According to Business Insider, 70% of millennials are living paycheck to paycheck, higher than any other generation in history. That means no savings, no investments and an even deeper debt hole to dig out of. These alarming statistics are hardly surprising, but they are concerning about what the future holds for the generation. It seems that the millennial money situation has been painted as quite dire and hopeless, and of course there are many factors contributing to this dreary picture, but it’s not all bad news.
There has been a lot of exploration into the precarious financial state millennials find themselves in – unable to afford their first home without some help, along with many other issues and woes, but another side of this story is what savvy millennials are doing to claw back some financial freedom and control in a situation that seems pretty much uphill. There are so many new economic trends that are being driven by millennials wanting to create a better future for themselves, and we’re likely to see more of these developments. What are some of the ways millennials are improving their precarious financial situations? Here are a few trends that stand out.
Living Well Below Their Means
Lifestyle creep is one of the biggest culprits of financial pressure for young people. As you start to earn more and more money, it’s natural for your lifestyle to go up along with your salary. That means a more expensive car, more travel and other trappings of an upwardly mobile young professional. Many millennials are flipping the script on this and living frugally by choice. That means keeping your costs as low as possible, and not falling into the trap of adding more to your lifestyle because you have more income coming in. By living below your means, you don’t just save money but you make it possible to raise the capital to invest and create more wealth.
Making Smart Real Estate Decisions
Real estate is and will always be one of the best paths to financial freedom and millennials understand this. The challenge is, it might seem difficult for a millennial who isn’t earning much to buy a home to live in, let alone an investment property. Savvy millennials have combined the two through a strategy known as house hacking. House hacking is where you buy a property, and then have multiple people living in the dwelling. It gives someone somewhere to stay while zero-costing their own living expenses and mortgage. It’s a great strategy for someone who wants to start out as an investor and they don’t have the money to do it. There is also the opportunity to use someone else’s home equity to get the capital you need to start investing. If people have family members with a lot of equity, they can partner with these people for private lending. Millennials who want to use this particular strategy need to understand different reverse-mortgage pros and cons so when they implement its strategy it doesn’t have a bad effect in the long run for them and their lender.
The millennial money mindset is governed by the mindset that you don’t have to accept the status quo just because things were done a certain way before. We’ve seen this with everything from how they work, and how they socialize, and it’s also very apparent in how they view financial freedom. For many people financial freedom is something you attain in your 40s and beyond, but millennials see things differently. There’s a movement for people to retire early, working as hard as possible and investing a lot of money in order to have financial freedom a lot earlier than the traditional retirement age.
Streams of Income
Millennials have also popularized the idea of having multiple streams of income. In a situation where someone’s primary employment doesn’t take care of all their expenses and savings, the best way to navigate it is to create another way to earn money. This is where side hustles come in. From YouTube channels, becoming an influencer, to coaching or selling products, the millennial generation has found ways to earn more than one paycheck, get an additional creative outlet, or even a path into full-time entrepreneurship. Even current university students have found a way to turn their free-time into an opportunity to earn. Side hustles are so great that all generations are taking it on and exploring the chance to do something different while still maintaining your day job.