Yes, money was easier 30 years ago
Ahh 1993… when baggy clothes, grunge, and Michael Jordan were at their peaks. Things seemed easier back then. And from a financial perspective, they were. In general, 25-34 year olds were being paid more and things cost less. All that made it easier to afford essential life purchases like rent, homes, and tuition.
Today, not only do these things cost 50-150% more, young people are making less. The chart below shows some noteworthy comparisons.
Prices adjusted for inflation
What (the h*ll) happened
So what’s been going on these 30 years?
Annual Salary — Wage stagnation has been around a long time. The pace and effects have varied over the decades, but the broader trend is consistent. Young people are not making money like they used to. (Sources: 1, 2)
Gas — Demand and the cost of crude oil have gone up, making the price at the pump go up too. (3, 4)
House — Low inventory and high demand have driven housing prices up. It’s true that mortgage rates were higher in 1993, but recent spikes combined with prices have significantly increased the total cost of ownership. (5)
College — The soaring cost of higher education is well documented. What’s less appreciated is the extent to which we have normalized large amounts of student loan debt, while maintaining the expectation that college is everyone’s best path to success. (6)
Rent — The renter's market relies heavily on the housing market. Since more people are shut out of homebuying, the demand for rentals and rent prices have shot up too. (7)
Domestic Flight — If you looked at the chart and thought, “Hey, at least the price of flights has gone down,” think again. While the sticker prices on flights have decreased, the value of tickets has decreased too. Things like extra leg room, in-flight meals, and checked bags used to be included with tickets. Now that those cost extra, you could make the argument that the actual cost of flying has increased. (8)
It’s (more) complicated
Needless to say, it was easier to afford things in 1993. It was also easier to make financial decisions because there weren’t as many options for saving, investing, and even spending.
Take Roth IRAs. They didn’t exist until 1997. HSAs didn’t exist until 2003. Bitcoin was introduced in 2009, followed by a bajillion other digital currencies that have made us all wonder at one point or another, “Is that something I should be doing?”
In 1993, the internet was just coming on to the scene, so a lot of commerce was still brick and mortar. Today, we have social media platforms serving up things to buy every second of the day, with Autofill and 1-Click purchasing making it even easier. We have services like Afterpay and Klarna putting more expensive items in reach by letting people pay them off over time. We also have delivery apps making food more accessible than ever, increasing costs for a generation quick to adopt new technologies.
The world has gotten a lot bigger, and thus, more complicated.
Silver (not gold) linings
While this information is undoubtedly frustrating, it’s not to say we’re screwed. With all this newness comes new solutions to financial problems. And although we don’t hear about them as much, there are plenty of young people living happy, financially stable lives.
But if it seems like making your way in the world is harder these days, it is! And it’s not your fault.
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I recently rewatched the 1993 classic “Sleepless in Seattle,” in which Tom Hanks, on a whim, buys a floating home to escape the memory of his deceased wife. Naturally, I had to find out how much it cost. Around the time of the movie, it was purchased for $550,000 ($1.2M adjusted.) Today, it’s worth around $2.5M. One-year-old me really should’ve invested in real estate.