Buying a house with avocado toast

Let's just be clear: It can't be done. Millennials cannot save enough to buy a house by foregoing avocado toast. (Unless, of course, a particular millennial is ordering avocado toast every day, three meals a day, which even another millennial is likely to acknowledge is a bit excessive, not to mention tedious.)

But let's say you're a fairly normal millennial with a reasonable penchant for superfoods, and you order two avocado toasts per week – eight per month – at a whopping $22 each. If you gave up every healthy smashed avocado sprinkled with creamy Feta, it would save you a mere $176 per month. At today's paltry interest rates, that's likely to net you just $11,000 in five years, which isn't enough for a car, much less a house.

Of course, if you gave up smashed avocado permanently, you could, perhaps, have enough for a traditional down payment on a house in 20 to 50 years, depending on average home prices in your area and the rate of return you're able to earn on your money. But that may take deferred gratification to an untenable level, even for Australian millionaires, like Tim Gurner. (Let's be clear, Bernard Salt, the Aussie columnist who started the whole avocado toast debate, was kidding. Really. Read his column.)

But, wait. Maybe Tim Gurner was only using avocado toast as an example of discretionary spending – the way my generation used to refer to Starbucks lattes. In his television interview in Australia, he actually talked about trips to Europe and unrealistic lifestyle expectations that need to be tamped back to achieve long-term goals, such as buying a home. (I vaguely recall spoilsports saying the same to me and my friends some 30 years ago.)

Millennials are likely to counter that their lifestyles are not at all excessive. Instead, their incomes are low, which some blame on graduating college in the midst of a recession. If you happen to be college educated, however, your prospects are better. The Pew Center found in a recent study that college-educated Millennials actually earn more in inflation-adjusted dollars than previous generations and the more education you have, the greater the disparity. Millennials with bachelor's degrees earn an average of $3,836 per month -- 13 percent more than the baby boom generation's $3,399. Millennials with masters degrees earn an average of $4,772 -- 23 percent richer than previous generations; while those with doctorates earn $5,799, a whopping 34 percent more than the baby boomers in inflation-adjusted dollars. 

However, millennials who have not completed four-year college programs earn less, on average, than previous generations, according to the same study.

It's worth noting that the impact of college tends to magnify itself when millennials couple-up, since college-educated youths tend to marry other college-educated youth, which creates a massive gulf in household income between the have-college set and the have-nots, according to Pew. When it comes to household income, the average college-educated millennial household earns $7,232 per month vs. just $4,479 for households headed by those who didn't complete a bachelor's degree.  

Educated millennials, however, also have more college debt to repay. According to Student Loan Hero, today's average graduate has a student loan balance of $37,172. Back in 1984, experts were complaining that student debt was out of control and, at that time, the average baby boomer had a mere $5,470 in student loans.

Generational competition aside, is the millennial generation locked out of home buying as the result of unaffordability or excess spending or none of the above? Unfortunately, the answer may be all of the above, depending on where you live.

According to the National Association of Realtors, the median home price in the midwest is $176,600 -- easily affordable on a college-educated millennial household's median salary of $7,232 per month ($86,784 per year) and even affordable for a household with an associate's degree median income of $4,841 per month ($58,092 per year), assuming that this household could come up with even a 5 percent down payment of $8,830.

But if that same household happened to live in the west, where the average home price is a lofty $342,500, both the recommended down payment and the monthly payments become less affordable. To buy the median western home, you'd need a minimum of $17,125 (5 percent) down, plus other closing costs. And that would leave you with a home mortgage balance of $325,375. At a 4.5 percent rate of interest (the kind of rate you'd get with a small down payment), you'd need to pay about $1,650 per month on your loan; roughly another $406 per month in property taxes and an estimated $100 per month for homeowner's insurance. That's doable on a $7,232 monthly salary, but unaffordable to those earning the lower salary you're likely to pull down with less education.

However, what's always the biggest challenge when it comes to homeownership is the down payment. And that's where advice like Gurner's comes into play. If college-educated millennials want to buy a home, they might need to make a whole host of day-to-day sacrifices, including living in cheaper apartments (or with Mom and Dad), going out less for drinks or brunch, and giving up expensive vacations for a few years. Filling out a budget worksheet like the one at Kiplinger, or simply tracking expenses on a site such as Mint or Personal Capital can help determine just how much sacrifice it might take.

Then the question becomes one for the ages: Is it worth it to you? If buying a home is a precious goal -- more precious than near-term travel or eating out with friends -- then the chances are good that you'll find a way to afford it. If it's not that precious to you, then why make the sacrifices required to buy it? It's not about avocado toast, per se. It's about spending your money on things you find precious – even if that happens to be avocado toast.