Making a Plan for Those Who Don’t Have a Plan

How do you get Millennials to obtain a mortgage when most of them don’t plan a year ahead?

That’s a question that Varo Money Inc., San Francisco, posed in its research about the up-and-coming Millennial generation, which has only recently began entering the mortgage market.

Varo conducted a deep dive survey on how “hands-off millennials” manage their finances without making detailed budgets or categorizing expenses. Varo surveyed 287 hands-off, creditworthy millennials about their financial hopes and fears, their day-to-day financial routines and their use of credit.

The survey found typical hands-off respondents are working full-time in well-paying jobs in cities across America. Colin Walsh, co-founder and CEO of Varo Money, said the survey also showed Millennials need better systems for managing their financial lives.

“Spreadsheets and budgeting apps are too detailed for most respondents, and while most hands-off millennials manage by bank balance because it’s simpler, the method fails when their spending spikes or unexpected events pop up in their lives,” Walsh said.

The survey noted Millennials have the same hopes as previous generations but are terrified they can’t get there. Respondents’ top three hopes were following their passions (66 percent), traveling the world (42 percent), and getting married (40 percent). More than half (52 percent” said they have experienced a “cash trap” in the past three months, meaning that they’ve had to borrow money or dip into savings to make it to the next paycheck. And 80 percent of respondents actively worry about the state of their finances.

Despite these concerns, the survey said hands-off millennials manage by bank balance rather than a detailed budget. It said 78 percent rarely or never make spreadsheets for their finances, and 35 percent say “they’d rather vomit” than do so. Nearly six in 10·(58 percent) rarely or never plan out next month’s spending in advance, and 36 percent rarely or never review last month’s spending. However, 80 percent check their bank balance at least once per week and 69 percent spend mostly or always on their debit card.

On the plus side, the survey found most hands-off Millennials are active savers. The vast majority of survey respondents (80 percent) try to save money by reducing spending on daily purchases, like restaurants, coffee and ridesharing. Nearly half (50 percent) of respondents move their extra checking balance into savings. However, only 24 percent of respondents have a percentage of their paycheck automatically deposited into savings.

Additionally, the survey found 90 percent of millennial respondents actively and responsibly use some form of credit. Millennial respondents leverage many forms of credit to achieve their life goals, including mortgages, auto loans, student loans, personal loans and credit cards.

“There’s a stereotype that hands-off customers–people who aren’t super involved in the details of their spending–don’t care about money and don’t think about the future, but it’s simply not true,” Walsh said. “They’re focused on a future that’s often one year out, and are looking for ways to pay down debt faster and save more automatically without having to track every penny in a spreadsheet.”

Meanwhile, research from the Urban Land Institute reported Virginia Beach, Va., was the hottest city for Millennials-and “traditional” Millennial meccas such as Austin, Texas and Portland, Ore., didn’t even make the top five.

The report said cities such as Austin and Portland have hit “peak Millennial,” leaving room for smaller, more suburban cities to pick up the slack.

The report said the top five cities for Millennials, that have seen the most relative growth in their population of 25-34 year olds from 2010 to 2015, currently are Virginia Beach, Va.; Richmond, Va.; San Bernardino, Calif.; Memphis, Tenn.; and New Orleans.