Welcome to the inaugural post for Avocado Toast Finance! I love that we have a new term in the personal finance lexicon that’s both fun and controversial. For those who aren’t in the know, the term “avocado toast” really took off after a millionaire put millennials on blast by suggesting they won’t be able to afford homes due to splurging on $19 avocado toast. Rather than taking the insult laying down, the millennials of the internet did what they do best, fighting back via memes. I thought it was appropriate and somewhat poetic (depending on which side you’re on) to name my blog after this term.
So enough with the backstory. Who am I? I’m one of a pair of millennials who is trying my best to thrive and raise a family in Los Angeles. You read that right. We’re millennials who have the audacity to try and outperform despite the odds being stacked against us (high student loan debt, absurd coastal city home prices, abysmal savings rates, record high stock market, etc). And we’re actually doing pretty well having amassed a significant savings and having closed on our dream (and first!) home in December of 2017. If I can do it, other millennials can too – and I’ll show you how.
I’ve always been fascinated with personal finance having worked both at an investment bank and a personal finance startup out of school. Although I’ve switched jobs and industries quite a few times I’ve always kept up with the finance and personal finance world. This is quite an interesting time in all our lives due to all the interesting things going on in the finance world. Hello, Bitcoin and Trump!
So why do I think yet another personal finance blog needs to exist among thousands of others?
- First, I’m living proof millennials can make it in one of the most expensive cities on earth and I firmly believe we need to share our stories of triumph with each other more often.
- Second, I’m not the most intelligent or hardworking individual so anyone can do well with enough consistency and a desire to be strategic – I need you to really understand that.
- Third, I’d like to selfishly go back and revisit my thoughts to see how they’ve changed over time.
- Fourth, I think a lot of personal finance blogs are boring, one-sided and inaccessible to millennials and I’d like to change that.
- And finally (and most importantly), I’d like to help other millennials who maybe aren’t as fortunate or are maybe a little lost to learn enough to realize their financial goals.
Anything is possible and I can’t wait to share more about the ups and downs I’ve had in hopes you can learn and benefit from them. I’d also love to hear more about your stories and engage in a dialogue about the best go-forward plan for us all as I’m just trying to learn everyday. Now onto the real post!
The Case for Avocado Toast
When I first read that millionaire’s avocado toast comment, I have to admit I was on his side. Here’s exactly what he said:
When I was trying to buy my first home I wasn’t buying smashed avocados for 19 bucks and four coffees at $4 each…” -Tim Gurner, Australian Millionaire
I immediately thought of rich kids of Instagram, iPhone X’s and lattes, aka things people buy they can’t really afford. I never actually thought he meant the specific food but rather the splurges society tells us we deserve. We can always justify anything we put our mind to, right?
To that extent, I do see it often enough in my own circle of friends and coworkers that I can admit it’s a problem with our generation. I’ll give you an example that’s particularly relevant given Coachella is coming up. Inevitably, I start seeing the excitement build on social media. People ask about tickets and discuss the lineup among other plans. But as we near the festival date, the ugly side starts rearing its head. People asking about carpooling because gas is too expensive, others begging people to stay in their temporary AirBNB home because they still need to rent out two spare bedrooms to cover the rental costs. I always stop and wonder how people can put themselves in such a bad position for a damn festival in the middle of the desert, and then have the nerve to beg others to bail them out. However, they push through for the Coachella dream because “they’re only young once and life is short.” Sure sounds like avocado toast problems to me.
If that was exhibit A, exhibit B would be an unemployed friend of mine who just can’t stop spending despite having no savings. Ironically, he’s also the friend who constantly tells me how I should invest in Bitcoin and other cryptocurrencies. He invites me to a coffee and then proceeds to tell me how he just landed a job after nearly 8 months of unemployment. Success! Seconds after his announcement he whips out his new iPhone X that he bought himself as a reward for landing said job. Super fail! This is coming from a guy who just told me he almost didn’t make rent if not for this new job. Sure, he reasons that the new iPhone is extremely fast and powerful, allowing him to be more connected than ever to his work. Remember how I said we can justify anything to ourselves? As I watched, he demonstrated the phone’s new features including an upgraded camera and extra memory. He also showed me all the budgeting apps like Mint and investment apps like Robinhood he recently installed that would help him save and invest, respectively. I just kind of nodded but couldn’t help but feel sorry for him. I can never imagine him saving diligently and escaping the rat race. This job is a stopgap and my friend clearly has a spending and or saving problem. Worse, the fact that he needed more than half a year to get a new job tells me he wouldn’t be okay if the economy took a turn and he became unemployed again. It scares me most that I’m more nervous for his future than he is, which is a huge problem!
