What do you think about the avocado toast guy?
You can do a quick google to find out more about the millionaire avocado toast brouhaha that's happening on the internet right now.
Here's an article to get you started.
I'm of two minds about this guy.
This part? Haven't got much of a beef with it.
"We're at a point now where the expectations of younger people are very, very high," Gruner said. "They want to eat out every day, they want to travel to Europe every year. The people that own homes today worked very, very hard for it, saved every dollar, did everything they could to get up the property investment ladder."
Unless you have unlimited funds, you have to make some choices with your money.
And if eating out and traveling is more important than home-ownership to a person, that's fine. But then when you can't afford a home, you have to remember that you made some different choices.
But then too, if a housing market explodes (as I gather it has done in Australia?), that does indeed make it harder for young people to get into the market.
Mr. FG and I saved up for a down payment on our first house when we were pretty low-income. It took a lot of hard work and discipline on our parts, but we managed to get a $104,000 townhouse.
We bought right before a housing market explosion, and five years later, we sold the townhouse for $252,000.
Things have leveled off slightly, but the fact is that right now, it's harder for a young person to buy an affordable house than it was for Mr. FG and me back in 2000.
So, it would be a little silly for me to get all high and mighty and to tell young people that if they just stopped eating out, then they could do what I did.
The big money-maker for us wasn't so much that we scrimped and pinched in order to buy; it's that we happened to buy right before the market went way up.
But then on the other hand (how many hands am I up to now??), the housing market is what it is. And if you want to have a prayer of buying a home, then you DO need to look hard at your finances and prioritize home-ownership.
That might mean making avocado toast at home (or eating other kinds of toast if avocados are too expensive!), taking local vacations, reducing your cell phone bill, buying second-hand items, and so on.
And you probably also need to take a look at the income side of things. Frugality is great, but it works even better when you manage to up your earnings.
That's the killer combo. You can scrimp and pinch and make it by on a low income and you can spend willy-nilly and blow a high income. Neither of those scenarios are going to get you ahead.
But if you can earn a good income AND keep your spending in check, then you've got something super effective going on.
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What do you think? I'd love to hear your opinions!
P.S. For the record, I get my avocados very inexpensively either at Aldi or in my Hungry Harvest box. So, I'm pretty sure my avocado toast isn't what's keeping me from becoming a millionaire. 😉
A kind and commonsense commentary. Thanks!
I also like the kind yet firm approach Kristen has taken to analyzing this article. It's so easy to start criticizing other people when they don't do what you do and don't get what you have.
I agree with the article that many people buy expensive items here and there and then complain about not being able to buy a house or a car. Self-discipline and prioritizing, I think, are key to getting what we really want in life.
My husband and I are both millennials. Prior to having a baby, we would have fallen into the category of eating out and vacationing quite a bit. However, there was method to our madness. We owned a home in a not-so-fancy neighborhood that was previously a foreclosure and fixed it up. Because we had a lower monthly mortgage payment we were able to pay in cash for a European vacation, our cars, and eat out quite a bit. We don't have cable TV, use a baseline Internet package, buy our avocados from Aldi, and keep a monthly budget with a good chunk going into savings. We Both work for non-profits and by no means are rolling in the dough. We just decided some things were a priority for us that aren't for our parents (traveling vs. owning a vacation house, coffee shops vs. cable TV, eating out vs. going to the movies, etc. oh, and Aldi helps too!
I live in Australia and lost my home in our divorce. Sadly the home was bought with my money and my ex deliberately destroyed my credit rating. I don't think I will ever be able to buy a home again. However, on the flip side I am safe and I have my self respect. I have lost my capacity to earn. Some of it relates directly to my hearing loss and being unable to work in either career I am trained in. Therefore extreme frugality is part of my life now and I will accept that because I am no longer entangled in an unhealthy mess.
You're spot on - I couldn't have said it better myself. And I'm a mom of 3 millenials - here in the States, not Australia. None of them care about purchasing a house. They want to go on vacations and experience things. But then I'm that way - if it weren't for my husband I probably wouldn't have purchased a house. So I guess I'm just an old millenial 🙂
I want to agree with you, and I think I do agree with you *in some housing markets*.
The trouble is, average home prices in major markets in Canada mean that even a high salary and making your avocado toast at home aren't going to get you into the market.
These numbers are from April 2017:
Vancouver: almost 1.2 million CAD
Toronto: 759,000 CAD
Calgary: (this one recently took a huge dive) 461,000 CAD
Saskatoon: 385,000 CAD
Edmonton: 381,000 CAD
The cities with the jobs are the cities with the high home prices, and some cities (like Toronto) are seeing 25% increases in resale prices *per year*. So the longer you take to save, the longer you get shut out of the market.
