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The Financial Challenges 20-Year-Olds Face Today, And How They Can Find Their Financial Path

Recently, I was quoted in a New York Times article by Isabella Simonetti focusing on the financial roadblocks young people face today. In the article, I suggested that an individual’s time is often best spent focusing on moving their big financial rocks (housing, career path, building up emergency savings) instead of worrying about small expenses – like lattes and Netflix. This is an unpopular opinion, especially after the “avocado toast” phenomenon in 2019-2020. 

20-somethings of today are facing the most difficult financial circumstances of any recent generation. In this article, I’d like to dig into what roadblocks today’s young adults are dealing with and how they can navigate them to create a fruitful and fulfilling financial future.

The Challenges Faced By Today’s 20-Somethings

Navigating capitalism, and the many financial ups and downs we’ve all collectively experienced since 2020, is exhausting. As healthcare, education, and housing costs have soared, unions and good jobs have declined. As a result, people in their 20s today have a much harder time than those who started when I did in the early 2000s or earlier.

In today’s world, young adults are dealing with the following: 

  • Sub-par employers that don’t always compensate well, provide reliable employment, or offer tangible benefits to young employees
  • A social media landscape that presents complex challenges like influencer marketing, or short-form video “tips” to help you “hack” or uplevel your financial life
  • Inflation (this is a big one!)
  • Recession
  • A nationwide work environment that’s torn between work-from-home and heading back to the office
  • Relentless targeted advertisements
  • Ever-climbing student loan debt
  • Constantly-changing tax laws
  • Dramatically higher costs to rent or buy and maintain homes in a wild housing market
  • Climbing interest rates
  • Soaring health care costs
  • The highest costs for college and professional degrees that there have ever been
  • Transferring risk from employers to workers via apps like Uber and the gigification of the job market

And so much more.

When Gen Y, Gen X, or Baby Boomer individuals talk down to young adults of today or offer hard-hitting advice, we often miss the point:

20-somethings have it harder than many previous generations have. Things that used to work often don’t anymore.

Many of the challenges they’re facing are outside of their control, and they don’t have a good path or role model to follow because much of today’s circumstances are unprecedented in the lifetimes of anyone they know. Who can say they had to job hunt or graduate college amid a global pandemic? Certainly not me, and most colleagues over 25 can’t sympathize with that experience, either–the 1918 Flu Pandemic was before our time! 

Decision Fatigue: A Real Problem 

Amidst these difficult circumstances, there are several things young adults can do to try and lay a strong financial foundation, but a strategy that relies on consistently giving up a morning latte or the occasional dinner out with friends is doomed to failure. When people dispensing this type of advice say these things, they’re playing into a real problem: young adults face insurmountable financial challenges while being faced with immense decision fatigue. 

Decision fatigue is defined as the struggle or failure to make good decisions because of the sheer number of decisions one needs to make in a given day. And the truth is that people make a lot of decisions. The average adult makes somewhere in the neighborhood of 35,000 decisions each day. So, when we listen to financial “experts” tout the importance of good decision-making, we’re not considering that making all good decisions is, frankly, exhausting. 

Young adults are expected to:

  • Save for emergencies
  • Save for retirement
  • Reign in spending
  • Spend in alignment with their values
  • Make sure they have the right health care coverage
  • Grow their careers
  • Buy a home
  • Invest more

The list goes on.

If they spend all of their mental capacity trying to skip their morning latte and save a few dollars here and there, the potential for bigger financial “wins” to be missed is higher.

We have only so much decision making (and implementing) bandwidth each day. It’s critical that we spend it on the most impactful decisions. I have never seen a situation where that is whether to get a latte. If we obsess about that, we’ll use up emotional bandwidth we desperately need for more important things. 

As Ramit Sethi says: focus on the $30,000 questions, not the $3 ones. 

What Can Young Adults Do?

Instead, I recommend young adults living in today’s financial landscape focus on three things:

Avoid decision fatigue by trying to move the “big rocks” in their financial lives instead of the small stones. Don’t focus on making 1,000 decisions a day that adds up to saving a few dollars here and there. The latte, the avocado toast, or whatever other small indulgences you enjoy are the “small stones” in life. Instead, focus on implementing systems that help you move the “big rocks.” 

This could look like:

  • Learn how to negotiate and get a raise. Everyone can become a better negotiator regardless of their background, skills, or personality. 
  • Organize your workplace. If negotiation doesn’t work (or if you’d rather build power instead), talk to your coworkers and achieve a collective solution. Get yourself a union! 
  • Contribute to an emergency savings account. Remember that while 3-6 months of living expenses are ideal, even $100 tucked away can be a game changer if an unexpected bill hits.
  • Contribute up to your employer match for retirement savings. You’re not alone if you can’t max out your retirement savings accounts. One way you can start to get ahead, even if you’re not able to save thousands each year out of your paycheck, is to contribute up to your employer’s match. This is often 3-6% of your annual salary and helps ensure you’re not leaving money on the table. If you can’t do even the full match right away, start with 1% and then increase the amount every time you get a raise.
  • Pick a debt payoff strategy. Whether you “snowball” payments toward your debt by starting with the smallest amount of debt you have or “avalanche” payments by focusing on the high-interest debt first, pick a strategy and stick with it. 
  • Gamify your money when you can. Set up a system that works for you! Reward yourself in alignment with your values when you hit a goal, or use a budgeting app that celebrates your financial wins.
  • Automate, automate, automate. Think back to decision fatigue – if you remove deciding from the equation altogether, you’re much more likely to stick with your financial roadmap. Automate bill payments, contributions to savings, or debt repayment to make it easy to stay on track.

Tap into support. We need friends and allies to help us stay on whatever financial path we want to be on. So many targeted advertisements, crappy employers, and other entities will try to knock us off our path. We need solidarity with people we care about to resist the clever and constant reach of companies trying to access what we have. 

Whether your support system is your family, friends, colleagues, or financial advisor, having a group to hold us accountable and help us stay aligned with your goals and values is so important.

Find helpful resources. In addition to good people surrounding us, we also need a wealth of good information to support our decisions. This is true regardless of age or financial status – helpful resources provided without judgment are critical. 

Seeking educational blog posts, podcasts, or videos from accredited experts that touch on your unique financial questions and pain points can be a game changer. Financial planning professionals, particularly fee-only fiduciary planners, can help you find your footing and make informed decisions as you grow.

What The Rest Of Us Who Aren’t In Our 20s Can Do

Next time you’re ready to offer up (often unsolicited) financial advice to the young adult in your life, remember to approach the conversation with empathy. What this group of young adults is facing is unprecedented, and they’ve been dealt a bad hand. The least we can do is understand that they’re facing challenges we have not experienced, and try to offer insight, advice, support, and resources to help them move forward toward their goals. Have your conversation with the recognition that it’s not hard because they are missing some easy solution, that it’s hard because they are in an enormously difficult economic setting.