OPINION:
Last week, Kiely Reedy, 34, detailed to The New York Times how she spends $200 to $300 a week on food delivery on a $50,000 annual salary.
It’s not that the delivery meal is particularly good, she acknowledged to The Times, “it’s the instant gratification.” She conceded that spending roughly a third of her income ordering in has depleted her savings and led her to socialize less, but she feels “reliant upon it.”
While affordability remains a key issue among younger generations, leading many of our youths to believe the American dream is out of reach, a tough conversation about values and discipline is needed.
If you are making less than six figures and are spending more than $10,000 a year on luxury services such as DoorDash or Uber Eats, then you are making a bad financial decision that is keeping you from achieving the wealth you desire. The “affordability crisis” you’re facing isn’t because of bad fiscal policy implemented by politicians in Washington but because of your own entitlement.
Studies have found that younger spenders have a different perception of money than their older counterparts, leading to questionable financial decisions.
“The emphasis on experiences can at times lead to splurging on things like vacations and pricey travel adventures that can get thrown on credit cards and lead to maxed-out balances,” Bobbi Rebell, a certified financial planner, told U.S. News & World Report. “Add to that the influence of social media and the unrealistic lifestyle expectations, and it can be a recipe for financial chaos.”
A New York Federal Reserve Bank study found that younger credit card holders, especially Gen Z, are much more likely to have maxed-out credit card balances and delinquent accounts. Cardholders ages 18 to 29 had the highest percentage of accounts transitioning into delinquency.
“Big Banks have thoroughly convinced Gen Z and millennials that credit card debt is part of life and good for your FICO score. So, they carry record levels of credit card debt, not realizing they’re being brainwashed,” financial expert Dave Ramsey posted on X.
He noted that these generations have grown up with the “magic wand” of a smartphone since birth, which has allowed them to purchase anything they want and have it show up at their house within a few hours, and gives them the ability to instantly answer any question based on the wealth of all human knowledge.
“Because everything has an easy button, sometimes Gen Z and millennials struggle with patience,” Mr. Ramsey said. “They have always ‘gotten there’ quickly and easily, so when they have to gut through a tough patch and show real grit, it feels foreign to them.”
Mr. Ramsey also notes that car debt is a problem, with younger generations believing they need to either lease or buy a new car rather than purchase a used vehicle, which is cheaper and more prudent.
Indeed, he is right.
U.S. auto loan debt has reached a record high of $1.66 trillion, with delinquencies and repossessions surging to levels not seen since the Great Recession, according to the Consumer Federation of America. With new car prices exceeding $50,000, nearly 1 in 5 borrowers have a monthly car payment of at least $1,000, quadruple the number from 2019.
Student loan debt also contributes to the perception of an “affordability crisis” among the younger generations, with many believing they need a four-year degree to earn a living. Thankfully, trade schools and community colleges are providing lower-cost options for high school graduates, and public perception of their quality is growing.
“Get rid of the ridiculous credit cards and debt. Sell the $80,000 F-150, get a reliable used Toyota with no payments and work like you mean it to pay off your student loans — because the stupid government is not going to forgive them,” Mr. Ramsey advises.
“When you sweat, side hustle and lower your lifestyle for a period of time, you will find yourself debt-free. When you have no payments, you’ll have disposable income to save for a good down payment on a home. … That is when the math will math,” he said.
This lifestyle will not be convenient to many, but maybe that’s our problem.
The “affordability crisis” may just be a crisis of our own abundance.
• Kelly Sadler is the commentary editor at The Washington Times.
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