Millionaire to Millennials: Stop Buying Avocado Toast If You Want to Buy a Home

[DonFerrari]

jonager said:
I am a millennial and I agree that some of us spend stupid amounts of cash on eating out. But stagnated wages is what is killing us, and in many regards, we have baby boomers to blame for it. I am just gonna leave this here, for the next time a baby boomer feels like criticizing us: http://highline.huffingtonpost.com/articles/en/poor-millennials/

Sorry man, but much more important than earning more ("stagnate wage") is to spend wisely and invest most.

Nymeria said:

DonFerrari said: 

Agree with most you said, would only say that 30% saving would be a good compromise, making like you said a part for rainy days (you saving that once just keep it unmoved with the amount that should go there going to long term or retirement). And depending of the country don't save for a house or car, keep that invested and pay rent..

Here you can have something like 10-15% annual interest on your saving if invested on safe means. So if you save 300k for housing that would net you 30-45k annually, while the rent of a property of this value would be around 20-25k annually. And in the case of the investment it is liquid and fast to move if you need while the house if you go on a finnancial problem is a very hard moving item.

While in USA it is like the opposite, the safe investment generating 2% a year while rent is quite high so buying a house takes precedence. Unfortunately people put a lot of other priorities in front of it and will live a life of debts.

I don't disagree, it is more a "Walk before you run" trying to help people plan finances.  When someone never saves it is an accomplishment to get them to set aside even $10 a week for starters just to get the idea in their head.  As a culture we are just not good at it, which is why many companies take the money out of the paycheck for retirement plans. If it was something people had to pay into on their own, they wouldn't do it nearly as much.

The challenge is balancing what is right in front of someone and what is long down the road over the horizon.  For example, in the US when you buy a home can pay for it over 15, 20, or 30 years. What is the most popular? 30 years, because it allows for the lowest monthly payment.  Of course in the long run it costs tens of thousands of dollars more in interest payments, and you'll be paying it off right up until retirement.  

Your 20s and 30s set your financial life for most people.  With proper planning you don't need to sacrifice much and will be set in your old age.  Every stumble such as forms of debt, interest, and penalties puts you in a deeper hole.  I foresee a lot of people having to work until the day they die due to poor planning.

I do agree it isn't part of the culture (at least in Brazil) to do any saving at all, and when people do they put on saving account that is "safe" while generating less than inflation is eating. So sure showing how saving is important and that anyone can do it, while starting slow is good.

Well I have done the shortest plan available (17 years) because I couldn't compromise more than 30% of my wage on it, but always can pay up in advance and lower the time... have done it in a way that after paying it for 6 years I only have another 4 to pay... which if knew the money invested earned more than the interest I pay on the house I would have saved it for when really necessary.

And yes poor planing is a kick in the ass, and the reason I try to counsel my team over finance and was happy when a senior director started a special class on lunch to teach the young employees. 

Nymeria said:

VGPolyglot said: 

The issue though is that the minimum wage is actually lower than the costs of living, so millions of people aren't even able to make enough money for the bare minimum, let alone even thinking about saving money:

https://www.citylab.com/life/2015/09/mapping-the-difference-between-minimum-wage-and-cost-of-living/404644/

Yes, stagnate wages coupled with increased debt has greatly reduced savings.  It is possible even if your situation is bleak enough that it isn't an option.  I know children of immigrants for example where their parents poured everything into them. They had zero illusions of moving up the social ladder, but through education they believed their children could.

I will say there is a case to be made about how salaries are distributed and what we are going to do as mechanization removes more and more low level jobs.  It has been floated for a universal basic income in the future as the number of jobs you need humans for dwindles.  The thought process is that you have to have a consumer base or could see stagnation or even a full scale revolt if it reaches depression levels.

Most of times people aren't aware or willing of the sacrifices they have to make either for themselves or the next to grow....

My great grandparents were slave children, but they fought hard on the farm to have as much as their son as possible attend school to have at least 4th grade and know how to read and do simple math, with my grandfather finishing high school on technical level (the other grandfather worked as construction employee, my grandmother was a clerk in a store turned housewife and the other teacher turned housewife). Those grandfathers pushed their son to university in the case of my father and high school in the case of my mother family (although her and my aunt from 7 children family attended university and 3 didn't finish high school because they didn't want - one of those have done it later). My bother, sister and all direct cousins have university degree.

It wasn't easy, it wasn't fast, but at each generation the family moved higher.

And you see this on immigrants, they start at the absolute zero, sometimes don't know the language and on average move faster and further developing their families (even without formal jobs) than settled families that believe they are just not meant to thrive because they were born poor.