Key takeaways
- Baby boomers and millennials have vastly different views on money and how to use it.
- The severe frugality of most millennials likely stems from them watching their boomer parents or other boomers suffer during financial crises in the 80s to the dot com financial crises and the great recession of the 2000s.
- Budget so that you can cover all of your needs, but also add in some money to treat yourself with a couple of wants.
Greed is good. That was a line uttered by actor Michael Douglas in the 1987 movie, Wall Street. You may remember it. It made a big impression on my generation, baby boomers. A little while ago, a research group asked millennials a provocative question: What would you do with a million dollars? It wasn’t formal research because it was conducted on the street, so the results are anecdotal. The answers that came back are in line with what I’ve seen and heard millennials say when asked similar questions.
The number one answer involved three key parts:
- Buy an affordable, reliable car
- Pay off student debt
- Buy an affordable home
From a boomer’s perspective, these answers sound very conservative because boomers would have done something very different with the money. They would have bought a vacation home, bought a nicer car, and upgraded their permanent residential home. They certainly wouldn’t think about holding back savings, paying off debt, or any of those things.
People are curious to know why there’s such a marked difference in boomers’ and millennials’ answers to this question. Some of the reason is experiential. Many millennials watched their boomer parents go through the great recession in 2008 and through the Dotcom crash in the early 2000s. Both of these, in many cases, destroyed much of their livelihood due to losses on various investments, overspending, and over-leveraging their homes.
Seeing the pain this caused their parents, millennials made mental notes to themselves so they would remember not to do those things. Essentially, they’ve gone to the other extreme. I’d like to make one point about this, which I think is important for you to consider. There’s a sweet spot in between the boomer-type of overspending and rigid frugality. In other words, don’t be so ultra-frugal that you can’t enjoy life at all; on the other hand, still guard against overspending that puts your budget out of control.
This in-between is different for everybody, but it’s probably around the same spot for most people. When you set out to find your personal in-between, avoid approaching your finances in such an adamantly severe way. Instead, look at it to, of course, cover all your needs, but do take care of some of your wants. That is the freedom afforded you in this country — the liberty to do those things with the dollar that’s available to you.
Consider this when thinking about your answer to that million dollar question. It’s good to want to avoid making the same financial mistakes your parents may have made back in the 80s when greed was good, in most cases, with baby boomers. But you work hard for the money you have. It’s ok to use some of it for wants and fun. Until next time, enjoy.
Gary
