Research shows that many Millennials don’t think they’ll ever buy a home. Those who did spend nearly half of their income to pay for it.
After getting hit by multiple financial crises, Millennials carry thousands of dollars in debt and some don’t think they’ll ever pay it off.
When people are struggling financially, they have to rely on debt. Nearly three-quarters of Millennials have some form of non-mortgage debt, according to a study from Real Estate Witch, a Clever-owned site. The average Millennial owes about $117,000.
This has left Millennials in a sort of cycle of debt – when expenses are too high you have to rely on debt, but when debt is too high it’s harder to afford basic expenses like housing. Experts recommend that no one spend more than 30 percent of their income on housing, but the average Millennial spends nearly half of their monthly income.
Now about a quarter of Millennials regret that they didn’t choose a higher-paying career. Despite being in their prime-earning years, they make significantly less than older generations.
“Millennials trace their financial struggles to the 2008 economic crisis, when the oldest members of the generation graduated into a market with few jobs available,” the study says. “The stagnant economy depressed wages, leading to lower lifetime wealth and delayed milestones, such as marriage and homeownership.”
After 2008 and now the COVID-19 pandemic, Millennials may never catch up and fully recover their finances. With mounting debt, financial crisis after financial crisis, and a looming recession — 4 in 10 are “very pessimistic” about their finances.
Waking up from the “American dream”
Millennials think that the American dream is dead. Almost half don’t think they’ll ever have the things they want in life because they lack the funds, according to Fortune magazine.
About half of their generation owns a home and since it takes about half their income to even keep up with the costs, 30 percent don’t think they’ll ever be able to afford one.
“Millennials who spend a significant portion of their monthly income on rent have little left over to save for a down payment on increasingly expensive homes,” Real Estate Witch says. “As a result, many millennials are priced out of the market or their debt prevents them from obtaining a mortgage.”
Even amongst those who have been able to buy a home, 1 in 6 regret their purchase.
After buying a home, the next step for many couples is often having children. The majority of Millennials either have kids or want them, but a quarter told Real Estate Witch that they can’t afford to.
Can’t afford life’s necessities
Caring for kids is impossible when you can’t take care of yourself.
Millennials can’t afford…
- Gas (27 percent)
- Their mortgage (29 percent)
- Medical care (27 percent)
- Bills (24 percent)
Survey respondents also said it’s a struggle to pay for rent and food.
Because they’re worried about today’s expenses, they can’t save for tomorrow’s. Such a tight budget makes it hard to put money into savings. A third of Millennials say they couldn’t pay out of pocket for a $500 emergency expense, more say that they couldn’t cover $1,000.
“The generation’s debt burden may also make it more difficult to afford discretionary expenses, such as a vacation, that could improve their quality of life,” the study says. “It may also explain why millennials are slow to reach traditional markers of adulthood.”
Published by Debt.com, LLC