#32 Entitlement, Millennials, and The Universe

Entitlement.

The word every millennial has heard in reference to our generation. 

Entitlement is the lifestyle we expect at the minimum.  It's the lowest standard of living we can imagine living. 

Some say it's what the world owes us.

Many parents often say they want to give their children opportunities they never had. This means many kids grow up in their parent's home with a standard of living on the level that far exceeds what they can afford as new adults.

Millennials grew up in a home that took their parents 20-30 years of hard work to get. As adults, we went out to live on their own expecting to maintain the same standard of living we had only a few years earlier.

It's not the standard of living new adults should expect.

That's the privilege we were raised with but when we are supporting our own lives we cannot rely on that privilege anymore.

A big house with extra rooms, a yard and a gated driveway. A garage around back to protect their shiny new car from the elements and in a suburb not too far from the big city.

Most people don't start their lives this way. My parents certainly didn't. 

My parents made sacrifices. They found ways to save as much as they could at the beginning. They moved to Canada when they were 32 and rented basements with two young boys for 3 years before buying their first house.

My dad always tells me how he was working 3 jobs when we first moved to Canada. He delivered newspapers before dawn under the street lights, during the day he worked at a print shop in an industry diminished now by the internet and a flower shop at night. At some point in there, he also was a cook at a Thai restaurant. 

The first house they bought was two cities out from downtown where he commuted in for his primary job at the print shop. Even 30 years ago when my parents had "four" incomes (3 from my dad and 1 from my mom), they still could only afford to buy a house way out in the boonies. 

Eating out was not something we did too often. But I do remember eating McDonald's fries in the backseat of my parent's old silver Chrysler Reliant. My dad cooked most of our meals.

My parents shared the one car. All four of us would wake up early in the morning and take turns sharing one washroom. We would all hop in the car before the sun came out to drive an hour to downtown to drop my dad off at work before my mom would drive another 20 minutes to send my brother and me to school and then another 15 minutes to her office.

And we would rinse and repeat every day for years.

Looking back I don't think life was that tough, but compared to the life I had at the end of high school I do sense this feeling of entitlement creeping in. I wouldn't want to go back to that lifestyle. No one would. Not once you've tasted the sweet taste of a better more comfortable life. 

It's one of the reasons I don't want to fly business or first class before I can truly afford it. I'm afraid it will make economy class seems like torture.

30 years later, my parents have bought, sold and moved to their 4th house. And now they live in a 3,500 sqft house they built.

I never expected to start my adult life in a 3,500 sqft house. I actually never want to live in a house that big. It's too much space for me.

No Entitlement At All

My friend moved to Toronto the same time as us, 5 years ago, at the time he was single. He saved so much on housing because he expected even less, he doesn't have an entitled bone in his body.

He rented a room in a house for $200, sharing a bathroom, living area and kitchen with 6 other people. He did this for 3 years before he met his future wife and bought a house.

I don't know if he saw this as a sacrifice, but from many outsiders looking in, it was. He didn't come from a poor family. Even when he was living in Vancouver he had a good paying job as a software engineer. And in Toronto, he has only done better.

He didn't have to live like that. This is a guy making a six-figure salary. But doing so allowed him to save so much money. He cut his living costs down to a level lower than his food cost. And the guy still cooked at home.

Imagine if your cost of living every month was $500 including both your food and housing. That's only $6,000 a year. Add in a bus pass brings you up to $7,500 a year. Even if you made minimum wage you would save 60% of your take-home salary. 

Ridiculous!

And consider my friend was making a six-figure salary while living on less than $10,000 a year. I don't smell any entitlement at all.

You Can Live A Good Life In A Condo

I grew up nearly my entire life in Canada. We lived in rentals and basements, but I never lived in a condo until I was 26. It took me a few extra years to move out of my parents home as many in my generation can probably related to.

Moving to Toronto, renting with my girlfriend was the first time I left my parent's home. That was 5 years ago.

Surprisingly I found condo life pretty nice. Heated common spaces, a front desk, building management to take care of things that break. The space was just right. Enough to be comfortable, but not too much to feel like I need to buy stuff to fill it up.

