Reply to Wells Fargo ad about millennials eating out

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[quote=Anonymous]A few years ago, I sat down and tried to do a comparison of new federal employees entering the workforce in 1984, 1994, 2004, and 2014.

I tried to normalize everything-- Student attends eight semesters at University of Maryland while living at home and working 700 hours a year at federal minimum wage to pay tuition/save for a vehicle. Student starts work as a GS7-1, rents an apartment, and saves to buy a compact car (Toyota Camry or Corolla, depending on the year-- the models all shifted up a class around 1990 or so), and hopes to buy a house in a particular neighborhood in Columbia, MD where I could find good sales history. Any tuition not covered by the minimum wage job is paid for with student loans. The house is to be purchased with 20% down and with current mortgage rates. I also factored in differences in DC-area locality pay. It did not exist in 1984, and has grown since then.

I couldn't get historical rent rates for any particular apartment complexes, so I had to rely on regional statistical data for that, which kind of sucks.

I factored in federal and local income tax rates, medicare and social security, required pension contributions, 10% charitable giving, and 5% TSP contribution. I did not factor in cell phones or internet service or cable bills or luxury items.

The biggest thing hurting this fictitious person as time went on was college tuition. In 1984, the student would have about $5000 in his pocket. By 2014, he'd be about $15000 in debt.

With no other debt, a new, basic car was more attainable in 2014 than 1984. The student loans really kill it, though.

Median rent in the area for a 1-bedroom apartment was $326 in 1984. That's 30% of the new grad's take-home pay.
Median rent in the area for a 1-bedroom apartment was $1302 in 2014, or 49% of the new grad's take-home pay.

For a new grad after paying taxes, rent on a 1-bedroom apartment, 10% charitable contribution, 5% TSP contribution, and required pension contributions, I came up with a monthly "discretionary" income of:
1984: $444.24
1994: $490.60
2004: $683.96
2014: $445.72

These numbers are not adjusted for inflation and would have to cover bills, groceries, student loans, if applicable, and savings toward a new car or house. For the new grad in 1984 and 2014, these are virtually the same number. I put "discretionary" in scare-quotes because groceries, bills, and loan-repayments still have to be covered out of this money.

A car, by itself, became more attainable as time went on, but the extra savings for the 1984 new-grad more than made up for it. Assuming a new-grad uses 70% of his discretionary income to pay off student loans (if applicable) and save for that new Toyota Camry or Corolla, he'll be all set in:
1984: 14 months
1994: 28 months
2004: 23 months
2014: 35 months

Assuming he then saves 70% of his discretionary income, he'll have a 20% down-payment on that house in an additional:
1984: 52 months
1994: 67 months
2004: 101 months
2014: 180 months

But mortgage rates have changed a lot. Instead, let's assume he wants to save enough so that he has a down-payment that allows him to keep the 30-year mortgage bill to 1/3 of his income, it will be an additional:
1984: 140 months
1994: 109 months
2004: 199 months
2014: 197 months

The total to do all three-- pay off college, buy a Toyota Corolla or Camry, and save a down-payment to get the mortgage to 1/3 of income comes to:
1984: 156 months
1994: 147 months
2004: 245 months
2014: 302 months[/quote]

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