Living paycheck to paycheck has become a harsh reality for millions of Americans, where even a minor financial setback can drain savings and trigger a cycle of debt. At the heart of this struggle is a simple but powerful truth: many people just don’t have enough money to cover unexpected expenses.
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While millennials often take center stage in conversations about financial instability, this issue spans generations. In fact, baby boomers and seniors report insufficient funds as a leading cause of financial strain even more frequently than younger adults.
So, what’s keeping millennials, the largest living adult generation, stuck in this cycle? Here are seven key factors holding them back from building savings and achieving financial stability.
Unstable Employment
Many millennials are currently facing employment instability. According to the latest Bureau of Labor Statistics data, the unemployment rate for Americans aged 25 to 34 is 4.3% and 3.4% for those between 35 and 44 — both higher than the 2.9% unemployment rate for individuals 55 and older.
There’s a reason this generation is known for building the gig economy; many millennials appear to have to work several jobs just to make ends meet. And it doesn’t seem that being in their career prime has helped matters much either.
If you haven’t been able to build an emergency fund because all of your paycheck goes to cover your monthly bills and living expenses, then chances are a job loss will devastate your already depleted financial resources.
Medical Bills
Medical bills can quickly eat away at savings, especially when they’re unexpected. For millennials living paycheck to paycheck, a surprise visit to the doctor can become a major source of financial strain even before factoring in things like poor healthcare coverage or a lack of insurance. With many millennials caring for elderly parents and raising children, all while addressing their own health challenges, financial emergencies like medical bills can be a major burden for this generation.
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No Emergency Savings
Many experts recommend saving at least three to six months’ worth of expenses in an emergency fund to help cover costs should anything unexpected pop up. This can be hard to do when most, if not all, of your paycheck goes toward bills and other necessary purchases. Unfortunately, financial recovery becomes much more difficult if you don’t have an emergency fund to fall back on and are forced to rely on credit.
Whether it be household expenses, a car repair or a medical emergency that depletes your savings, replenishing the funds is critical — even if you’re already stretched thin. Whether you live more frugally or take on additional work, rebuilding a financial safety net quickly is key to being prepared should another emergency arise.
Splurging
It’s easy to get swept up in buying things you don’t need, especially for a little serotonin boost. However, impulse purchases can sneakily eat away at your budget and your bottom line. For many millennials, splurging can be a major reason why they’re living paycheck to paycheck.
No matter your short-term or long-term financial goals, developing stricter spending habits and adopting a more frugal lifestyle can help you pad your bank accounts instead of depleting them each month. Try writing out a shopping list and sticking to it or doing a no-spend challenge to help reset your spending habits and mindset.
Taking Care of Family Members
Providing financial support to family members can stretch finances thin, and millennials are at the age where paying for expenses for family members, both younger and older, is more common. While it might feel rewarding to help your family, helping others at the expense of your own financial well-being is not ideal in the long run. To avoid long-term repercussions on your financial security, assess how much you can realistically contribute to your family and set clear boundaries to protect your finances if needed.
A Massive Amount of Debt
Whether saddled with student loans, credit card debt or both, millennials can point to a high level of debt as the reason they’re stuck living paycheck to paycheck. Many millennials are shouldering significant debt, with the average individual carrying $6,434 in credit card debt, according to Forbes, and $42,657 in student loans, as reported by Education Data Initiative.
Madeline Duley contributed to the reporting of this article.
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This article originally appeared on GOBankingRates.com: 6 Financial Struggles Causing Millennials To Live Paycheck-to-Paycheck
