$19 avocado toast isn’t stopping millennials from buying homes, no matter what some millionaire in Australia may think. Sure, flippant spending is a surefire way to ruin your finances, but many who indulge in the occasional brunch do so consciously, knowing what they’re doing.
If you truly believe that avocado toast and coffee are ruining your finances, here’s the truth: it’s a bigger issue than your $4 coffee and your $19 avocado toast. Those things are fine to enjoy every now and then, and a coffee is fine more frequently (I don’t know anybody who’s buying avocado toast every day…). The key is that you need to budget for them. All too often, millennials – and people in general – don’t budget well, and, even after they put together a budget, many fail to follow through with it.
No, avocado toast and coffee aren’t inherently ruining anything – it’s that people don’t know how to budget. How many of you actually learned how to create and maintain a budget in high school before being off on your own in college?? My parents taught me, but nowhere in high school did I learn it; even in college that sort of thing wasn’t required education.
So what can you do to take control?
Using a tool like Personal Capital helps you track your saving and spending, and makes sure you’re headed in the right direction over time. But for the daily stuff, if you want to use something more granular, there are options like sticking to the envelope system (all your categories of your budget are physical envelopes with cash in them. Once the cash is gone, you’re done spending in that category for the month) or just tracking in a spreadsheet.
This article sheds light on a few other things as well, aside from strict budgeting:
- Not everybody wants to own a home. Just like everything else in the world, just because one person wants to buy a home does not mean that everybody does. Houses come with a lot of responsibility that, quite frankly, many people can’t handle or don’t want to deal with. Mowing the lawn? Shoveling (if you’re a poor sap like us where it gets cold)? Replacing your own light bulbs?
Yeah, there’s a lot of cool stuff about owning a house and it comes with a sense of pride, but it’s not for everyone. It’s not even a monetary decision a lot of times; it’s a personal, emotional one for many people. Making the assumption that just because one person wants to own a house or rental property, therefore everybody must, is a bad assumption that people need to get out of their heads.
- Some people value things differently than others. Adding to the last point, some folks value different things – and their spending reflects it. If you highly value mobility and flexibility to get up and go, chances are owning a house isn’t the number one thing on your list. Something like finding a more flexible living situation, and spending money on experiences instead of on stuff probably means that you’re a more likely candidate to be eating expensive avocado toast.
But it doesn’t mean that your spending is wrong; just that it doesn’t align with what somebody else’s is. And that’s perfectly fine.
- Some millennials spend now because they’re not sure if they can spend later. They go into work and see people who are 70 years old and still working, some because they like it, but many because they can’t afford to retire. One of my good friends used to work with a guy who was in his late 70’s and still working. I see an old guy who I assume is around 80 years old still walking the halls at my work.
Millennials see our parents and grandparents working, unhappily, at their jobs. Instead of thinking about how they can set themselves up to not be in that position when they’re their age, some folks shut down and declare defeat. If you genuinely think you won’t be able to retire no matter what you do, you won’t have a reason to try to save for retirement – so you may as well spend now when you know you can enjoy things in good health.
- Some millennials think they’re going to inherit a lot of money: in fact, Personal Capital ran some numbers and the average inheritance that millennials are expecting is around $1MM. A million dollars!!! Inheritance expectations shouldn’t drive behavior – but it sometimes does. Any inheritance should be considered a windfall and treated as such. Plan for what you’ll do if you get one, but don’t expect one. It’s easy to change a will, and leaving everything to a charity – unexpectedly – isn’t unheard of.
But it’s not just a problem with millennials; folks of any age who are relying on any sort of inheritance and planning their lives now around that assumption are setting themselves up for a bad time down the road. Bad spending habits don’t just magically go away when you have more money – they often times get amplified. Think of the phrase “more money, more problems”. Think of all the lottery winners who lost everything because they didn’t know how to handle their new-found wealth, likely due to bad spending habits before winning.
No, avocado toast and coffee isn’t ruining anything for anybody. But for some, bad habits are, and bingeing on things like overpriced hipster toast instead of saving for your goals may definitely fall in that category.
The key is moderation, and weighing every decision and dollar you spend now versus what you are putting off in the future. If you’re going into the situation with open eyes, then who am I to judge?
What are your thoughts on this avocado toast article? Do you think that skimping and saving as much as you can to buy a house is the key to happiness?