Millennials have been described (mostly by older generations) as young, unmarried and financially irresponsible. I would agree with 2/3 of this description as we are younger and we are more hesitant to get married with only a 70% marriage rate prior to the age of 40 which is significantly down compared to boomers at 91% and GenX at 87%. But I take offense with the third description and wanted to dive into this more today.
In many ways, Millennials got the short end of the stick when it comes to financial success and retirement planning. Millennials are the most educated out of our older cohorts, however that education came with a price tag. In fact, 40% of millennials above the age 28 have student loans in which their outstanding balances make up 43% of their income. This is substantially less of an issue for our older generations as GenX only had 29% of their income go to student debt and boomers only 10% at the same age.
When we talk about homeownership, this student loan debt is an issue. 17% of Millennials that don’t own a home say it’s primarily due to student loan debt which causes them to have limited savings had impacts their debt-to-income ratio making it harder to get an affordable mortgage.
Additionally, many Millennials were negatively impacted by the Great Recession of 2008 as they were trying to find jobs out of college. And after the housing bubble popped, it became a hell of a lot harder to get a mortgage which hurt younger people more.
These financial setbacks are a big reason Millennials are now considered the generation of renters. 59% of older Millennials (born between 1981 and 1988) are homeowners, which is significantly lower than our older cohorts when they were our age. But this isn’t the only reason.
When we were growing up, owning a home or land was a sign of success and wealth. Renting was seen as “throwing your money away”. I remember growing up this was instilled in me for sure. My parents always prioritized home ownership.
I remember moving houses when I was a kid. Even though I was only maybe five when we moved, it’s amazing what you can remember from that age. I remember the first house I lived in had this sky blue carpet (hello 80’s!). One time we had people over for dinner, not sure the reason, and we were having chocolate fondue for dessert. It was plugged into the wall and sitting on the dining table. My clumsy childhood self, which never went away BTW, ran by the table, tripped on the electric cord and sent that chocolate fondue onto the sky blue carpet. I remember my parents put a plant over the stain when we were showing the house so the potential buyers wouldn’t see it.
Even when my parents got divorced, my dad moved out and only rented until he found a place to buy. From there, he’s only owned. I remember going to open houses like our very own version of House Hunters – which I also still love to do. Even virtually as I’m obsessed with checking Redfin and Zillow – just like that SNL skit about real estate porn? Yeah, I’m into it.
So in my mid-20’s, as I started my first role in my now advertising career and had a salary for the first time, my friend and I purchased our first home because I didn’t want to “throw that hard earned money away” on renting. Well, that was at the height of the housing market in St. Pete, Florida. A housing market had no problem giving two 25yo girls with a total HHI of no more than $50K a $187K home with no down payment. How could that go wrong? Gee I wonder why we hit a housing market crash?
Needless to say, we ended up foreclosing on said home and are no longer friends. So lesson learned from this experience? Never buy a home with a friend and don’t buy a home you can’t afford. While I didn’t have student loan debt to pay off (thank you mom and dad), I also had no savings. No backup plan. I was making $27K a year pre-tax (thanks advertising industry) and couldn’t even afford three meals a day.
Despite driving two hours south each weekend to work as a pet sitter for my mom’s company for extra cash, I still lived off of the snacks in the kitchen and stole toilet paper for my house. Yes, the toilet paper that was the big industrial rolls were sitting on my toilet tank at home. Picture that in your head ha!
I was so broke that one night, we were having left over pizza from a work lunch that we had taken home. We had two pieces between the two of us for dinner. We heated them up and put them on the coffee table to eat in front of the TV. I got up to get a glass of water, and when I came back my friend’s dog had eaten my piece. So I went without dinner that night because I didn’t have money to go get food and we had no food in the house. And I know what you’re thinking – didn’t she stop her dog from eating your slice? Or give you some of hers? No, she did neither. She just said that – well you know Lola jumps up and eats things from the table. You shouldn’t have left it there. And that’s reason 257 why we are no longer friends.
So if I don’t even have enough to go to the store and get some bread on a weeknight, I should have rented. I should have never co-signed a mortgage for $187K with someone that wouldn’t even share a slice of pizza with me!
In my experience, owning a home was throwing your money away or at least no different than renting because I didn’t put any money down and put money into the house to fix it up and got nothing out of it.
So when I moved back to Chicago, I rented. And I rented some fabulous places and some not so fabulous places. But it was the first time I realized how important location was to me vs. if I owned a home. My first place in Chicago was interesting to say the least. It was in Old Town which was perfect for a mid-20s, single lady. I could walk to bars, restaurants and shops. I was near a grocery store and across the street from the train to get to work. It was so convenient, I left my car in FL.
