We’ve heard much of this before — but a new survey delivers fresh insights into the Millennial generation. More than 60% of millennials are living paycheck to paycheck and only 38% feel financially stable, according to a new survey from Charles Schwab.
Millennials (ages 23 to 38) feel the most insecure when it comes to their finances, according to Schwab’s 2019 Modern Wealth Report, but also say they spend an average of $478 a month on “nonessential” purchases, such as dining out, entertainment, luxury items and vacations.
“It may seem odd that when we look at statistics that say so many millennials are living paycheck to paycheck, but on the other hand, they’re overspending,” said Farnoosh Torabi, personal finance author.
Millennials also carry more debt than previous generations did at their age — and student loans are the main source. The median amount of loan debt millennials carried was $19,000, significantly higher than Gen Xers’ balance of $12,800 at the same age.
“When you’re saddled with student loan debt, when you have credit card debt, when you don’t have a lot of financial literacy, that can lead you to making unhealthy decisions with your money, including overspending,” Torabi said.
Credit Crisis on the horizon?
The N.Y. Fed’s latest report shows that total household debt increased by $124 billion in Q1. It was the 19th consecutive quarter with an increase, and household debt is now $993 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008.
Between the lines: Delinquency rates are trending up again, and not just for younger consumers.
- The report found that seriously delinquent credit card balances have also risen for consumers aged 50–69.
- For borrowers aged 50–59 and 60–69, the 90-day delinquency rate increased by nearly 100 basis points each.
- “People are probably extending themselves too much,” said TwentyFour’s David Norris, also noting that the headline numbers for Q1 U.S. GDP were a bit misleading.
Morehouse Grads: No Student Debt! And no taxes either!
It was one of the most feel-good stories we’ve seen in quite some time. Billionaire Robert F. Smith, the commencement speaker at Morehouse College in Atlanta, announced that he was paying the student debt for the entire Class of 2019.
The gift is estimated to be worth $40 million. A spokesperson for Morehouse College called it the biggest single gift in the school’s history.
Smith is the chairman and CEO of Vista Equity Partners, a private equity group that invests in software companies.
Smith’s generous gift means that the nearly 400 students in the Morehouse College Class of 2019 won’t have to scramble to pay back potentially tens of thousands of dollars worth of debt.
Student loan debt numbers are staggering:
- 44 million borrowers collectively owe $1.5 trillion in student loan debt in the U.S. Student loan debt is the second highest consumer debt category in the country — more than credit cards and auto loans.
- Most students shoulder debt between $10,000 – $25,000, but a whopping 2.5 million students owe more than $100,000 in debt.
But the good news for the Morehouse grads didn’t end there — it appears there won’t even be any tax consequences on the debt payoff. The recipient of a gift isn’t subject to federal income tax on a gift.
While the relief was granted to all of the students in the class without the need for them to do anything in return (again, the hallmark of a gift), Smith did have some expectations. “I know my class will make sure they pay this forward,” Smith told the students. “[L]et’s make sure every class has the same opportunity going forward because we are enough to take care of our own community.”
Pay attention — Jobs are changing!
“The slope of the curve in the change of jobs and skills, when measured against time, has never been so steep,” Art Bilger, WorkingNation Founder and CEO, said last week.
Bilger spoke about how technology will radically change the job market, where the new jobs will be, how people can reskill, the debate surrounding Universal Basic Income, and work and fulfilling one’s purpose in life.
Survey: Tech will not fully replace financial advisors
A recent Wells Fargo survey says that U.S. investors are adamant that technology will not take the place of financial advisors.
The survey — of more than 1,000 Americans with more than $10,000 invested — found that 84% think that financial advisors will always be needed and will not be replaced by automated investing technology.
Some 56% work with an advisor and 22% would like to work with one, suggesting that investors want guidance when saving, investing and preparing for retirement. Around 73% said the benefits that come from professional advice are worth the cost.
“Financial advisors remain a vital source of advice for most investors,” said Wayne Badorf, head of intermediary distribution at Wells Fargo Asset Management. “Financial advisors and technology can work together to help investors reach their saving and retirement goals.”