25-year-olds

CNBC wants millennials to be better at budgeting. So they tweeted a graphic of a suggested budget for 25-year-olds who are “excellent with money.”

The only problem with the graphic is its lack of understanding for what 25-year-olds actually pay in monthly expenses, instead using the sole example of Boston resident and test prep instructor Trevor Klee, who never explains how he paid for his college degree.

In the pie chart, which was designed by CNBC’s Emmie Martin, the largest slice in Klee’s budget is for rent, at just a paltry $825/month (Klee lives with four roommates). The second largest monthly expense is, oddly enough, “donations,” capped at $615/month. Klee’s monthly budget for a cell phone is $40/month (he’s still on his parents’ plan), and internet service at $20/month (which he presumably shares with his roommates).

CNBC’s total suggested food budget for 25-year-olds is $650 ($400 for groceries and $250 for dining out) going by Klee’s example. The maximum suggested budget for utilities is just $195/month (again, roommates). Finally, when tacking on $130 for transportation costs, $270 for health insurance, and $30 for house cleaning services, 25-year-olds can supposedly make ends meet for $2,775/month ($33,300/year) using Klee’s suggested budget.

Klee’s example is extraordinarily rare, as he was able to graduate college without having to take out student loans. A February 2018 article from CNBC estimates that approximately 70 percent of college graduates today have incurred significant amounts of debt — an average of more than $37,000, which is $20,000 more than just 13 years ago.

According to data from the College Board, published in-state tuition and fees at public four-year institutions for the 2015-2016 academic year came out to an average of $9,410, or $37,640 over a four-year period. Student Loan Hero’s repayment calculator finds that, if one were to pay the 4.29 percent interest rate on that amount of undergraduate loans in the 2015-2016 academic year over a ten-year loan term, a borrower would have a monthly payment of $386.

Trevor Klee graduated in 2015, meaning his average monthly student loan payment, had he taken out loans for college, would be approximately $400/month, according to 2016 figures from the Federal Reserve Bank of Cleveland. That would bring his monthly budget up to $3,175/month.

Of course, most 25-year-olds don’t have the luxury of remaining on their parents’ cell phone plan. Comedian Akilah Hughes, who is a millennial, tweeted that her monthly AT&T bill is nearly $200. She also laughed at the suggestion of paying just $825/month in rent.

The reality for rent in Boston is much different than Klee’s unique example. As CNBC noted in its article on Klee’s budget, studio apartments in the Cambridge, Massachusetts area, where Klee lives, typically rent for anywhere between $1,400 and $2,000. SmartAsset estimates the average monthly rent for a studio in the Boston area is more than $1,800.

And because they’re classified as smaller than even just a one-bedroom, studio apartments are notoriously difficult to share with roommates. For someone paying a cell phone bill comparable to Akilah Hughes’ and renting a studio apartment going by those rates, the monthly budget jumps to nearly $4,000/month, or approximately $48,000/year before taxes. BuzzFeed global news director Lisa Tozzi sarcastically tweeted that rent in “Imaginary City Place” was “very reasonable.”

And while Trevor Klee makes $100,000/year as a self-employed test prep instructor, most 25-year-olds don’t make anywhere near that much. According to SmartAsset, the average annual take-home pay for American adults aged 25-34 is just $39,416/year — well short of the estimated $48,000 pre-tax income one would need to afford the more realistic Boston budget listed above.

The Klee budget was widely ridiculed on Twitter. User @actioncookbook tweeted a similar pie chart in the vein of Emmie Martin’s, calling it “the budget breakdown of a baby boomer in 1972 who now thinks millennials complain too much.” The largest pie slice was $35, for a “novelty singing wall fish.” SBNation writer Hector Diaz responded by tweeting a pie graph of a $4,900 budget with $3,500/month allotted for “candles.”

Others, like Twitter user @facialmerkin, pointed out that Klee never budgeted for car insurance and car payments, out-of-pocket medical expenses, haircuts, or personal expenses like clothing and entertainment.

“$825 in rent? Do they live at home & throw Mom $30 for ‘housekeeping?’ ” he added.

Kelly Carrion was more blunt.

“WHO HAS EXTRA MONEY FOR DONATIONS! SORRY IM YELLING! BUT I CANT,” she tweeted.

Emmie Martin did not immediately respond to Grit Post’s requests for comment about how Trevor Klee paid for college.

 

Tom Cahill is a contributor for Grit Post who covers political and economic news. He lives in Bend, Oregon. Send him an email at tom DOT v DOT cahill AT gmail DOT com.

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