When I moved to Vancouver, BC in 1999 to go to school, the market was already pushing past the top of my price range. At that time, I wasn't in a position to buy. The market has only gotten worse. Today, if I was half my age and made 3 x my current salary, I still wouldn't make enough to be comfortable taking on a million dollar mortgage. In this city, being frugal isn't enough. Having two full time incomes is often not enough. Now the BC government is giving out loans to people for their down payment. Yikes.
I never did get into the market. I've stayed in the same apartment for nearly 18 years. That choice means I'm paying well below market, thanks to rent controls. I've made some improvements at my cost, as they enhance my enjoyment of the space. I have a retirement fund and an emergency fund. I can go on vacation without taking on debt. I don't worry about paying my bills. I'm careful with my money, and spend it on what's important to me. No avocado toast. 😉
I made my peace with never being a homeowner. For my parents generation, it was dream to strive for. That's not the case for me.
I have read differing opinions about what is causing the high real estate prices in Canadian cities. Why do each of you think it is happening?
We live in Indianapolis, with an astounding cost to value ratio concerning our quality of life (excellent: great parks, lovely medium sized city surrounded by beautiful rural areas, lots of museums/theaters/fantastic restaurants, good schools, etc.) compared to home prices. So, we are lucky because, heck, we were born here.
Re: Vancouver prices - I think it's a combination of factors. Lack of supply, foreign buyers, unscrupulous real estate agents, shadow-flipping, money laundering, etc.
The GVRD (Greater Vancouver Regional District) is made up of several cities. Each city has their own rules and regulations for building & development. I've heard complaints that getting a development project approved can take years. Then there's the geography that limits how much building can be done. The lack of supply drives up prices.
Money from mainland China has been flooding the market for years. I've read numerous reports of a foreign student buying a house while their attending university, but there's no evidence of income. It's suspected that M&D have put up the cash. There have also been reports of multiple properties being purchased by a company in a foreign country and then sitting empty for years, leading to the suspicion that the houses were bought as an investment. The company that bought the properties aren't interested in being landlords.
The Foreign Buyer Tax was introduced in hopes of slowing the market. It didn't work. I think they found a way around the rules. Prices are still rising. Next up is the Empty Home Tax, which is trying to make people who use their Vancouver properties seasonally become landlords instead and rent their property out, rather than use it themselves. If they don't, they have to pay big in the form of higher property tax or large fines. I don't think that's going to work either, and it's breeding resentment for those who have owned their properties for decades. I don't blame them.
Then there are those who bought a property as an investment, but soon discovered it's far more lucrative, and the only way to make the insane mortgage payment, is to rent it out on Airbnb, rather than a tenant on a long term lease. The City of Vancouver is passing regulations to curb this issue. It's unclear how effective it will be.
Another problem? The Real Estate Council of BC is self-regulating, and it doesn't work. Real Estate agents who are found guilty of wrongdoing or misconduct - the fines are a joke. What's a $1,200 fine, when you made a commission of $25,000? The market is overrun with real estate agents who are not being held to an ethical standard.
All of this has made the rental market worse, as the current vacancy rate is less than 1%. I've seen horror stories about bidding wars on rental spaces that should be condemned.
In short, it's a big mess here...
Sydney Australia is in the same state for the same reason.
I do think some of it is a generational shift compounded by the economical situation millennials have grown up in. They have a large student debt load but income just hasn't risen to take this into account, so taking on a mortgage just isn't that attractive. Also, millennials don't find suburban living as the end-all of everything, preferring to stay in urban areas where renting and eating out is more common.
Some of it is also pure luck as you said, depending on when you buy your first property and whether you can step on the ladder of appreciating value.
All that said, frugal principles do apply of course. But one thing irks me always, which is to treat travel as a luxury always. We have to travel back to Europe from the US to maintain family connections, and it's always a very bare bones trip. We can't afford to make it every year which breaks my heart, as very few family members visit us here. We never travel anywhere expensive otherwise, only do camping trips etc. On paper, we have a very good income, eat out very little, cook from scratch (and with less and less meat), buy clothing used or very seldom on sale, don't spend much on entertainment or extra gadgets, drove old cars for years, live in an older, smallish house and do not hire any outside help, and yet we seem to go nowhere. This is really what my dilemma is in today's economy. Why do I feel so insecure, when on paper we should be in the upper middle class?
For what it's worth, I'm solidly in the millennial bracket and despite our lack of "real world experience," all my peers somehow know we can't afford European vacations (or vacations period!) every year! Regardless of how nice that sounds.
While I can appreciate what this guy has to say, I mean who doesn't want to eat out all the time and jet set to where ever? The problem is this: millennials, want to live the lifestyle their parents already have. They believe it should be an easy transition for them to a nice, stable home, with all the necessities of life met as well as obtaining comforts and rewards in life.
