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According to a new survey by Charles Schwab, nearly two-thirds of millennials report living with a paycheck and only 38% feel financially stable.
The millennial generation, more than any other generation interviewed by Schwab, feels the least secure financially. That's according to about 380 millennials (aged 23 to 38) surveyed for Schwab's 2019 report on modern wealth.
Millennials, however, also report spending an average of $ 478 a month on "non-essential" purchases, such as restaurant meals, entertainment, luxury goods and vacations. That's less than the $ 587 expenses reported by Gen X, but more than the $ 359 spent by Baby Boomers.
"It may seem odd that, if we look at the statistics, millennia live on paychecks, but on the other hand, they exceed the expenses," says Farnoosh Torabi, author of personal finance and host of the podcast "So Money". Schwab associates with Torabi's Stacks House, an ephemeral experience that promotes women's financial independence.
But, even if it may seem counterintuitive, it is the reality facing the millennial generation, she says. "If your financial life is in disarray, there is a good chance that you will exceed the expenses," she told CNBC Make It. "Emotions around money lead us to make irrational choices."
It's not just an expense problem
Terri Kallsen, Schwab's Executive Vice President of Investor Services, tells CNBC Make It that it may be easy to blame Millenarians for spending too much, but other issues are also at stake.
"Spending is not the enemy we could think of," she says. As a generation, millennials also face systemic financial problems that can seem overwhelming. They usually have more debt than previous generations at their age, for example. One of the main reasons for this is the student loan. The number of indebted households under student loans doubled from 1998 to 2016, according to the Pew Research Center. The median amount of millennium borrowings is $ 19,000, which is significantly higher than the $ 12,800 balance of Generation X balance at the same age.
Student loans are not the only type of debt that millennia have. According to a recent poll by LightStream, SunTrust Bank's online lending business, about 40% of millennials (defined here by those aged 20 to 35) have credit card debt.
According to Northwestern Mutual's 2018 Planning and Progress Study, people between the ages of 25 and 34 had average debt of $ 36,000 last year, excluding home mortgages.
Rising housing costs and the fact that wages simply do not go as far as they used to cover necessities also increase the pressure.
"When you're in debt with a student loan, when you have credit card debt, when you do not have a lot of financial knowledge, it can lead you to make unhealthy decisions with your money, including excessive spending." said Torabi.
It's about finding a "balance"
Although managing your money is part of the math, most of the time it's the mentality, says Torabi
Kallsen adds: "We want people to have good experiences in life, but the most important thing is that people find the right balance so that their expenses do not affect their long-term financial security."
You need to find a strategy that works for you, which allows you to have rewarding life experiences and save for the future. "Too much of one thing is not a good thing for your biochemistry in general," says Kallsen. "And too much of a thing, from a financial point of view, is not a good thing for your overall financial plan."
If you're trying to reduce your expenses, the first step is to organize yourself according to what you spend and how you spend it, says Saundra Davis, financial coach and adjunct professor at Golden State University, CNBC Make It . "Know where you are and know what you want," she says.
Be really clear with yourself about what you want and what is achievable. And be realistic, she says. Do not expect you to save immediately while saving $ 400 a month. If you can barely save $ 40, start by trying to save $ 40.
Surround yourself with people and influences that will help you make healthy financial decisions. "If you hang out with people who are constantly spending money, keep up with the Joneses, guess what – this will also have a big impact on your bottom line," Torabi said.
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