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Justified concerns

The outlook for young Americans is undoubtedly bleak. House prices have surged alongside interest rates for mortgages, leading to the most unaffordable housing market since since the mid-80s, according to mortgage data firm Black Knight.

Furthermore, Sethi highlights that the price of some essentials has surged faster than inflation over the past few decades. He uses government data to highlight how the cost of a college education, new cars and rent prices have outpaced inflation since the 1980s.

“What we can see is that there are forces working against us,” Sethi said, which means many of the concerns of young Americans are justified. However, he doesn’t believe losing hope is productive.

A survey commissioned by Credit Karma found 43% of millennials and 35% of Gen Z adults admitted to spending money because of a sense of economic doom — well above the 27% average across all Americans. This money could potentially have gone toward savings or investments. But why save for the future when you already know it’s not bright?

“Some people have simply said, ‘I’m giving up, the American dream for me is dead’,” Sethi explained. “So what are they doing with their money? Well, they don’t believe in the American dream anymore so they’re spending it. They’re spending it on fun stuff.”

This approach is likely to make a bad situation worse. Gen Z Americans who are doom-spending still have to deal with the economic issues highlighted above along with self-created issues such as high debt burdens and a lack of retirement savings.

To break this vicious cycle, Sethi offers a simple solution.

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3-step solution

Sethi put forth three steps to avoid this doom spiral.

  • 1. Make your money work for you: He recommends young Americans start investing at least 10% of their paycheck every month. One edge millennials and Gen Z have over other generations: “Time and compounding are on your side.” Investing is therefore key to young folks generating wealth, he explains, which is why this should be a primary focus.
  • 2. Create your own point of view: Expert opinions and forecasts about the economy are certainly valuable. But Sethi believes young Americans need to take charge of their own destiny and create a unique point of view on how to deal with money issues and get the life they want. Instead of looking at statistics about what the average American is doing, think for yourself and figure out what makes you happy and what you would rather save money for.
  • 3. Don’t fall into the Vortex of Doom: Sethi believes many adults are inundated by negative perspectives on social media and mainstream media. Instead of getting carried away with gloomy headlines, he encourages young adults to tune out the noise and focus on what they can do to reach their financial goals.

“Please, do not become a doomer,” he said. “I know it’s tempting, I know everyone else is doing it, complaining about the price of lettuce. But please don't, it is the wrong way to go.

“Yes we need more affordable housing, yes we need education and child care to become more affordable. Yes that's why I vote and that's why you should too. But we all also need to take responsibility for our own rich lives.”

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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