Most millennials don't understand that our generation, scrimped, saved, worked sometimes more than one job, and didn't live at home until we were 30. Unlike many millennials, back when I graduated college, I did not expect to slot into a "CEO" position with the pay to match. I knew I had to start at entry level and work my way up. Although it maybe true that millennials may want to live in urban areas and rent apartments and condos, all of which is very trendy right now....but eventually, most will come to realize, if they want a family, that home ownership is the best, albeit, most expensive, investment they will make.
I hear you to a point- 20 years ago I rented a nice place with housemates for $400/mo. each. That same place now rents for $1000/mo. each- I can tell you that salaries have not increased by that much per month.
How much debt a person has also matters- even state school isn't cheap.
Home owning can be an albatross if you need to find a new job, the days of the same job for 10 or more years are pretty much over for most people. If I could do it over I would rent instead of owning a home.
Part of the issue facing millenials too w/r/t homeownership, is that most now that they will not stay in a single career or with the same employer for 30 years and then retire. The ability to be mobile is crucial when trying to rise up in your field, and the housing crisis of 2008 made buying seem like an incredibly poor investment. I had friends who bought houses because that was the grownup thing to do, then needed to move to find better jobs, and either had to bail on their mortgage and destroy their credit, or short sale at a loss.
I'm 37, have never owned a house, and am pretty much terrified to take on that kind of expense and responsibility. I also have a pile of student loan debt. I'm frugal, I save and I've only even made my own avocado toast 🙂 Priorities are different for different generations.
I really should have proofread before posting...
He's fundamentally correct but has undermined his effectiveness with his (hopefully rhetorical) exaggerations.
What one spends shows one's priorities. If one wants a house, that's where one should direct one's money.
However, I do not consider home ownership to be the be-all and end-all. Among other issues, this Great Recession showed the downsides of ownership: the owner is tied down. This lack of mobility is one reason that the Great Recession lasted so long and the effects still linger. Some people could not afford to sell their homes at losses and move to where the jobs were.
But maybe that's not the priority. Maybe travel is, or flexibility, or saving gobs for retirement, or supporting someone else, or never having to cook. My hope is that everyone knows what her priority is, and alligns her spending with her priorities.
When my husband and I got married at 23 and 26, home loans were running 12-17% interest and a recession was on, so jobs were scarce. My mother, who married during the Depression (!) and first lived as a newlywed in a rented 9 x 12 bedroom in a private home, told me that she didn't know how people my age (when I married) were ever going to own a home in that economy. Well, it took us long enough, that's for sure.
Both of my kids are now home owners with mortgages; they are in their early 30's. Each got a lucky deal on a house, and each is grateful for it. One thing that truly helped them was that we bought the state pre-paid tuition plans for them when they were little, they earned state scholarships, and so they graduated from college with zero debt.
I do think that there is some tendency for a younger person to feel one should be able to have what one's parents have, without thinking that it took the parents decades to get to that point. I don't think that's just today's young people -- I think my generation tended to think that way, too, only to find out it doesn't work out like that. (Borrowing one of Kristen's hands) on the other hand, my generation didn't have a boatload of young folks starting life with tens of thousands in debt, so that part was easier on us. Many in my high school class never went to college, or only took two year courses, but then many in my area were farmers who had their careers growing in the back forty from the time they were born -- girls included.
I think I'm with Kristen and her conclusions on this issue. Good comments, Kristen, on what can be a touchy subject.
It's tough but then it always has been. The first apartment my husband and I lived in after college was a dump- 3rd floor, tiny bedroom and kitchen and no shower or AC! We were fortunate in the fact DH got a good job and moved up the corporate ladder. We both had little college debt and wanted it paid off as soon as possible- just 1 car too. I walked to my job or took the city bus. My youngest daughter, soninlaw and GD live in San Francisco- they are not worried about owning a home and live in a small 2 bedroom apartment in the city. Rent is very high but soninlaw makes a good salary, uses public transportation, and my daughter stays home with the toddler. They have no college debt and are going to Europe soon haha but they can afford it and aren't concerned about owning a home, especially with rent control! I feel for the young Canadians and Australians.
So, I had to chime in because my husband and I are millennial homeOWNERS (no mortgage) and we travel internationally at least once a year AND eat out at least once a week.
We are sitting here stumped at how high-income millennials like us can manage to spend all of it, let alone be in debt. We both came from very large, very frugal families and simply continued with that lifestyle even though we don't have to. I think the big problem for millennials is college debt (we didn't have any) and then buying a house and new vehicles that they can't afford on top of it all. And of course, the avocado toast. I only buy avocados 3-4 times a year.
