The time of the baby boomers is fading and the Millennials are taking over. They are the drivers of the New American lifestyle. Many factors distinguish the millennials from previous generations including trends of being less likely to affiliate with a religion or political party, increased support of LGBTQ rights, and having grown up with access to more information than you could ever take in via the world wide web. Patrick Struggle states millennials are leading the change to a “New Zeitgeist” which he believes includes a new value system: “A desire for purpose and mission. An emphasis on positive impact over material gain. A preference for sharing and giving over owning and taking.”
This generation coming into adulthood has also had significant economic impacts. Research on how millennials work and spend has increased drastically as corporations try to understand millennials and how they can capture their dollars, including Macys analyzing how much millennials spend on those crazy Coachella outfits. These defining traits don’t only have an impact on the society and economy at large, but also each millennial’s own personal finances. Those who are a part of the “New Americana” need to realize that if they are approaching life differently, they will need to approach their finances differently also.
Making money and progressing through the beginning of a career looks nothing like it did 20-40 years ago. Millennials are notorious for changing the preconceived ideas of what work should look and feel like. They favor flexibility in work schedule and location over higher wages, and place a higher importance on their work being more than just their income, either though helping others, learning or developing skills, or doing something they find meaningful. Silicon valley has lead the corporate world in making these new work desires realities and forced the big banks firms like Goldman and Chase to capitulate and rethink how they treat their younger employees.
For those not working in big corporations, since the great recession crushed the career opportunities for many, some new trends have arrived. Due to both the innovativeness of millennials that love flexibility and creativity, and a necessity to survive in a period of high unemployment and underemployment, the “free-lance economy” has expanded and “side-hustle” gigs have become much more common. Catherine Baab-Muguiraeven refers to these millennials as “Generation 1099” referring to the tax forms received for non-employee work, the structure most side hustle gigs are set up under. Not having a financially satisfying day job (or none at all), millennials often piece together various gigs to make ends meet. In addition to the income additional part time jobs, Uber/Lyft, youtube, blogging, etc are ways that millennials can test the entrepreneur waters with very low risks. Managing this type of income and career path is a new challenge unseen in other generations.
There are plenty of unique millennial spending habits, but the two most often cited are the reluctance of millennials to buy homes and the preference to spend money on “experiences over stuff”. These trends can be attributed to both the general changing zeitgeist of our culture but also from other outside economic or social factors.
Data clearly shows that millennials don’t own homes at the same rate as previous generations. This has been cited often since the Great Recession, but what often is inferred, and possibly incorrectly, is that millennials distaste for homeownership is partially responsible for the drop in homeownership rates. The thought being that the more fluid lifestyle of the New Americana was less compatible with a 30 year mortgage. Nerd Wallet clarifies that a 2014 Fannie Mae report found that millennials have the same interest in purchasing a home as other generations, but are either unable to, or at least feel they are unable, to take on the financial burden of buying a home.
The other often noted spending habit associated with millennials is spending money on experiences: international travel, sky diving, concerts, etc. This change seems very refreshing, with more people putting the focus in life on experiencing things instead of obtaining things. Millennials are more likely to backpack through Europe and Asia rather than buy a boat or filling up their house with “stuff”. Shifting away from buying “things” is always a great move in our rampant consumerism America, but this trend isn’t necessarily stopping the “Keeping up with the Jones” mentality that contributes to America’s poor savings rates. Reports show that some of the “experiences over things” shift is driven by millennials desire for recognition of their adventures, mainly though the form of the “Like” button. Millennials allocating their budgets in a different way is great, but this means having to watch out for different financial traps.
The Need for New Financial Strategies and Resources
The uniqueness of Millennials themselves and the economic environment they are maturing in creates a new set of financial challenges. The long-term damage to millennials careers due to graduating during or just after the recession. -A sad student debt fiasco that will leave most still repaying their loans long after they hoped to be starting to save for their kids. -The highest rates of adults moving back in with their parents. -Since Millennials parents are some of the first without traditional pensions plans, Millennials are already fearing how stable their parent’s retirements are and if their parents will need extra assistance from their kids. With continued technological advancements redefining the work place and the “new normal” of lower economic growth, the financial challenges for millennials won’t be getting any easier or less confusing.
Americana Financial Planning (AFP) is a resource for helping navigate the “New Americana”. Traditional resources may have good information, but most just recycle the same content for pre-retirement consumers, those of 55-65 years. Another article debating the merits of taking Social Security now or in two years doesn’t help millennials make their immediate financial plans. The younger generations must realize that due to their place in the economy, few people are working towards helping them reach short term and long term financial stability. More than half of financial advisors are over 55 and focusing on the pre-retirement market (aka, people they know who have the most money) . A huge proportion of financial content easily available is provided directly by these financial firms or journalist interviewing these “experienced” advisors. So, these resources are not delivering the necessary information to help Millennials find a way to be financially successful in today’s world. AFP plans to be that financial resource for the new zeitgeist, bringing financial expertise on the topics that matter to the New Americana.