $57,500 a year, like I mentioned, today 60% of Millennials earning above $100,000 are also living paycheck to paycheck, which indicates there's a much bigger problem than people expect.

That's because living paycheck to paycheck could mean that you simply spend all of your money each month without having any of it left over, and technically, you could be making millions per year and still living paycheck to paycheck if you spend it all on boats and Lambos.

This is, of course, where we start getting into some of the issues. This reminds me of an article that was posted a few years ago which went absolutely viral online that claimed you now need to make $350,000 a year to live a middle-class lifestyle in a big city with a family of four. They prepared quite the argument.

First, they say that earning $350,000 a year is not exactly as uncommon as you would think—like a rapid transit janitor who marries an elevator technician could earn well above $400,000 a year, or a long-standing employee of a big five tech company could see that salary by the age of 35, or an OnlyFans creator could make all of that combined in a single month.

Okay, but seriously, they say that quite a few highly sought-after, competitive professional fields have the ability to make quite a lot of money once you move up within the company, and the paycheck-to-paycheck budget associated with that is, well, terrifying. With a gross income of $350,000 and a 401(k) contribution of $38,000, after taxes they're left with $223,800, or $1,653 a month.

Then they spend approximately $4,500 a month on childcare, $2,200 a month for food, $6,600 a month for housing, $2,500 a month for insurance, and three vacations a year, $800 a month for a car payment on a Toyota Highlander, and then $900 a month for other. After all of that said and done, that leaves a leftover amount of, wait for it, $121 a month on an income of $350,000 a year.

Now, on the surface, it's kind of like an Andre J Money trick gone wrong because it's like where did that money all go? I just saw it! But they provide a reasonable argument for each expense for such a family with an average house and a fairly average bill for someone living in a high cost-of-living area.

At the end of the day, with $350,000, they cannot save enough money for retirement. Although from the way I see it, here's where the math starts falling apart. This middle-class paycheck-to-paycheck lifestyle is still enough to invest $338,000 into a 401(k) along with another $112,000 invested into an HSA. They're also building $2,000 a month into home equity until eventually it's paid off.

$30,000 a year in childcare will eventually be a thing in the past. That means over time this family is still able to save and invest $100,000 a year without cutting back at all. Even though there's barely any money left over, I would hardly call that paycheck-to-paycheck.

Not to mention a lot of these expenses are discretionary, including another $20,000 spent on recreational and non-essential activities that you could easily remove entirely if needed. That means this family could be saving $10,000 a month or more on top of everything else with a proper budget plan and discipline.

But under this budget, it's absolutely possible to say they're living paycheck-to-paycheck simply because they spend the majority of what they make without a lot of money left over after everything is said and done. But that's not all; even though it's easy to poke holes in a hypothetical $350,000 budget, you know what they say: fact is often stranger than fiction.

What's even more interesting is that a 2015 survey found that 44% of Millennials earning between $1 and $149,000 a year said that they were living paycheck to paycheck, which was significantly higher than those earning $50,000 to $75,000 a year at just 33.5%. This means the more money you make, the more pressure you have to spend your money and the more likely you are to then live paycheck to paycheck.

Now, what's really sad is that this type of situation is so common that they made an acronym for it—it's called Henry, which stands for High Earner, Not Rich Yet. This encompasses young professionals who quickly start earning a lot of money but simultaneously increase their lifestyle to the point where all of a sudden they don't have any more money left.

Although if you're not a Henry and you don't earn $350,000 a year, you're still not immune to the fact that things are getting more expensive and your money does not go as far as it once did. So, in terms of why 70% of average-earning Millennials are now living paycheck to paycheck and what to do about it, let's dissect the average Millennial budget and then figure out where things are going so terribly wrong.

According to analysis by Go Banking Rates, Millennials spend an average of $27 a day, which is about $44 more than the average American. The largest Millennial expense, as you would expect, was spent on housing at an average cost of just over $1,000 a month. In high cost-of-living areas, this could be even higher, totaling as much as 45% of income.

By the age of 30, groceries were then another $330 a month, and eating out was an extra $300 a month, which was found to be the highest food budget among all generations. Even more astonishing is that 87% of Millennials say they're willing to splurge on a nice meal out even if money is in short supply.

Everything else starts out at what might seem like a low cost each and every day, but over time, in conjunction with everything else, it adds up. All of a sudden, the average Millennial has nothing left over at the end of every month. Of course, all of this is easily preventable, with a 2017 study finding that 70% of Millennials admitted to spending money on clothes they don't necessarily need, and 60% of Millennials say they spend more than $4 on coffee—which is exactly why I decided to make my own affordable coffee that you can make from home, now for sale at bankrcoffee.com.