Living exactly in the space we needed allowed us to save ruthlessly for 4 years. Sharing the cost of living with my girlfriend was the best thing that ever happened to our savings.  $1,500 a month in rent cut in half, but living only 20 minutes walk from the downtown core. It was a great situation. We didn't need a car.

Eventually, we had two good incomes as well, but that wasn't guaranteed when we made the move. We started by renting a 500 sqft condo. We ended up buying a condo of a similar size just around the corner. We were certainly not slumming it, but it's not the house and yard with extra space that most people dream of.

We had 1 bedroom with sliding doors for semi-privacy, but it was just the two of us so who did we need privacy from.

Every friend or family we had to visit would comment on the lack of space, but I always thought it was exactly what we needed at the time.

From my perspective, it was more than enough space to host 10 friends for Thanksgiving dinner. Most people I know with 500 sqft wouldn't have tried. I didn't even give it a second thought. We managed.

We weren't paying any more than we needed to, even though we could afford more.

What If We Had More Space

Imagine if we instead bought a two bedroom and kept one as a guest room for 4 years.

That would have cost us at least $150,000 more in a mortgage, at 3% interest that's $4,500 a year or $18,000 in interest for this extra bedroom.

That's a lot of money.

Some might argue it as an investment. Certainly, you could see it that way, but for the first 3 years we owned the condo, the prices in our building were stagnant or arguably negative.

When you are starting out, the best justification for buying real estate is to equalize the cost of paying rent but getting some equity out of it. That's the logic we used when buying our condo, and that's why we bought just enough space for our current situation.

Now we own a house, we have two bedrooms we don't use. They can be guest rooms if we get beds to fill the space. But otherwise, we are paying for the extra space with no functional benefit.

We may have some guests next year, which would be a great use for the few days they are here, but otherwise, we are carrying an additional $200,000 of mortgage for the extra space. At 3% interest that's $6,000 a year. I could put my guests up in a pretty nice hotel for that kind of dough.

Space Isn't All It's Cracked Up To Be

Turns out I was convinced by my wife after 4 years that we need more space. Space isn't all it's cracked up to be. And she will agree.

With space comes trade-offs.

We now have stairs which either can be viewed as a good workout or a pain in the butt.

We now have a 40-minute commute to downtown with 3 metro transfers which can be viewed as a good amount of time to spend thinking about life to ourselves or a painfully long commute when we used to walk 20 minutes from door to door.

We now have to rake the leaves every fall and shovel the snow every day in the winter. More exercise.

We don't have the luxury of building management to fix the things that breakdown at home, it's all on us now. Maybe it's a good learning experience.

The pros of condo living and living in less space has a lot of benefits on top of costing a lot less.

Saving ruthlessly is about what you are willing to give up in the short term for what's important to you in the long-term

Live life intentionally so you can be happy on the journey, but also move towards "levelling" up your financial well-being.

You don't always have to make sacrifices. But learning to start your life with a few major ones around your housing can make a huge difference for the rest of your life.

Millennials Are Not Entitled

Some people think millennials are entitled, and I think its just a matter of perspective.

Middle-class millennials have grown up with a lot and may have just forgotten the struggles their parents started with. They were not self-aware enough at the time to know how tough their parents lives started out.

The struggles are the same but the situation is different.

We have so much technology, we expect our standard of living to be way up high. We have smartphones and smart cars, we have tablets and laptops and gadgets all around the house.

We have so many life improving things available to us that our parents never had. But the reality is, we cannot afford all this technology, and we cannot afford to pay for extras for those "just in case moments", not yet anyway.

When you are starting out your life, saving is more important than a guest room. Saving is more important than the latest and greatest technology. Saving is more important than a new car (used will do).

We can't live like our parents right away. But if we live half as well as them now, it's more likely we will live better than them much sooner than them.

 

Save Money Retire Early is written by Jon Lo, a barely 30 something change optimist, and personal finance guy. I believe anyone can be rich or poor, it's what you save that makes the difference.

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