Where should your finances be in your 20s?

I am really excited about this week’s topic.

Say it with me, everyone:

THE U.S. BUREAU OF LABOR STATISTICS CONSUMER EXPENDITURE SURVEYS 🤩

Aka, all the data we have about what Americans spend their money on.

Today, let’s talk about what this data says for people in their 20s.

This week, meet:

➡️ The boring bit
➡️ Average finances if you’re in your 20s
➡️ The not-so-average stuff
➡️ Sooo, does it ever get better?

The boring bit

Light a candle and put on some soft jazz, because we’re setting the scene.

What even makes up that mouthful of a survey? Where are they getting their numbers, and how?

Here’s what we’re working with:

1. Quarterly Interview Survey: The BLS asks people about their large and recurring expenses. (Rent, utilities, etc.)

2. Diary Survey: The BLS asks people about their small, frequently purchased items. (Food, clothing, etc.)

3. Mean: These surveys are UNKIND. Just kidding, we mean mean in the “average” sense. As in, add ‘em all up, divide by the number of things you add up. This is the number the survey gives us.

4. 2022: This is the year this data is from. Check back in next year for the 2023 report, because the BLS takes a looong time to get their data published.

5. Generation: For the most part, we’re going to be looking at data for people with a “birth year of 1997 or later.” Aka, Gen Z.

6. Purpose: The Consumer Expenditure Survey exists because this data is “critical information in determining the strength of our Nation's economy” and is largely used to track inflation. But for our purposes today? We just wanna see where 20-somethings are at financially.

Okay, that’s our foundation. Now let’s dive into the crazy little numbers.

Average finances if you’re in your 20s

Meet Stan (short for standard-issue guy). This young man is made of AI, so don’t feel bad about insulting him.

But don’t get TOO judgy. He represents the average of Gen Z born in 1997 or later, as of 2022. Let’s look at his finances.

Income

Stan makes $52,225/year. Before taxes.

That seems like a lot to me, but I guess what’s between Stan and the BLS isn’t my business.

After taxes, Stan takes home $49,618.

Grocery spending

Stan spends just shy of $6,000 on food at home. That’s about a $500/month grocery bill.

Eating out

Outside the home (aka, restaurants and stuff), Stan spends $2,617 on food. That’s $218 monthly going out to eat.

Alcohol

He spends $423 on alcoholic drinks.

(I was just morbidly curious about this category. That’s the only reason I included it.)

HOUSING

This is the big question.

When you’re in your 20s, home ownership feels like a far-off dream. Yet rent remains an impossible battle.

If you’re paid twice a month, it’s often 1 entire paycheck (and then some) that’s dedicated to rent alone.

But rent “should be” no more than 25% of your take-home pay, according to this snarky-ass blog post by Dave Ramsey’s company (whose primary intent is to sell you renter’s insurance, and secondary intent is to make you feel like a piece of shit human).

That goat yoga line pushed me over the edge. If you do goat yoga and have been personally victimized by Mr. Ramsey, please reach out. Maybe we can stir up a class action suit. Or at least, maybe we could all get together and go do goat yoga?

OR, we could all live packed in a house together because what POSSIBLE conditions must you live in to only spend 25% of your income on rent as a 20-something?

For reference, someone working full-time at federal minimum wage could only afford $314 monthly rent, per Ramsey’s rule. If they were rooming in a house with 3 other people also making minimum wage, rent for the house still could only be $1,256. (Plenty to split a one-bedroom fair market rental – with $25 leftover!)

But, enough about people working for $7.25/hr. The star of our show today is Stan.

You’re probably wondering what Stan pays for housing?

If he followed the 25% rule, Stan would be paying $12,404 a year, or $1,033 per month.

Instead, Stan is paying $17,280 for the year on rent. Or $1,439 per month.

FYI

There are loads of categories listed on the report that I didn’t go into here. If you want to dig through the pure data yourself, you can view the Consumer Expenditure table here.

The not-so-average stuff

Listen, Stan’s an average guy. Or, at least, he’s a guy that represents an average.

And we all know how true “average” is…

So I want to take just a second to look at some other non-average data for folks in their 20s — because there are definitely outliers in all directions.

Homelessness

The best estimation we have for rates of homelessness is the National Alliance to End Homelessness’s annual report. It’s not perfect, but it’s better than nothing.

They have a category called “Unaccompanied Youth.” This is anyone under the age of 25 without a home, living apart from family.

There are 30,090 Unaccompanied Youth in the US. This makes up about 5% of all homeless people.

Home ownership

In 2022, people under the age of 25 owned a home at a rate of 25.4%.

For reference, the oldest data in the report is from 1982, where 19.3% of people under 25 owned a home. And the lowest rate ever for this category was 14.8% in 1993.

So… Go us? For our generation actually apparently owning houses, despite it all.

Debt

The Bureau of Labor Statistics crucially doesn’t mention debt.

According to Business Insider, Gen Z averaged $29,820 total debt in 2023. That’s up by about $4,000 from 2022’s average.

The report doesn’t outright say, but my guess would be that most of this debt is made up of student loans.

Sooo, does it ever get better?

There’s a general feeling in the air that “you get your shit together in your 30s.”

But does that really happen?

Will that happen for Gen Z?

Or are we, truly, doomed?

I can’t answer for certain. But, I can introduce you to one more friend…

We call this lady Tiff (but she’s really the typical 25-34 year old). She’s also not a real human.

Now, let’s compare Stan and Tiff. A little battle of the sexes action. A little the “Bureau of Labor Statistics has not yet had the guts to destroy the gender binary” fun.

Overall… things are looking up.

As you age, you’re more likely to spend more money – but you’re also likely to start making nearly twice as much:

Again, this is average. Outliers and all. You’re not Stan. You’re not Tiff.

You’re you.

You have all the life circumstances that brought you where you are, as wild or as tame as they might be.

And you’re the only person who will make, manage, and protect your money.

Cheers to your 20s, alright?

“Wait, I need MORE”

A couple things happening in the Meet Your Money world:

• More budget breakdowns and real talk on finances here on the newsletter & on socials. Completely free, always.

• Budget Club. Twice monthly. Currently at my house. With my friends. You’re not invited. (I hope to make this a recurring, free, online event soon… Stay tuned!)

• And coming soon — templates and 1:1 consulting time for those who need a little extra nudge.