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Millennials and Their Money Habits: Part II

If you ever spend time watching financial gurus bark loudly on television about how to live your best financial life, there is no doubt you have heard them talk about spending less.

On financial radio shows, I hear similar stories imploring people not to spend. The guidance is to save more, save early and save often! While that is noble guidance, I am left to wonder – if all we ever do is save, how are we living our best financial lives? Since the economy is largely made up of consumer spending, how would it be best for economic growth, jobs and our country’s future if all we did was merely save? Clearly there needs to be solid balance between saving and spending to create long-term financial stability. Yet, saving for the sake of just saving may not be the foundation of a solid long-term plan and living a happy life.

Catch up with Millennials’ money habits: part 1

Cash flow

We would rather focus on cash flow – money coming in and money going out. This is a critical area of financial understanding for individuals of all ages. I believe it is necessary for those starting early, particularly Millennials. As a young earner, money is tight. For the first time, many are trying to make it on their own financially without the help of parents. Thankfully today, Millennials can utilize technology to help them monitor expenses. But do they do it? A Millennial can understand the power of compounding with a simple Google search, but is this something they know about? Millennials are also burdened with more debt, more choices and overwhelming pressure. So, I reached out to our source on Millennials, my 21-year-old nephew Brett Carlin, to help us learn more about his generation. Let’s take a look at more Millennial money habits and how they view cash flow.

Millennials on earning income

As a Millennial, higher education is not an option for those in my generation, rather it is a required component to help me survive financially in the long-term. Teachers remind us all the time that the working world is no longer made up of manual labor jobs with pensions. We need to become educated in a growing field and then work hard to save annually so that we can someday achieve financial prosperity. Although for many, this alone is not enough – the mobility gap has been increasing for decades. With aspects of the American Dream being the driving force for many of my peers, including me, it is becoming harder to believe that everyone has a fair chance at a prosperous life. During our parent’s upbringing, they had a 92% chance of earning more than their parents. Fast forward 50 years and the number has fallen to 50%.* For some of my peers, it makes sense when they tell me they have a relative in the field of their choice to help give them an advantage. However, for a majority of my peers, they must take actions into their own hands.

Example of Millennial earnings and savings 

When it comes to earning income and saving, one of my roommates utilizes his free time by driving for a car sharing service and has an automatic deposit plan set up that takes a certain portion of his paycheck each month to split between cash and his investment account. With this, he invests into dividend-yielding stocks and bonds. For my roommate, it comes down to one simple concept: compounding interest. Luckily for him, he learned about the power of compounding interest in high school. So, he started an investment account with a mere $5 because he knew the earlier he did it the better his earnings potential would be in the future.

Another one of my peers began doing freelance work to create digital advertising. By investing in himself through building his own personal list of accomplishments in the working world, there is no doubt he is on track for greater success than many of his contemporaries. If there is one thing Millennials in my generation understand, it is that an education simply is not going to be enough!

Millennials on debt  

Many in my Millennial generation are part of the estimated 44 million individuals carrying a burden of $1.52 trillion of student loans on their shoulders. (Forbes)** Federal Reserve Chairman Jerome Powell said recently, “You do stand to see longer-term negative effects on people who can’t pay off their student loans. It hurts their credit rating. It impacts the entire half of their economic life.” ***

On a large scale, this can have obvious ramifications on the economy. As student loans increase, consumer spending will decrease. The largest majority of student loan debt is held by individuals who owe less than $5,000**** and for many, it’s because they start college and end up only going for a semester. They then are forced to work lower paying jobs to pay off a college loan. However, this cannot be accomplished so easily as paying off a college loan becomes significantly more difficult without a diploma to show for it.

Example of Millennial debt 

One of my friends, in an attempt to minimize his debt before it occurs, decided to utilize the community college in his area. My friend John did not want to find himself buried in loans 20 to 30 years down the road, so he decided to pursue his higher education at a community college for two years and then transferred to a moderately-priced state school (he was out of state) to complete his education. This was his strategy to cut his debt load in half by getting half of his education at a low cost.

This is one of the most common debt strategies among my generation, even with those who plan on investing into a trade school. As the cost of attending trade schools is relatively cheap in comparison to private institutions, another common trend is to go to a community college and pursue management, economic or marketing classes that can further help my peers start up their own businesses once the trade schools have taught them what they need to know.