To those Coachella dreamers and to my iPhone X-loving friends, I’m inclinded to agree with those making a case for millennials overspending on avocado toast or whatever else you want to substitute in its place. We splurge too much because marketing convinces us we need or deserve something. However, I’m often reminded that my small circle and the obnoxious people I see on social media are not representative of the world. For every millennial that is hurting our good name, there is another who is working hard, saving and investing intelligently for their future.
Which brings me to…
The Case Against Avocado Toast
I don’t really have to take the time to pick Gurner’s comment apart because the Internets has already done the job for me. In doing some light research I was heartened to discover that millennials are actually pretty good at saving and contributing to retirement funds. The numbers could always be better but they could also be worse. Judging by how people view millennials I’m in the camp that believes we’re not nearly as bad as our reputation suggests, especially compared to Boomers. We can caveat the hell out of any study but the fact that we’re not doing substantially worse is a good sign.
So let’s take a look at the real reason we can’t afford homes. First, student loan debt is a huge albatross ever looming. The average student graduates with something like $30,000 in debt, and student loan debt in aggregate is $1.2 trillion with a capital T. That’s an all-time record high for both figures. It’s certainly not the record we wanted of but it’s also not our fault. All expenses associated with higher education has blown up since the boomers went to college. Tuition, textbooks, college apartments, food and entertainment have all ballooned dramatically to support the higher education machine. But hey, someone has to support faculty pensions right? I personally know several liberal arts majors who are forever saddled with $100k in student loans and are struggling to get jobs that pay even $35k per year. You could make the argument that people shouldn’t take on loans they can’t afford but the pressure to get into the best college possible is real, cost be damned. Don’t believe me? Talk to parents who’ve sacrificed everything to get their kids the tutoring they needed or moved to a downsized to a smaller home and accepted a lower quality of living to access a better public school. You’re telling me those people are going to suddenly pump the brakes? It compounds even more when you deal with parents who constantly compare their kids with yours. But I digress…
Second after student loan debt is rising home values. It’s extremely difficult for anyone to afford a home in a decent neighborhood in coastal cities nowadays. I say difficult, not impossible, because I was able to buy my dream home at the end of last year. However, we had to go through multiple properties and countless offers to get to the finish line. Affordability is currently very low and almost as bad as during the last housing bubble. Despite my new homeownership status, I’d be glad to see values return to normal so that others my age would have a chance at a home in a decent neighborhood. However, despite macro-economic factors like rising interest rates, demand for housing remains high and supply remains extremely low. Neither bodes well for a young millennial family purchasing a home.
Lastly, employment is a super tricky proposition now. Millennials are known to jump ship for a higher paycheck or more stability leading employers to loathe the entire lot of them. But if you examine the reasons behind it, millennials I know are just trying to make enough to pay down debt and compete for expensive housing. See how we’re connecting the dots here? Job-hopping is a symptom of the circumstances millennials face. Many I know don’t want to leave an employer they love but they simply can’t turn down a job that offers substantially larger pay and a better outcome for their family. Companies are also known to cheap out until you submit your two week notice, then they’re ready to roll out the red carpet. There’s little company loyalty of any kind in today’s market. It’s just a different time and no one retires after 20 years in the same position anymore. There are no more gold watches to hand out so people are trying to find ways to buy their own. 😉
There’s no real conclusion here, sorry. And that’s because it’s not a one size fits all world. We have the luxury of choice. People are going to fall into the avocado toast crowd or the diligent saving + investing crowd, or somewhere in between like me. I’m hoping that we start a dialogue about ways we can reduce the former and improve the latter as a start. There’s really no magic or hyper-intensive strategies you need to master in order to achieve a wonderful life. You need a framework and goals, things we’ll definitely be covering in depth on Avocado Toast Finance.
To my millennial friends who are struggling, hang on, there’s hope on the way. Everything resets and you’ll have your opportunity to overperform if you start planning for it now. To my millennial friends who are hitting home runs at work and at home, a great big kudos to you!!! You pull our averages up and make us look much stronger as a whole. Please share how you did it so we can all learn together.
So are you an avocado toast splurger or a diligent saver? Introduce yourself in the comments, I’d like to get to know you better!