We have friends that purchased a livable (very small, but livable) home for $7,000. Not even kidding. In our area, at least, there are affordable homes if you are willing to buy something small or a fixer-upper. Ours was $200,000, but we put half down and paid the other half off within a year. I can understand why it would take a low income/very large family 5-10 years to pay off a house, but there are no excuses for high income earners.
Aha, well, home prices are definitely part of the picture in your case, then. You can't buy a shack where I live for $7,000. In fact, $200,000 will basically get you a shack at this point!
Those would be dream numbers for Australians. Property prices, especially in the main cities (and remember, most of the population of Australia lives in a few cities clustered near the sea for climate/geographical reasons) are astronomical compared to income.
Well, depending on when and where you buy, I always think a house is the best investment you'll ever make. I'm of your generation, so maybe he is right in that respect. I do think that with the consumer society we live in it is harder for our children to be as frugal as we may have been at their age. In most situations a car, a phone and a computer are necessary for everyday life, something which we didn't necessarily need (you can argue the contrary, but jobs are scarce and travelling to work is an option open to our younger drivers - my mother, for example, didn't drive so jobs were in town or not at all). Travel is so much cheaper and maybe even more acceptable than it was 20 years ago, although even a good income won't take you across the world every year (I live in Europe so travelling here is a whizz - I drove to Barcelona this weekend from France!). I embrace the changes that every new year brings and if it means our children have different lives from us, so be it, doesn't necessarily make it worse.
Timely article!
I just read this one yesterday: http://www.slate.com/articles/business/the_united_states_of_debt/2016/05/the_latte_is_a_lie_and_buying_coffee_has_nothing_to_do_with_debt_an_excerpt.html?wpsrc=sh_all_dt_fb_top
The article breaks down the true numbers - that spending $5 per day on a latte is a considerable amount of money, but the assumption that you would otherwise be a millionaire (by getting an absurd 11% ROI) is way off the mark.
The real problem with buying a home today is that housing (rental and mortgages) is eating up considerably more of our income today than it used to.
Followed your link and read the Slate article. It's definitely interesting, but I think the truth lies somewhere in between. Though I don't deny that it looks like his numbers don't quite add up, it seems the real gist of the "latte factor" is the way we can end up spending a lot of money by frittering it away a bit here and a bit there. Those expenses individually might be small, but they do add up. And though we might not become millionaires, spending less on all the little things might be a simpler way to build up an emergency fund or a down payment on a house or plane tickets to travel abroad. Years ago, Amy Dacyczn wrote in The Tightwad Gazette that there were always more ways to save a few dollars here or there than to save a big chunk of change. That's always resonated with me. How often can I refinance my mortgage or find an amazing deal on auto insurance? I can, however, choose to be very selective about how often (and where) I eat out, what I put in my grocery cart, whether I buy books or check them out from the library, and on and on. And it does add up.
I totally agree. That money is not insignificant, and I do think that we all need to be aware of the small purchases that add up to big expenditures and more stuff over time. That money might not be enough for a house, but it might help one pay down student debt, or build an emergency fund, or take that european vacation they want to take. Thanks for the book recommendation.
Two words to remember whenever the topic of millennials comes up: student loans! The cost of getting a college education in the U.S. has skyrocketed within the last 10 years, to the point that student loan debt now comprises a larger proportion of U.S. household debt than credit card loans or auto loans. Student loan balances are counted against you in your credit score, so this also works against many people (even if you always pay on time, it is part of the credit you're "using" so unless you have lots of room on high balance credit cards, you can feel the pinch). No generation of people can be described in such a simplistic, broad-brush way. People are always varied and complicated and worthy of respect until proven otherwise.
I think that's true only in *some* housing markets. In my city for instance, a 'normal' house (by which I mean a 3 br/2ba condo - not even a house) is at least $500k. (And I'm hardly in the most expensive city). Now no matter how much I scrimp and save, it's barely going to put a dent into the ~$200k down payment. Of course, I could move to a place with cheaper real estate but then neither my husband nor I would have good jobs. Or I could move to the suburbs and commute in (at which point you're 'paying' in time rather than money). And, even there, the 'normal' house would be $500k.
Fundamentally, housing has become ridiculously expensive and all the careful living doesn't change the fact that you need many more years of earning an income to afford a house now than you did 20 years ago. Added to that is increased rental costs so in the time you're saving for a house, you're paying more in rent.