Millennial spending habits

Most of the Millennials I know go out of their way to spend $4 on a cup of coffee. Every day at 9:30 when I arrive to class, it is inevitable that a minimum of 50% of the class will have a Starbucks coffee. Some of my peers will say they do it just for the convenience, and some even had the nerve to tell me they purchased a coffee every morning because it is “better for the overall economy.” Although it is true that consumer spending is a good sign of a strong economy, it is unwise to think that it would be more beneficial to waste money on expenses that you could make yourself at a fraction of the cost. On top of that, many of these “coffee lovers” do not have an investment account to even put their earnings into.

Example of Millennial spending habits

One of the smartest strategies you can utilize to further assist in better spending habits would be setting up a direct deposit plan with your bank. I have countless friends who do this – from a few dollars a month, to over 50% of their paychecks. Just creating this plan and watching what you can do with a few dollars might help to deter anyone from the coffee craze, saving upwards of $700 a year.

If a Millennial can redirect $5 of expenses per day and invest that into a portfolio of all equities, assuming a long-term historical average return of 10%, this amount would grow to a portfolio of just about $1 million in 40 years. (For illustrative purposes only. Any rates of return shown are for illustrative purposes only and are neither guaranteed nor implied. Actual rates of return will be based upon the actual performance of selected investments. Taxes and fees are not a consideration in the illustrated returns.)

Living off and learning from parents

A common trait among Millennials is that we work to pay off our debts as early as we can, pushing home ownership and starting a family to the back burner. Generationally, we are faced with attempting to pay off high interest debt right out of college. Often, we are forced to ignore saving given the current burdens we face. Parental assistance is talked about far more than it is utilized. In the case of private institutions, a minority of Millennials are having their parents pay it off.

On the contrary, a much larger percentage of parents are helping their children out than that of a generation ago. The difference is that our parents are helping the best they can in other ways. Many of my friends have saved money and attended private institutions by simply commuting to school. At most institutions room and board can be costly, adding up to 40%. Staying at home with parents longer than previous generations coupled with higher tuitions prices equates to thousands of dollars of savings.

Example of Millennial living with parents

With this being said, most of my peers cannot make it financially on their own with no help. Although our parents, the Baby Boomers, were relentless spenders, it is indicated that this Baby Boomer generation made 20% more than we do when they were our age on an inflation adjusted basis.***** Baby Boomers tend to blame Millennials for their poor spending habits, when in reality, in my view, this is not the case.

Millennials are more focused on the short-term than the long-term. The average age for marriage and home ownership has been increasing for decades, and Millennials are starting to believe that these are “post-World War” values. I think today’s Millennials are saving much better than our parents did years ago when they were in our shoes. Just like marriage and plans of home ownership, saving for retirement is in the back of our minds, as we just try to pay off what we owe first. This mentality has led to many more people getting apartments on their own than with significant others, and for a larger portion of their life.

The Millennials that will be the most comfortable down the line will be the ones who not only thought of their short-term goals, but their short-term goals relative to their long-term goals. Millennials need to realize that parental assistance is only a cushion to entering the real world and, if abused, can end up being detrimental.  Unfortunately, from my perspective, I see most Millennials not understanding that parental support doesn’t always last forever, and I don’t see enough of them pushing hard to maintain their financial independence.


Thanks to Brett for helping us investigate the financial lives of the Millennial generation. With this insight, we begin to better understand and hear the financial worries of the Millennial generation more clearly and see that the burdens of debt echo loudly when making financial decisions today. Moreover, the past experiences of their parents helped shape financial attitudes of a generation as does the financial tethers they continue to provide to their children in years to come. This information helps us understand where our country may be going, the types of financial concerns of the largest portion of our U.S. population and how best to address these needs for a successful financial future for all.

Are you looking for an Arizona wealth management firm to provide personalized investment management? If so, contact the wealth advisors at Henry+Horne Wealth Management.

Brett Carlin and Michael Carlin, AIF®



** https://www.forbes.com/sites/zackfriedman/2018/06/13/student-loan-debt-statistics-2018/#4b4713e87310

*** https://fee.org/articles/americans-are-drowning-in-student-loans-new-household-debt-report-shows/

**** https://www.theatlantic.com/business/archive/2016/07/the-scariest-student-loan-number/492023/

***** https://www.bankrate.com/personal-finance/millennials-earning/

Opinions expressed in the attached article are those of the author and are not necessarily those of Independent Financial Group, LLC. All opinions are as of this date and are subject to change without notice. Investing involves risks, including possible loss of principal. No investment strategy can guarantee a profit or protect against loss.

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