Why You Feel Financially Behind (Even If You're Doing Well)

Summary

In this video, Andre Jick discusses the pressures of living in a society where social media creates an illusion of wealth and success. He explains the rising levels of household debt, high-interest rates, and the increasing cost of living, especially when it comes to housing. He delves into the negative impact of social media on financial anxiety, particularly among millennials and Gen Z, while highlighting the importance of financial literacy and long-term investing. Andre reassures viewers that they are likely doing better than they think and emphasizes the power of building good financial habits to escape the rat race.

Takeaways

• 😀 Social media creates an illusion of financial success, making people feel behind despite their actual financial situation.
• 😀 Millennials and Gen Z are significantly impacted by financial FOMO (Fear of Missing Out), leading many to overspend and accumulate debt.
• 😀 Interest rates are at historic highs, making borrowing expensive and contributing to financial strain for many.
• 😀 The rise of 'buy now, pay later' services has led to increased consumer debt, especially among younger generations.
• 😀 Homeownership has become increasingly out of reach, with the average first-time homebuyer age rising from 28 to 38 over the past decades.
• 😀 High social media usage is linked to anxiety, depression, and lower financial self-worth, despite financial realities remaining unchanged.
• 😀 Credit card debt is at an all-time high, with average APRs surpassing 24%, making it difficult to pay off purchases if only minimum payments are made.
• 😀 More people are turning to short-term loans for essentials, like groceries and entertainment, putting themselves further into debt.
• 😀 Institutional investors now own a significant portion of the housing market, making it harder for individuals to afford homes.
• 😀 Success in personal finance isn’t about keeping up with others but focusing on building wealth through consistent savings, investing, and financial literacy.

Q & A

Why do many people feel financially behind despite working hard and saving money?

Many people feel financially behind because they are comparing their reality to the curated lives they see on social media. The pressure to keep up with appearances, influenced by platforms like Instagram and TikTok, can distort people's financial perceptions, leading to feelings of inadequacy.

What is 'phantom wealth' and how does it affect millennials?

'Phantom wealth' refers to the feeling of being wealthier due to an increase in net worth but not actually feeling better off. Millennials have experienced an increase in net worth from 2019 to today, but many still report feeling financially insecure due to comparison with others and the inflated lifestyle portrayed on social media.

What impact does social media have on financial well-being?

Social media can lead to anxiety, depression, and a distorted sense of financial reality. Studies show that millennials and Gen Z experience financial FOMO (fear of missing out) due to seeing others spend money on luxury items and experiences. This often leads to impulsive spending and lower financial self-worth.

How has the housing market changed over the years, and why is homeownership becoming more difficult?

The housing market has become more challenging due to rising home prices, increased demand from institutional investors, and higher down payments. The average age of first-time homebuyers has risen from 28 to 38, and the number of first-time buyers has dropped to the lowest level in over 40 years, making homeownership more out of reach for many.

What role does social media play in driving impulse buying?

Social media platforms like TikTok have made impulse buying easier by influencing users with recommendations from creators and influencers. Over 50% of TikTok users report being more likely to purchase something after seeing it recommended by an influencer, leading to increased spending on items that might not have been originally considered.

Why is 'buy now, pay later' becoming a significant problem for financial stability?

The 'buy now, pay later' trend has become problematic because it encourages people, particularly younger generations, to make purchases they can't afford upfront, leading to mounting debt. While it seems like an easy solution, many people end up missing payments, adding financial strain and leading to long-term consequences.

How do rising interest rates affect the cost of living?

Rising interest rates increase the cost of borrowing, affecting everything from car loans to mortgages. For example, a $500,000 house purchased in 2020 with a 3% interest rate would cost $2,100 per month, but at today's 7% rate, the monthly payment would rise to $3,300. This makes everyday expenses, including home ownership, significantly more expensive.

What does it mean that institutional investors are buying up residential homes, and how does this affect the market?

Institutional investors buying up residential properties has led to increased competition for homes, driving prices higher. In some cities, investors own up to 25% of single-family homes, which reduces the availability of affordable homes for families and contributes to higher housing costs across the country.

How has the relationship between income and housing prices changed over time?

Over the past 40 years, home prices have increased by almost 500%, while real wages have barely moved. This growing gap between income and housing prices has made it much harder for people to buy homes, even if they are financially responsible, leading to higher rents and longer timelines for achieving homeownership.

What advice is given for people who feel financially behind?

The advice is to stop comparing yourself to others' curated social media posts and instead focus on your own financial situation. By living below your means, saving consistently, investing wisely, and being financially literate, you're likely doing better than most. The key to success is focusing on your own numbers and avoiding the pressure to keep up with others.