One of the things that I think is important to note, which I've seen in articles in response to the original "avocado toast guy", is that even if Millennials want to eat out constantly and to travel to Europe, most Millennials can't afford to do those things on a regular basis. I think it's a case of the Instagram life of a few well-off folks being interpreted as the general lives of everyone else in that age bracket. 😉 Research indicates that Millennials are spending less on travel than other generations, even those lucky ducks with moderate incomes. They seem to spend slightly more on eating out, but what I've read shows that "slightly more" to be an amount that doesn't calculate easily into a magical house payment. Things are just different.
Yes, going to dinner is the only entertainment there is that is affordable. I spend about 100 a month on meals out (3-4 meals at reasonable local places taking advantage of happy hour deals). If that's what I cut out the 1200 a year would still mean 8 years to save for even the most modest house down payment for either a house that's move in ready, but small or a dump plus what I'd need to fix it up and I'd have 320 less fun times out socializing. I even live in a pretty good area cost of living wise.
There is literally no way to buy a house with the loan debt from college and the low salaries that followed. Older people are not retiring, jobs are not paying well, if they exist at all. I've been looking for an entry level secretarial job for 4 months, applied 74 times, and had 2 interviews that were unsuccessful. Sure there is the odd person who has a good salary and blows it, but none of my friends, even the ones doing pretty well, who have flash cars and European vacations. My friend who married well is the only one with a big house and instragrams pictures of Starbucks cups.
The housing market is just like anything else. Homes sell for what a buyer is willing to pay. Homes are way more expensive than when I bought my house 45 years ago, but my then husband brought home $100 a week, too. Salaries may or may not have kept up with home prices, but we never missed a payment in 30 years, so, yes, things have changed, but in some ways they stay the same. For most people, you can't splurge on extravagances, pay your bills and save for a major purchase like a home, but there are young people who expect to immediately have it all, the new home, the new car, the latest iphone, the nice clothes, the meals out. My home is now worth 10 times what it cost initially and it's paid for.
Kristen's right - it takes many hands to look at all the sides of the issue!! That said, I sometimes wonder about the numbers published about housing costs. Ask your real estate professional to start sending you listings under $50-75K (US). Except for the very highest COL areas (and speaking only of the US), there are a lot of houses out there, some in remarkably good condition, most in average neighborhoods in average towns, many within easy driving distance of employment/industry centers. A lot of people just don't want to look at anything in that price range, or don't want something that needs new carpets and repainting. My son works a $10/hour job in construction (low pay now but good future mobility) and is house hunting. He has already saved up enough since he started working five years ago to put 20% down on such a home and end up with lower mortgage and utility costs than he would have with rent. He has skills to do repairs and renovations (something most young people desperately need to learn, but certainly can do so - YouTube!!), so it's a very real possibility for him. He also doesn't need cable, an expensive cell phone, a fancy car, or filet mignon every meal. Owning your first (or 2nd or 3rd) home does not have to mean a $300K McMansion. Remember that starter home concept we all grew up with? They're still out there for people willing to actually look at what they can realistically afford. As numerous people have pointed out in the comments, it's about priorities and discipline, and maybe a little dose of realism.
I don't know where your son lives, but around here (Ottawa, Canada) 300 000$ for a house does not get you very far. We are very very far from a McMansion! That said, our minimum wage is more than 10$/hour. It all depends of where you live. 300 000$ will buy you an amazing house some places and a dump in other cities....
Over-generalizations are ripe (ha!) for critique, but what he's saying has validity. Put together avocado toast, Starbucks, and any other over-priced "necessity" that can actually be done without and one can save a significant amount by going without them. The principles of his statement are true, even if one doesn't care for his examples.
No amount of homemade toast will allow someone to save up enough to buy in this area. The median home in Seattle in April 2017 was $722,000 and for the "Eastside" suburbs (where we live) it was $880,000, an all-time high. Our (not fancy) townhouse has gone up $105,000 in the almost two years we've owned it. Great, right? But unless we leave the area, if we sold it we could not afford to buy anything else. Rents are sky high too. So here we are, paying about 50% of our income for our mortgage and feeling lucky we bought when we did even though being house poor is NOT FUN. We bought where we did because the school district has a program my son has been waiting for for years. So it's a win for him which requires a lot of sacrifice from us parents but it's totally worth it. I cook from scratch (only vegetarian, too, which saves a ton), I don't shop unless someone absolutely needs a new item, and we've only gone on two (short and close-to-home) vacations in the last ten years. Then you have my parents, born in the 1930's, who bought their house for $165,000 in 1987. Now it's worth about $875,000 (and it's very outdated, so whatever Microsoft employee who buys it will spend another $100,000+ to upgrade it because that's what people think they need to do around here) but my mom's still always complaining about how they don't have enough money. For 45+ years, they ate out a ton, shopped all the time, bought new cars every few years, and traveled frequently. I believe that's why they didn't save enough in their retirement accounts. They were lucky to buy at a time when housing was cheap and they paid it off when my grandfather died. So now they have everything wrapped up in the house but don't want to sell it because they want to stay there until they have to be carried out. I've often thought their spend-happy lifestyle was a backlash against the deprivation of their childhoods in the Great Depression/war years---my MIL, born in 1936, is the same way. So people don't have to be Millennials to have an extravagant lifestyle they can't afford.
p.s. we paid less than half of the current median for our house. I don't want anyone to think I'm sitting in an $880,000 house whining about not going on vacation. 😉 That's so not my lifestyle or philosophy.
