When you were a kid, what did you think your life would be like as a grown-up? Did you dream of being a firefighter or a doctor? Did you think you’d be married? Have kids? Did you picture yourself driving a fancy car and owning a big house with a pool in the backyard?
Everybody has dreams, and that’s great. I spend my life challenging people to dream about retirement. Dreaming can lead to goals, and goals matched with hard work make dreams come true. But there’s a time when dreams become a problem—when they become expectations.
Millennials and Lifestyle Expectations
As Americans, we’re used to having our expectations met. We expect food at every meal. We expect clean water. We expect a good education. We expect happiness. We expect to get what we want—and we demand it right now. That mindset has been passed down to the Millennial generation as they begin to establish their careers and adult lives.
I have a sneaking suspicion that Millennials (and other age groups) expect to enjoy the lifestyle of their parents—large homes, expensive cars, nice clothes, fine jewelry and fancy vacations—even though it took their parents a lifetime to reach this point of financial security. And as a result, Millennials are not saving enough for retirement.
Why do I think lifestyle expectations are part of the problem? Because that’s what the numbers are telling us.
In a recent survey commissioned by Ramsey Solutions, Millennials reported an average of $30,580 in debt, even though their average income is $55,200. Of the 58% of Millennials who are actively saving for retirement, 39% of them are putting away less than 4% of their income. That’s just $2,200 a year. Why so little? According to them, the two biggest reasons are the cost of living and taking care of their children’s needs.
That’s right. The cost of living is zapping this generation. And I think that’s largely because Millennials are trying to live like their parents—right now.
Looking Toward the Future
Here’s the deal: When you’re just graduating from college and entering the workforce, you’re supposed to live in an apartment and drive an older, used car. You’re supposed to have less money to spend. You’re just starting out! With time, you’ll reach your financial goals just like your parents did—but only if you budget your money, save for big purchases, and avoid debt. Otherwise, you’ll be throwing money away in interest fees instead of putting it away for retirement.
The great news is that you actually have an advantage over your parents. You have more time to save than they do, and that’s a really big deal. If you get rid of debt and spend only when you have the cash, then you’ll have decades to save for retirement. A modest lifestyle now will mean you can enjoy the benefits of your discipline and patience later on. Then you can enjoy the lifestyle you want without being buried by debt.
It’s okay to enjoy your life. You can live in the moment and look toward the future. That approach means you can already be saving for retirement—and possibly enjoy it earlier than your parents did!