While the location was perfect, the place left some to the imagination. It was a studio, the bathroom was a big as my wingspan. The tub was a half tub – what’s a half tub? Well, apparently, it’s when you literally saw a tub in half and just install that. I also had a mini-sink where I would hit my head on the wall everytime I washed my face. But, when I left my house to walk my dog, and looked south on wells st, I could see the sears tower lit up like a beacon of my future. I remember looking at that every day and thinking to myself I finally made it.
From there, I slowly increased my rent and my standards as my rental budget increased. But I was responsible and increased my budget as my salary increased. I lived on the lake, I lived in a beautiful historical loft in Printers Row designed by Daniel Burnham – you may have heard of him from “Devil in the White City”. He wasn’t the serial killer, he was the architect.
To my last rental in River North that was nothing short of luxury. This place had a pool scene that rivaled a Las Vegas pool party on the weekend, live DJ and all. I was living the life. Waking up from my 39th floor apartment, watching the sunrise and walking into a closet that could have fit a queen size bed – ugh, I loved that place. I didn’t miss homeownership at all. Renting gave me the ability to move when I wanted. Try out new neighborhoods. Try out brand new buildings that no one had lived in, and in prime locations. I couldn’t afford to buy in those areas anyway, but I could live there – all amenities included.
This is also a big reason Millennials are behind in homeownership. Owning a home is no longer the sign of success it was when our parents were starting off. The cost of homeownership can be high between monthly mortgage payments, home improvement costs, insurance, property taxes (which in Chicago are very high!), association fees and all of this after you put $$ down.
Not being a homeowner has its downside. It puts more pressure on our retirement savings to be able to also pay for housing expenses because we most likely won’t have a house paid off by the time we want to retire.
I’d like to say I am now, again a homeowner. Christian and I purchased a condo together in December 2019. I know what you’re thinking – you’re a co-owner again? Well, Christian isn’t a piece of shit. And he’s very good with money, he works in finance. Plus, we were already engaged so we would be legally bound through marriage. But I guess that puts me right into the Millennial statistic where I waited longer to get married – I’ll be almost 39 when we tie the knot this year and I was more hesitant to be a homeowner again. I didn’t really see the need to. I have worked hard. I have a good retirement savings plan. I have extra savings and investments. And I love living in Chicago which isn’t the best when it comes to homeownership.
Prices are high (nowhere near New York), but as my suburban friends and relatives would say – I could get so much more for my money if I left the city. Taxes are outrageous and not going down. Assessments can also be high – definitely had to give up my Vegas pool lifestyle if I didn’t want to pay an arm and a leg in assessments (which talking about throwing away your money, you never get that back). And insurance is higher in the city as well. Plus, the chances of you making any substantial amount of revenue from your purchase is very low. Unless you buy in an up-and-coming area or you do a major rehab project, chances are you’re going to sell for not much more than you purchased.
But am I moving to the burbs? Hell no. I love our life. I love walking down the street and seeing a diverse group of people. I love walking to restaurants bars – some of the best in the country! I love running along the lake. I love all the activities and festivals and sporting events and the list goes on. We could get cheaper square footage but at what cost? Our entire lives would change. Everything. We would be eating at chain restaurants, driving to friends houses, or just heading back into the city for a social life. I’d go from a 5 min commute to work to over an hour. That’s 2 hours of every day I could be doing something more valuable than commuting in my life.
To close out today, I was reading this article about how Millennials are challenging traditional measures of financial success and they ask a great question – what am I continuing to save for and why am I building wealth in the first place?
I’m building wealth to live the life I want. Not the life I can afford. I work hard so I don’t have to sacrifice what I want. That’s success to me. Maybe that means owning a home. Maybe it doesn’t. Maybe that’s renting. Maybe that’s living in a van and traveling the US. Am I young? I like to think I am. Am I unmarried? For now, but yes, I waited until almost 40 to tie the knot. Am I financially irresponsible? No I am not. I have made my mistakes, but I’ve picked myself back up and learned from them. Some may think I spend money recklessly when I go on trips and spend $100 on brunch, but 1. It’s none of their business and 2. Don’t you worry – while I’m buying another bottle, I’m also building my financial portfolio and my nest egg. So if you’re questioning on if you should buy a house or if you’re behind because you are still renting – don’t. Maybe speak to a financial advisor to help you plan your retirement if you haven’t, but don’t let others view of success determine yours.
Until next time!
Sources from today’s episode: