Millennial Wake-Up Call

Millennial Wake-Up Call

The Seed was Planted

THE TIME HAS COME! Do you know how excited I am to finally get to talk to you about the passion that makes my brain tick? This seed was planted in me about 2 years ago, and it continues to grow and blossom to this day. It originally started when I logged into my 401(k) account for the first time at my previous employer. There wasn’t much money in there, but what did catch my eye was some bright GREEN lettering…It read +$50 (and some change) underneath my account balance. I kept asking myself “how did that happen!?”

I literally did nothing to make that happen. I was looking at something that was completely beyond my comprehension at the time. What was happening was my money was making money all by itself. Let me repeat that again…

MY MONEY WAS MAKING MONEY ALL BY ITSELF

Did you know that my money was making money all by itself? Well good, I am glad you firmly understand that concept now. I just had to make sure! Moving on…

After I came back down to reality and accepted what had just happened, I then had to learn more. I immediately went on to Amazon and searched for “Investing Books.” The first book that popped up was Investing for Dummies. I have never read a “for Dummies” book in my life so I decided I would give this one a try, and hoped it would help give me answers to explain what had happened in my 401(k). That purchase turned out to be the best purchase of my entire life. It opened up the financial world to me and helped me understand complex (at the time) financial buzz words like compound interest, stocks, bonds, index funds, mutual funds, 401(k)’s, 403(b)’s, TSP’s, portfolio, and the famous S&P 500.

I finally understood how my money was making money by itself! I continued to buy more investing books, but it didn’t take too many books for me to discover something that scared the s*** out of me. What I discovered was that millennials (ME) were essentially the first generation that is almost fully in charge of funding their own retirement. Let that sink in for a moment.

YOU ARE RESPONSIBLE FOR YOUR OWN RETIREMENT

Retirement is on YOU

Millennials, raise your hand if you are enrolled in a pension plan at your employer? Hell, raise your hand if you even know what a pension plan is? I suspect not many of you are enrolled in such a program unless you’re a government, military, or another type of public worker.

A pension plan is essentially a retirement program where your employer put away money during your working years (employees also sometimes contributed), and invested that money for your retirement. At the time of your retirement, your employer would then pay you a fixed benefit that would provide you a monthly check for the rest of your life. All the investment risk was on the employer and if the investments were underperforming, then it was the responsibility of the employer to tap into the profits of the company to make up for the difference. In summary, you were guaranteed a monthly check for the rest of your life and the company was legally responsible for it. Sounds good doesn’t it? Well that time has come and gone.

Yes, there are programs out there like Social Security (if it still exists down the road) that will provide you with a small income for the rest of your life. For those of you who have been thinking that Social Security will be the means to your retirement fund, take this into consideration. You are eligible to begin collecting Social Security at the age of 62. The person who elects to begin withdrawing from Social Security at age 62 receives an average monthly payment of $1,076.70. That comes out to an annual income of $12,920. Millennials, do you think you can live off of $12,000/year for the rest of your life? I didn’t think so either.

So if you don’t have a pension and Social Security isn’t going to pay all of the bills, then where is your retirement money coming from? Easy answer…YOU!

The actions you take now are going to 100% affect the quality of life you have come retirement. If you are one who continues to run from their finances, turns a blind eye towards your spending habits, runs up debt, fails to contribute money into your employer retirement plan, then I have bad news for you…If you don’t change your financial habits now, then I can almost guarantee you that you will fit into 1 or more of these scenarios:

  1. You will never actually retire, and you will have to work for the rest of your life
  2. You will have to significantly downsize your lifestyle, and potentially your home (assuming you own a home)
  3. You will be forced to move in with your family/children (assuming you have family and they let you), which can place a burden on them
  4. You will hover around the poverty level
  5. You will become severely DEPRESSED and WISHED you didn’t ignore your finances in your youth

You will have nobody to blame but yourself. You can’t go crying to the government in your elderly years saying they should have or need to take care of you. You can’t blame anyone saying they didn’t teach you how to handle your money because if you’re reading this, I AM TELLING YOU RIGHT NOW. Your direct actions will bring the results you get later in life. Nobody will feel bad for you. I don’t mean to make this sound so negative, but it is simply the truth for the young worker in the workforce today. I need you to understand NOW how important your actions are in determining the quality of life you will establish for yourself, and more importantly for your family.

Millennial’s Great War

If you have never seen Fight Club before, put it on your to-do list for the coming weekend. There is one scene in that movie that really stuck with me, and it highlighted itself again when I learned of millennial’s retirement outlook. Brad Pitt’s character said “We’re the middle children of history, man. No purpose or place. We have no Great War. No Great Depression. Our Great War’s a spiritual war…”

fightI believe our generation is currently facing it’s “Great War.” Our war is DEBT. We are the first generation that is in danger of earning less than our parents, and when you combine this with the depressing level of debt we carry, we are presented with our war. We must fight to get out from under this financial equation that is almost destined to defeat us. I know how frustrating debt can be, and it makes us want to blame everyone else for the situation we’re in. Yes, this tactic may make you feel good in the moment. In the end though, this strategy will do nothing to change our scenario. Our debt is our debt, and nobody else is going to get rid of it except us. It doesn’t matter if you have $10,000 worth of debt or $100,000. You are solely responsible for clearing this debt from your name.

