Why Millennials Struggle with Their Finances.

Millennials are not the first to complain about the cost of living. But, it would be unfair to reject their claim without consideration. Ultimately, as time goes by, everything is getting more expensive. Life for Millennials is a little less affordable than it was for their parents at the same age. For means of comparison, the median home value in 1940 was almost $2,400. However, by now the median value has risen over $120,000. That’s about 50 times more than it would have been for your grandparents. Admittedly, the inflation does change the figures a little, but even if you adjust the 1940s type home price to today’s situation, previous generations would have paid only a quarter of what current homeowners need to spend.

Similarly, education fees have also gone through the roof. Between 1971 and 2000, the cost of college education and student life has increased by more than 1,550 percent. No wonder Millennials worry a lot about their student debts; the threat is real.

But, on the other hand, the price increase is partially met by a change in the minimum wage, which has grown from $0.40 per hour in the 1940s to $7.25 per hour in 2019. It’s a rise of over 550 percent. While this isn’t enough to sustain modern living costs with the same ease than the previous generation, it doesn’t justify the dramatic financial situation of many Millennials. Indeed, Millennials are the product of their social, professional, cultural and technical position. It’s the combination of these factors that can lead them to accumulate more debts than previous generations if they’re not careful.

They don’t always live within their means

Millennials are the first generation to grow up with digital technology from a young age. As a result, they have rapidly adopted social communities online, such as social media. Their presence on social media platforms is dictated by a need to belong to a community. Selfies are essentially a mean to the approval of other members of their digital network. However, their constant use of social media exposes them also to new images of social expectations in their growing community. From expensive dieting habits to gadgets, social media models can be challenging to follow, especially on a limited budget. It’s not uncommon, unfortunately, for young Millennials to fall for these traps and try to live above their means in an attempt to fit in. It is, indeed, a delicate balance to maintain. Young adults, and especially Millennials who are still under 30, are particularly vulnerable to the influence of their peers.

They are too conservative investors

Millennials are aware of their financial difficulties. As a result, a lot of them pay great attention to their saving strategies. Indeed, over 70% of Millennial professionals are saving for retirement, as part of a workplace plan or even via a dedicated saving program outside of work. Almost 40% of this generation are actively saving 10% or more of their salary, which makes them super savers. But, while they focus extensively on maximizing their saving, they tend to neglect their investment strategies. No less than two-thirds of Millennials under 30 are intimidated by the prospect of using stock market strategy as part of their investment plan. They prefer a conservative approach that relies on bonds, stable investment plan, and cash. A direct consequence of their traditional investment behavior is the difficulty to grow their income significantly. Failing to boost their wealth, Millennials find themselves often stuck in the same financial position for several years, which makes it tricky to handle debts.

They misunderstand less traditional trading approaches

As two-thirds of Millennials find stock markets scary, they tend to look for safe trading approaches, such as Contract for Difference – or CFD trading, you can get more info about it here. As a rule of thumb, CFD arrangements allow investors to enter the market with a small initial investment instead of using the full value of the asset they are buying. For traders, it’s the option to start without taking ownership of the asset, while still amplifying the chances for gains. Unfortunately, while amateur investors see in CFDs the potential to make money without overspending, they sometimes fail to realize that the potential for losses is equally amplified. You could make a lot of money with a small sum, but at the same time, if you’re not experienced, you could also lose a lot too.

They click for an easy win

Millennials are less likely to take financial risks as long as they need to sign a piece of paper. However, if the process operates primarily online, such as online trading markets or even gambling sites, they can be tempted to take risks. Indeed, for someone who has grown up to interact digitally with most everyday life decisions, from applying to a job to booking a holiday, it can be difficult to realize the full impact of each digital click. Ultimately, when you’re used to having everything available with a click on a website or a smartphone app, the mind is trained to click its way to happiness. As a result, Millennials are more vulnerable to online gamble, which can drain their savings in no time. But when the tool promises to make you rich in a click, it can be difficult to unlearn the automatic response that everyday technology has left ingrained in our very system.

Their first home is a draining investment

Buying a home is a lot more expensive today than it was for the previous generation. But, the investment doesn’t stop at the price tag. Millennials are sensitive to technology that makes their property safer, as they wish to secure their investment. As a consequence, they are the most significant buyers of smart technology for their home. They are prepared to spend large amounts of money on purchasing the latest gadgets, even if they fail to understand whether the tech device is a valuable investment or even needed. A typical example of careless expenses is smart thermostats, which have claimed for several years to lead to dramatic energy savings. However, recent studies have proven that in most cases the homeowners didn’t make any significant saving on their utility bills, creating a negative ROI.

They lack cost-saving DIY skills

Aside from spending a lot – and often too much – of keeping their home tech up to date, most Millennials don’t know how to perform some of the most basic DIY tasks related to running a household. A third of Millennials don’t understand how to bleed a radiator, which can not only lead to high energy costs but also affect the overall maintenance and repair expenses of their heating system. Unfortunately, their lack of DIY know-how makes it more difficult to spot small issues and fix them before it’s too late. As a result, some Millennials are forced to pay extra to get their furniture assembled, or even to get help while changing light bulbs.

They value their health… a lot

Last, but not least, the Millennial generation is praised for its positive health culture. Millennials have made fitness a priority, and keeping their body strong is a natural part of their routine. However, according to a study from My Protein, Millennials are spending more on fitness than they do on tuition fees. Indeed, Millennials spend between $3,000 and $6,000 a year on average on their health and sports regime. While there’s no denying that you can’t afford to neglect your health, the fitness frenzy is affecting your financial health!

Millennials are driven into debts by a series of factors that relate to their DIY skills, investment knowledge, fitness attitude, sense of social approval, and overall addictive clicking habits! While not everyone struggle with debts, this generation is more vulnerable to poor financial choices as a result of crushing factors.

 

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