Why Millenials Will Lose
A dire situation for the global economy got much, much worse over the past year.
The Federal Reserve’s rush to print trillions of dollars amid the pandemic shutdown helped boost the stock market… for now.
A collapse has yet to happen, but I predict it’s inevitable and they’re merely kicking the can down the road.
Sadly, the group most likely to suffer the most is millennials.
Millennials make up the majority of the labor in sectors where job security is most vulnerable to an economic downturn… as we saw during the pandemic.
Leisure and hospitality; health care and social services; professional services (like consulting, administrative, and IT roles); and retail sectors.
It’s why they’ve fallen behind where they should be at this stage in their lives.
But there’s a way out…
Millennials Were Already in Trouble
Americans, in general, were already $15 trillion in debt before the pandemic according to the New York Fed Consumer Credit Panel/Equifax, and layoffs, furloughs, and wage cuts only added to the stress many households were dealing with.
Many students, or their parents, are deeply in debt with college loans. Additionally, in college, students can sign up for credit cards, which contributes to more bad debt piling up. When a student takes out loans and signs up for a credit card, cash flows out of the student’s pocket for years to pay off the debt from the loans and credit cards.
The Department of Education found that “Americans 24 or younger had $116 billion in debt at the end of 2019; those 25 to 34 had $498 billion, and those 35 to 49 had $581 billion. People above the age of 50, on the other hand, owed about $323 billion in student loans.”
So what does a generation do that is losing jobs and has rising debt?
A New Financial Plan
The reason 90% of people struggle financially is that cash is always flowing out to someone or something else — flowing to the 10% who know the name of the game. The harder the 90% work and the more they earn, the more cash flows out to the 10%.
My poor dad worked very hard. He went back to school for higher degrees and specialized training. He made more money and saved some of it, but he never got control of his cash flow. When he lost his job and was forced to stop working, no cash flowed in — yet he still had to honor his outgoing cash flow obligations. He was in real financial trouble.
The old rules — work hard, save money, buy a house, get out of debt, and invest for the long term in a diversified portfolio of stocks, bonds, and mutual funds — keep people, millennials especially, struggling financially. These old rules of money have led millions of people into financial trouble.
It may have worked for their parents in the 1970s, but today that old “American Dream” is a bigger fantasy than ever. We live in a different world than in the 1970s. So it only makes sense that we need new rules and strategies to help the next generation not only match pace with the last generation but surpass them.
Millennials desperately need a new financial plan, one that teaches them the new rules of money.
Millennials Need to Shift Their Position in the CASHFLOW® Quadrant
The oldest millennials are turning 40 this year, and yet, compared to previous generations, millennials have not accumulated as much wealth at the same age.
If you look back to 2016, the average older millennial was 32, earning a median income of $57,500, and had a net worth of approximately $27,900. Based on wealth rates previous generations recorded at similar ages, the typical millennial should have been earning a median salary of $65,900 with a net worth around $46,600 in 2016, according to calculations by the St. Louis Fed’s Institute for Economic Equity, based on the Federal Reserve Board’s Survey of Consumer Finances.
But those wages are for employees, people on the left side of the CASHFLOW Quadrant. And, as we know, wages are not an indication of true wealth. Instead, they are shackles that keep you imprisoned in the Rat Race, bound to a traditional employer and the whims of the economy.
If you aren’t familiar, here’s what the letters stand for: E = employee, S = self-employed, B = business owner, and I = investor.
Employees and Self-employed are the ones who pay the most in taxes and trade their time for money.
On the right side of the quadrant, business owners and investors pay the least in taxes and invest in assets that make them money.
I bet that most of the parents who were earning high wages in the 1970s were still Employees. Higher-paid Employees, but still fell on the left side of the CASHFLOW Quadrant.
Today, if millennials want to out-earn their parents, they’re going to have to drastically shift their mindsets, and make the move from the left to the ride side of the quadrant.
If millennials want to rise up, they have to move over to the right side of the quadrant by becoming business owners and investors. They have to practice the rules of the rich.
How? Millennial business trends will only shift once that generation learns the new rules of money.
The New Rules of Money
As I’ve mentioned there two sets of rules when it came to money, old rules of money and new rules of money. One set of rules is for the rich and another set is for ordinary people. The people who are most worried by our current financial crisis are those playing by the old set of rules.
There is good news for those who are ready to move on into a brave new world: This is the best of times for those willing to study, learn quickly, work hard, and not join the chorus of negative people. Learn from the past to succeed in the future.
If you want to feel more secure about your future, you need to know the new set of rules — the eight new rules of money.
Rule #1 – Money is knowledge.
Rule #2 – Learn how to use debt.
Rule #3 – Learn how to control cash flow.
Rule #4 – Prepare for bad times and you will only know good times.
Rule #5 – The need for speed.
Rule #6 – Learn the language of money.
Rule #7 – Life is a team sport; choose your team carefully.
Rule #8 – Since money is becoming worthless, learn to print your own.
Learning these new rules of money will help millennials navigate a drastically different world. They still have the opportunity to surpass their parents, but they can’t do it the old way. They can’t rely on their parents’ advice and rules. They don’t just need to out-earn their parents — they need to out-think and out-grow them as well.
Millennial Can Bounce Back
I understand why a lot of millennials get branded as “entitled” or “spoiled.” In a lot of ways, they’re victims of unfulfilled promises and old ways of thinking and teaching from those from my generation.
But that’s where the excuses have to stop. This might just be the wake-up call that gets millennials back on track and headed toward the American Dream.
If millennials can learn and embrace these new rules and mindsets, they can change the course of the nation for the better. We see it happening every day, with 25-year-old CEOs who think outside of the box running prosperous startups. They create and play by new rules, and we need more entrepreneurs like them.
The world has changed, and the next generation needs to change with it. Only then will they be able to leave a positive legacy, and achieve the New American Dream.
So please stop living by the old rules of money. Don’t keep pushing your head against the glass ceiling hoping it will break. Instead, go where there is no ceiling and create something incredible.
Play it smart,
Editor, Rich Dad Poor Dad Daily