Yesterday, The Time published an article that cited the love for avocado as one of the things making home ownership an impossible goal for millennials. They were quoting Tim Gurner, an Australian millionaire and property mogul.
“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” Gurner told the Australian news show 60 Minutes.
This was in response to a recent study by HSBC, which found that American millennials have a homeownership rate of 35%, and in Australia only about 28% of millennials own their homes. Cost is often a major factor in millennials’ decisions to buy — the study found that many young homeowners got a financial boost from their parents when making their purchase.
According to Gurner the problem is not the cost of homes, but young peoples expectations.
“They want to eat out every day; they want to travel to Europe every year. The people that own homes today worked very, very hard for it, saved every dollar, did everything they could to get up the property investment ladder.”
The gist of the story was that if only we stopped spending so much money on fancy food fads and traveling, we would be able to afford housing like past generations.
As a millennial who is growing tired of simplistic explanations of a generation that is not a monolith, I found that article interesting in some not so interesting ways.
First, Gurner has a point. Overspending on overpriced items (avocado toast for $19 is overpriced by any standards) is detrimental to your personal finances. These small expenses add up in the long term, and you really could save money by adopting a DIY approach to avocado toast. We can make a case for these purchases being about the experience, but the problem with food is that the more you eat something, the less the pleasure you derive from it.
However, not buying avocado toast will not mean you now will become a homeowner. Seems Gurner overlooked a number of things in his analysis of millennials:
1. There are structural issues that make home ownership unattainable young people. Young people are completing school with record high student debt levels, and in a recessionary, high interest rates environment. This affects their ability to buy homes and cars post schooling. In addition to this, jobs have changed. While past generations could go for 10-20 year mortgages because they were assured of employment for life, this is no longer the case – holding one job for 10 years is considered a record. In another decade or two, the jobs we have today will be no- existent. Not to mention that even for stable employers, the nature of employment has changed. The pressure to post good financial results means that employers now offer minimal benefits and extract maximum value for those benefits.
2. SOME millennials may not want homes. Times have changed, we are now talking of a sharing economy with ride sharing, bike sharing, Airbnb etc. Millennials are a lot more mobile than past generations, and therefore, it is not unfathomable that a good number of young people out there are starting to view housing as a service and do not mind just paying for that service.
In addition to this, like he says, home ownership took EVERYTHING for our parents, some of us may not be willing to make this sacrifice.
Sure if they had a ton of cash they could buy a house, but where there are other competing needs, they may not want to buy one. I am one of those young people. As much as I am interested in real estate as an investment, I do not see value in buying a house to live in. I would rather keep my options open, should I need to move locales or even countries.
3. Yes, we want to travel and experience the world, and that is ok. Last year, I went on a 7-day Euro cruise and after which I had coffee with one of my older, richer (owns many houses) friends. We were discussing business, but he had seen my photos on Facebook, so he brought the cruise up. The first thing he said about it was “Kellie, you must be making a lot of money these days eh?” This was partly in jest, because nothing about me suggested that I was swimming in cash. He could not understand why I would spend so much money on a holiday, yet I live in a rented house, drive a second hand car and so on and so forth. Despite his money, his holidaying was restricted to the December holiday with the family, because that is how you grow wealth.
This is the story of past generations. Many of our parents have wealth locked in investments and businesses, but have enjoyed very little of that wealth. We on the other hand want to do both – invest a bit and enjoy life a bit. There is nothing wrong with that. It is called living a life that is rich in experiences. The millennials that want to be multi-millionaire real estate moguls like Gurner above are doing what they need to do to become that, resist the urge to project that desire on all young people.
4. Let us talk privilege and luck. What Gurner was not saying as he spoke of the sacrifices he needed to make to succeed is that at 19 his grandfather gave him $34,000 to start his gym business which grew into the empire he is so proud of. Even as he talks about “saving hard”, he neglects to mention this fact, and other privilege he had starting out, that most of his age mates do not have. When business moguls discuss success, they make it seem common place, like anyone can do it, totally ignorant of statistics on business success. Most fail.
This is why I take personal finance advice from millionaires with a pinch of salt. They are outliers, most of whom are gifted with privilege and lots of luck, and while they may have helpful advice for those who want to be millionaires, statistics show that most of us will not even achieve financial independence, leave alone become millionaires.
My take: spend your money with both the present and the future in mind. Buy value today, and invest for value in the future.
Here is a lovely photo of an avocado, just because.