The biggest issue from all of this, though, is that Millennials spend an average of $838 a month on non-essentials. The biggest spending habits here include vacations, dining out, and coffee, which they say is heavily influenced by your friends, boredom, advertising, and social media.

Then we got the final nail in the coffin: 49% of millennial respondents said that their non-essential purchases contributed to their debt. So in terms of what to do about this and how to easily avoid these mistakes, here's a few simple pieces of advice that anyone could follow relatively easily, and I promise they will help save you money.

Now first, in regards to housing—because this is your single largest expense—generally, the rule of thumb is that your housing payment should not exceed 30% of your income. Ideally, I would even go so far as to say that if you could get that number closer down to 20%, whether you live further away from work in a smaller place, or live with roommates, that would allow you significantly more money left over every single month that you could then use towards number two.

That would be investing. Like I mentioned earlier, Millennials own just 5% of all U.S. wealth, and that's it. In fact, it was found that 43% of Millennials are straight up just not investing anything, and almost 50% of them are waiting to earn more money to invest, which is a huge problem and not acceptable.

The main point here is that it's essential to start investing your money as soon as possible because the sooner you start, the longer your money has a chance to grow. Postponing this is only going to further set you back.

And if you don't have the extra money to go and invest, that brings us to number three, and that would be cutting back your expenses. From the entire Millennial money spending budget, we could see that the biggest expense beyond housing is discretionary. This includes eating out, entertainment, clothes, and, uh, coffee.

Just get this: the average 25 to 34-year-old admitted to spending more than $2,000 a year at coffee shops, and 40% admitted to spending more money on coffee than they do on their retirement— which come on, don't do that!

Instead, my solution is this: do enough to cut back in your discretionary spending to max out your Roth IRA at $6,000 a year. If you just start doing this at the age of 25 and you get an average of a 7% return in a broad index fund, by the time you're 65, you're going to have nearly $1.4 million completely tax-free.

Now, obviously, not everyone is spending over $1,000 a month on non-essential items, so it's not easy to say just spend a little bit less money. So in that case, we've got number four. One of the best ways to make more money is to switch jobs. There are multiple studies out there that show that people who switch their jobs every 2 to 3 years make nearly 50% more than someone who stays at the same company.

If you switch jobs just once, you could see yourself with an average of a 15% pay raise. Not to mention, slow wage growth does not apply to the top 1% of earners. In fact, wages for this group went up 138% since 1979. For some context, the bottom 90% of earners only saw a 15% increase. Even more surprising was that the income for the top 20% of earners rose 1,300% more than the lowest income tier between 2007 and 2017.

And if you're curious how you could get one of these high-paying jobs, according to LinkedIn, these industries include technology, healthcare, and finance. So if you're curious about switching careers, going back to school, or educating yourself in a different field, picking something that's in demand and difficult to replace should help you make more money overall.

Overall, the reason why 70% of Millennials are living paycheck to paycheck without any money left over to save and invest is due to a combination of low wages, increasing expenses, and poor spending habits—all culminating in the perfect storm of little leftover money. If you're making under the median wage and you're already cutting back and saving as much money as you can, then switching jobs, learning a new career, or increasing your income is going to be the best way to start saving and investing more money.

However, if you're making above the median wage, then I would take a careful look over all of your expenses and identify exactly where your money is going. Then find a way to scale back and invest the difference. Lifestyle inflation and keeping up with the Joneses seems to be one of the main culprits behind why 60% of Millennials earning above $100,000 are also living paycheck to paycheck, and that deserves a full evaluation to identify exactly what you don't absolutely need.

Now, of course, you're free to spend whatever money you want because, after all, it's your money. But there is a cost to investing your money later in life, and the longer you wait, the more expensive it's going to be in order to retire.

Just consider this: If you need $1.5 million to lay on a beach all day after the age of 65, you could do that by investing $333 a month starting at the age of 18. But if you start at the age of 25, you'll need to invest $550 a month to wind up with that exact same amount. If you start at the age of 30, you'll need $791 a month, and if you wait until the age of 35, you will need $1,158 a month.

I personally choose the option to invest as soon as possible because the longer you wait, the more expensive it gets. Also, by the way, thank you, Stefan, for smashing the like button! I read all of your comments, so if that's what it takes to get you to hit the like button, I'm all for it. I'll do it.

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Thank you guys so much for watching and until next time!