I remember my mom saying to me in my mid 20's after securing my first job as a nurse that you need to get into the housing market soon or you will be outrpiced b/c of your income. I bought my starter home in June 1996 for $99,000. 3 bedrooms 1.5 baths,fenced in yard,garage. For me as a single mom by choice to 2 girls adopted from China I was able to afford my adoptions and have lived very comfortably. We have travelled yearly, been able to put a lot away for retirement and house will be paid off in 9yrs at age of 55. BUT the one thing I have never wanted was to increase the size of our home or move into something bigger and better. We are such a happy family and have been able to live debt free. I have also chosen to live in the midwest where housing is very affordable. My hope for my girls when they get into their adult life is to be able to live frugally to obtain what they need. It is all in reach of they work hard.
Oh, where to start...Owning a house became a bucket list thing for me after I had cancer at 21-22. I saved until I had a year's salary in the bank. Saved, not invested. I knew I couldn't afford to buy in L.A, where I was living and where my job was. I bought a 3+2 SFH in the less-expensive town where I grew up. I had hopes of working from there, but the commute wasn't feasible, so I fixed it up on less than a dime and rented it out, while keeping my not terribly cheap but at least rent-controlled apartment in LA.
Eight years later, during a housing slump, I found a miracle of a tiny condo that I could afford in my new HCOLA. I sold the first house, (yup, paid the taxes), and bought the 2+1 condo for more than I got for the whole 3+2 house and moved in. Four years later, I sold it for more than double my money. Lather, rinse, don't panic when the market dumps, repeat.
When I married my DH very late in life, I had two homes and he had one. We sold two, bought a bigger one together and have acquired a couple more rental properties since. Neither of us was ever more than an average or slightly below average wage earner.
Here's the key point: markets go up and every market on earth corrects at some point. The trick is to save your money and be prepared to buy when everyone else seems to be selling.
I hate to out my frugal self here, but we are millionaires now, and not just in RE equity. Start small, save big, manage your expectations, and you will get there.
My, oh my! I'm still trying to wrap my brain around avocado toast. Is this seriously a thing?
Anyhow, I guess I have mixed feelings on the issue as well. I would agree that wages have not kept up with the rising cost of housing - especially in places where the market is really hot like it is here in Denver. But, I also do think that in general, millennials tend to have unreasonable expectations about the sort of lifestyle they should be able to lead at such a young age - and where do they get these skewed ideas about how "easy" previous generations had it?
I mean, when I bought my house in the mid-1990s, I got a deal... but I shopped for over a year to find something I could afford. I bought a house with plenty of cosmetic issues in a working class/immigrant neighborhood. So I do tend to get annoyed when I hear millennials quoting median home prices - what makes them think they should be able to afford a "median" house as a first time buyer? What ever happened to the idea of a "starter house?" Plus, even though prices were cheaper then, mortgage rates were MUCH higher. I was lucky to get a fixed rate of 9%. Bottom line: I was making $14K/year and my mortgage payments were around $550/month.
So, yeah, it's a little hard for me to muster up a whole lot of sympathy for the avocado toast crowd - because the only avocado I could afford at that age was the avocado shag carpeting!
Admittedly, I'm skeptical of someone who was gifted 34000 to give financial advice. Not Kristen, but the millionaire who made the claims. It's dangerous to make generalizations about others.
Who is paying $19 for avocado toast is my first question? Secondly, the average home price in the US is around $250,000. To save a 20% down payment, that's 2,631 avocado toasts, or almost 22 years worth at three times a week. My frugal nature would never allow me to buy $19 avocado toast, but like Kristen says, I do cut back ruthlessly where I can so I an spend on things we like.
The article is Australian where $19 avocado toast in a cafe is not uncommon! Then again the average house price in Sydney, Australia is currently 1.2million so that is more of an issue than the cost of avocado anything!!
I know here the average house is $400,000+. In the suburbs and if you work downtown, a minimum 90 minute each way commute. I know that when I commuted I was spending nearly as much money as I would have if I lived closer to work. The cheap areas don't have the jobs.
