Spokane Journal of Business

Millennials forced to play with unluckiest hand

Generation hesitated to invest after 2008 financial crisis, faces rising costs to borrow

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Noah Schwab is a certified financial planner with Stewardship Concepts Financial Services LLC, in Spokane. He can be reached at 509.443.0845.

Millennials, members of the generation born between 1981 and 1996, have been dubbed the “unluckiest generation” regarding financial timing.

They are coming of age during economic instability and macro environment changes that have drastically affected their opportunities. Success depends on the person, but there is always an element of timing. The circumstances facing millennials look like the cards are stacked against them.

One of the main reasons for this is the timing of their entrance into the workforce. Many millennials graduated from college during the 2008 financial crisis, which led to a recession and a difficult job market, meaning they were competing with experienced workers for entry-level jobs, and they often had to settle for lower-paying jobs or jobs outside of their field of study.

During that time, due to the volatility in the stock market, millennials hesitated to invest, missing out on the potential gains through long-term investing.

Additionally, millennials face significant challenges with changes in the workplace. Even though the cost of living has increased significantly, wages haven’t. Many millennials have faced the rise of the gig economy, leading to an increase in contract and freelance work. While this type of work can offer flexibility and freedom, it often comes with lower pay and fewer benefits than traditional employment.

There is also a decline in unionization. Unions have historically helped negotiate higher wages and benefits for their members, but the percentage of unionized workers has steadily declined since the 1980s. This change has left many millennials needing more bargaining power to negotiate for higher wages and benefits. Millennials also have felt the rise of globalization. Many jobs are sourced to countries where labor is cheaper, decreasing wages in many industries. Lower salaries and a decline in retirement benefits like company pensions have significantly reduced millennial wealth.

In addition to these challenges, millennials have contended with rising housing and education costs, which make it harder for millennials to achieve financial stability. Education costs have resulted in record debt levels, further hindering their ability to save, because they allocate a considerable portion of income toward loan payments. The debt-to-income ratio of Americans born in the 1980s is higher than any other birth group, making them especially vulnerable to financial setbacks. 

Due to these constraints, many millennials have delayed major life milestones, such as buying a house or starting a family.

Currently, millennials are reaching the peak age for first-time homeownership. Single-family home construction is at an all-time low. In the 2010s, there was a 48% decline in such construction compared with the previous decade.

Many homebuilders were still weary of being burned in the financial crisis when the housing market collapsed. With low inventory and low interest rates, the median home sales price in the U.S. climbed to $386,900 in June 2021.

Millennials are currently in the midst of the worst hand they’ve been dealt. Low-interest rates and low inflation have surged other generations’ wealth for the past decade. While millennials are just beginning to save, they missed the benefit of one of history’s largest bull investment markets.

Low-interest rates, government spending, and a broken supply chain led to inflation. High inflation leads to higher interest rates, which hurts investments because it costs more to borrow money. Now millennials are trying to buy their first-time home with inflated home prices and with a much higher interest rate costing them more. Making that monthly mortgage payment is more difficult on top of high inflation, low wage growth, and increased debt.

Millennials face unique financial challenges due to the timing of their entrance into the workforce and the state of the economy and markets. But there is hope. Millennials don’t have control over what happens in the world but can control their actions. 

By managing their finances proactively, millennials can achieve financial stability and build a secure financial future with diligence. Anyone dealt a rough hand of cards can turn them into success if played right.

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