I'm a millennial. I got a good job after college, basically by sheer luck. I lived with my parents my first year out of college so I could pay back my small amount of student loans. When I married, four years later, hubs and I rented small apartments so he could finish law school (which he attended on scholarship). By the time he graduated, the cost of living in our town was so high we knew we would never be able to afford to buy a house there. So we moved to a big city where the cost of living is relatively high, but we both got good jobs and after two years were able to afford to remodel an older home. I know we have been fortunate. We have also pinched a few pennies. So before you judge millennials, remember that the financial profile of this country has changed drastically in the last ten years. Just because something was easy for you doesn't mean it's easy for us. Yes, we can be lazy and entitled, but that's not always the whole story. Thanks for presenting a well-rounded analysis, Kristen!
Owning the deed to my home is about the only security I have. It also is my greatest security blanket. Planning for the future is great, but along the way there are often many surprises. A suicide , the economy failing and destroying my career, three car wrecks in 11 months. ( none of them my fault ) children going off to college etc.... Life can be hard. My grandmother always told me to plan ahead. A good squirrel gathers nuts for the winter. I cannot afford avocado toast now, but even when I could, I wouldn't have. I see my daughter's dorm mates graduating in massive debt. Even the rich kids have unbelievable debt. I phones, 60 thousand dollar vehicles they upgrade each year. I am amazed and shocked at most everyone's recklessness. I honestly have no clue where these people will live. I do know that living in the moment is going to have dire consequences for the young . My daughter has a plan and is frugal. Sadly she just walked across the state with a thousand who do nothing more than party.
I agree with the toast guy. A lot of us has forgotten the difference between necessity and convenience (think paper towel). Treats (chocolate/chips/soda) have become an everyday thing. And it applies not only for millennials but also others.
Although "Avocado Guy" made some rather broad assumptions, there is merit in the advice that he gives. Money is a finite resource. If an individual spends money on things that are inconsistent with his or her personal goals, then the funds simply will not be available for the individual to invest, to travel, or to use for advanced education.
Everyday we make small choices that can have a big impact on our financial lives in the long run. It is important to stop and think about how we are spending our money on both large and small things -- even if it's just avocado toast and coffee.
I frequently eat avocado toast. Really. This is honestly my favorite breakfast. It costs me $0.50 and $0.60 a serving. When paired with my home-brewed coffee, breakfast is less than $1.00. However, at a coffee shop, I might pay $7 for essentially the same breakfast. Mine is a $5 a week habit. The other is a $35 a week habit -- a $30 difference. If the difference in these amounts was saved and earned no interest, it would still amount to $1500 in just the first year ... $7500 in 5 years ... $15, 000 in 10 years. It is food for thought. (No pun intended)
I am now 40 and I do own my home. When I was in my late-20s my father-in-law pressured my husband and I "to get into the market." He didn't understand how much salaries and home prices had changed since he was in his late-20s. He bought his first house for $35K, the same amount of money he made a year working as an adjunct professor. This situation did not exist by the time I was in my late-20s, and the situation has only gotten worse. I think a certain number of millenials focus on experience over home ownership, because even if they were incredibly frugal, their salaries tend to be very low and home prices are sky high, leaving them with little hope of ever saving enough for a home.
I totally love rich people who were gifted seed money telling people they are doing it wrong.
Amen!!
It's a ridiculous and disrespectful article. I am a millennial that purchased my first home at 22 because I got a well-paying job out of college and the market hadn't burst. I've since purchased my second home with my spouse and rent out the first. I have friends that I work with that make the same as me, and did not purchase homes because they started their career later, or returned to school. Now, no matter how hard they save, the market has gotten away from them. You can save as much as you want, but it's all relative to the market. Your savings have to be on par with the increase, and people still need to pay rent and bills in the meantime. It's easy to be judgmental of their lifestyle choices, but I would be apathetic too.
My 22 yo Son pays rent to live in my house. Not because I need the money but because he needs to live in the real world. He does complain that he doesn't have spending money. But his rent includes his food and is much lower than what he would have to pay for an apartment in our area. We did tell him that the rent could be returned for college tuition or a down payment on a house
So many comments! I am a regular reader (via email as I can then read them in breaks at work) and rare commenter. But I am Aussie, writing from Heidelberg, Germany. Making me a jetsetter. Who also did 7 course degustation in Iceland (not known for being cheap) this week. And I own a 700sq feet apartment (AD$465k when I bought it 5 years ago, estimates at $600k now for it's one bedroom). I want to say I feel INCREDIBLY privileged every time I travel - and it's one or two times a year to international destinations. I also eat out - not regularly, but enough.
But to get to this point at 32? I lived with my parents for three years (paying rent) to save a down payment (we call them deposits). I bought a small place well located (ie a walk to the city), which is perverse as I work outside the city... I studied a 5 year degree in Engineering, and work in a very well paid job (the sort that my equivalents are 60, and worked their life to get to, but due to changing circumstances, the company has employed some young 'book smart' types not just 'life/experience smart' types). I don't take ANY of this for granted. To save, I didn't buy new clothes for a year (not even knickers - my uber frugal dad had to tell me to buy some eventually as they started to lose elastic, and he'd sometimes be hanging out the washing). I travelled locally. I know with a different job, I'd earn a lot less, and have to change a lot. But... I pay my mortgage (and then some), I pay my bills, and there's money left, and I use it mindfully - on travel, on meals out.
We've been talking about this subject recently in my family ... my husband and I have worked our way up (lived below the poverty line, joined the National Guard for health insurance, worked multiple jobs, went to college ... all with two kids haha) and I guess you could say we've arrived ... we've got a lower-priced house in our area (285k), a VA loan so the terms are fantastic ... but we also have a significant amount of student loan debt left (our car is 17 years old, we only have one, so the student loans are the only debt besides the house). I'm not sure we could've gotten my husband his degree without taking out those loans (he works as an engineer for one of the national labs) and even though he went to a state school, nothing fancy ... it was way more expensive than what my parents paid when they went through college. So the financial dynamics are different for millennials, as many have mentioned. But I've got friends who're living that jet-set lifestyle and there's something about dropping $10 on a cocktail every weekend (and more than one usually) that just rubs me the wrong way ... but gen again if that's the lifestyle they want who am I to judge? I'm not paying their bills Home ownership is definitely no longer the dream for many millennials I know, including myself ... our mortgage is cheaper than rent or we might still be renting ... I don't like being tied down. So I see merit in the advice but also I think priorities are just not the same across the board. Anyway, interesting article, and I liked reading through the comments!
I've been musing over this article for a few days. I am a home owner and 30. We bought because it's cheaper than rent here, but I really have little desire to own again before retirement. We move a lot due to work and I don't feel like I can make improvements and care for maintainence issues in the home and enjoy it and live life with 3 toddlers and a husband who travels frequently.
If my life were less transient, I'd love home ownership. However, transience seems to be a growing normal in the workforce now (between me and my 5 siblings, 4 of us move at least every three years (4 different career fields) and 1 is in college)), which makes the investment of homeownership less worthwhile. I'd much rather rent a smaller place than what I'd buy (buying is long term:how big will the family get? Renting allows us to get just what we need for the very immediate future), save a few pennies doing so, not deal with the headache of inevitable maintainence problems, and explore the area that I'll only get to see for a limited amount of time. So, yes, I guess experience is important. We get paid to live in different places all across the country. Why not take advantage of that and explore?
Also, Wes have to pay for visiting family, the closest of which lives 1000 miles away. At times we've had to travel 4000 miles just visit one set of parents. That's so much Moreno important to me than owning a house. It's not so much a money issue but a time issue: where does one fit it all in? I can't, so I choose to de-prioritize my house.
A few months ago I read an opinion article on the difference between older millennials (those born before 1990) and younger millennials (those born from 1990 on). I wish I could now find the link to that article to share here, but I really enjoyed some thoughts in it. Namely, the technology surge that happened in the late 1990's to 2000's made drastic differences in the way older and younger millennial think and act.
I clarify this, because I am from the "older millennial" timeframe, and I do begrudge many millennial articles, and even just being labeled as such, because I don't feel it fits me. I try not to take offense at such labels, partially because it is just a label and partially because there is a lot of generalization to millennials that seems to ring true. But, I have to say, I never owned a cell phone until the age of 18 when I moved away to college and bought one myself. I never owned a smart phone until well into my working career post college. I have never received a penny of assistance from anyone in my family from the time I left home. If I travelled home for the holidays, I purchased my airfare. When I needed my first car to complete an internship 30 miles away in rural Idaho (not public transportation) as part of my undergraduate degree, I purchased it. If I went to the doctor, I paid for it.
Currently, I am 29 years old, married with two children, and my family and I live very frugally to put my husband through medical school (career change late in life... I like what Kristen said about increasing income and living frugally). We came to school debt free, though we are accumulating student loans now. After my husband graduates, we plan to immediately buy a modest middle class home in a middle class neighborhood and live on $50k-70k a year (depending on mortgage cost) while snowballing the rest towards student loan payoff and then mortgage payoff.
I guess my points are these:
A. I like Kristen's viewpoint on a good balance of everything: frugality, income, luck with the market, etc.
B. Not all millennials are the same. I feel particularly older millennials. (I've grown up in a blended family of 9 kids, all adults now, born between 1982 and 1999, and 1990 truly seems to be the division point between lifestyles of siblings who were otherwise raised together from 2000 on.)