Immediate Steps to Winning the War

They always say the first step is the hardest. Well in this scenario, it’s true. If you have been worried about your personal finances and your financial future, then you must begin with the first step…

Step 1: ADMIT TO YOURSELF THAT YOU ARE BROKE AND DON’T KNOW HOW TO HANDLE YOUR MONEY

The second step is by far the most time consuming and most gut-wrenching. You will feel like you are running in motion and trying to get out of quick sand. Without doing this step though, I will be up front with you. The odds are stacked against you to achieve true wealth for you and your family…

Step 2: PAY OFF ALL YOUR CONSUMER DEBT, IN THE QUICKEST AMOUNT OF TIME, AND FOREVER VIEW DEBT AS A PLAGUE

Ready for the scary numbers? In total, our total U.S. student loan debt crisis is now over $1.48 trillion. The average graduate is being handed a diploma with close to $37,000 in student loan debt attached to it. The average monthly payment for student loans is around $351.

Let’s combine these student loans to those who now believe they need a fancy new car to go with their student loan debt. The average auto loan in America is now right around $30,000. The average monthly payment for this “must-have” car? $503…

The average college graduate (Bachelor’s) is making close to $50,000 upon entering the workforce at an entry level position. This equates to around $4,166/month (Gross Pay – Before Taxes) for those who get paid twice every month. Now let’s combine all these number.

Scenario – Average Joe

Average Joe graduates college and gets an entry level job making $50,000/year. He gets paid twice a month, giving him $4,166 (before taxes). Once taxes take their share of the paycheck, Joe is left with about $3,000. Joe also has to begin paying that student loan back, so that $3,000 gets cuts by another $351. Joe now has $2,649. He also forgot that his car payment is due next week, so take that $2,649 and slash $503 from it. He is now left with around $2,146. Joe has to now pay rent on his 1 bedroom apartment that costs $1000. After rent, Joe now has $1,146. That remaining money has to cover the remaining of his monthly expenses like groceries, utilities, various insurances, and entertainment. Can you start to see the compounding effect of debt payments being added to regular living payments? It paints a grim scenario. Unfortunately though, Average Joe is the majority in America today.

Wondering what the biggest setback that Joe’s debt is causing him? It isn’t allowing him to appropriately invest for his future. He can’t tap into the wonderful power of compound interest, because he is giving his paychecks to everybody else except himself.

My advice…Take Step 2 SERIOUSLY and don’t be like Average Joe.

One of my favorite movies of all time is The Wolf of Wall Street. I don’t think I have ever laughed more in a movie in my life. Not only did I find the movie absolutely hilarious, but I loved the money aspect to it (obviously). Jordan Belfort was living the dream life so many of us desire. He was making multi-million’s, owned big homes, drove nice cars, and vacationed in dream destinations. Jordan Belfort wasn’t the most moral guy around. He eventually served time in prison because he was running an illegal penny-stock operation.

wolfAs much as I loved this movie, I understand the danger of movies like this. It displays individuals earning riches in a short time, and seemingly living like Gods at such a young age. Sure, this can happen to a few select of us but for the majority, these movies paint an unreal scenario for us. It gives us the idea that we too can become wealthy very quickly, without having to understand how money truly works. Do you want to know the hidden secrets to true wealth though?

Wealth is a slow process that is built over time. It isn’t a get rich quick scheme. It is a simple method of identifying a process and continuously doing that process for years and even decades. That process for the average American is investing EARLY AND OFTEN into low-cost, no-load stock Index Funds. It is the most boring investing strategy out there, but it is the most effective and easiest to access investment vehicle for the average American. The more boring you are in your investments, the better off you will be later in life. All of that leads to the last step in the intial steps to winning our “Great War” against DEBT…

Step 3: DO NOT EVER THINK THAT YOU CAN BEAT THE RETURNS OF THE STOCK MARKET OVER THE LONG-TERM. SIMPLY INVEST IN LOW-COST, NO-LOAD STOCK INDEX FUNDS CONSISTENTLY OVER TIME.

I won’t beat this horse too much more. You aren’t Warren Buffet. Don’t try to be. Attempting to beat the returns of the stock market is a loser’s game. Some figure this out quicker than others, but eventually everyone comes to the same conclusion.

Don’t believe me? Go ask an older family member or friend who invested in technology stocks during the Dot-com bubble during the early 2000’s. Hot tech companies were doubling and tripling their financial value on an annual basis, so investors dumped all their money into these companies thinking “I can beat the market.” Well when that bubble popped, all those investors lost close to 80% of their money, and some lost ALL their money. It took until this past year for tech stocks to finally recover and obtain the value they had as a whole 17 years ago.

Light at the End of the Tunnel

I understand that this was a little darker than some of my previous posts. I meant to do this. It is a scary financial scenario that is in front of us. I am not going to sugar coat it. We have a tremendous uphill battle, but it is a battle we can’t ignore anymore! Starting today, I challenge you to take your finances more seriously. You can even go buy a book like I did off of Amazon and begin to learn how money really works.

If you take anything with you after reading all of this, I hope these 4 highlights stick with you the most.

Millennials – Our “Great War” is against DEBT. The 3 initial steps to winning this war are:

  1. Admitting you’re broke and don’t know how to effectively handle your money
  2. Become 100% DEBT FREE
  3. Don’t begin to believe you’re Warren Buffet. You can’t and won’t beat the markets returns over the long-term. BE BORING IN YOUR INVESTMENTS AND FUND THEM CONSISTENTLY!

jon snow

I look forward to joining you all in our Great War!

 

24 thoughts on “Millennial Wake-Up Call

  1. FMM, Great post and wise advise. I must say though I am bit biased toward dividend growth stock investing rather than index funds. But for the target audience of this post, low cost index based ETFs are the best way to go as you say. Once the solid foundation is in place, maybe then I can convert them over to DGI! Tom

    1. Always good to hear from you Tom!

      I like to think of Index Funds as the concrete foundation to your financial house. Once that foundation is strong and secure, you then can add accessories (dividend stocks) that add further value towards your financial house.

      Thanks for stopping by Tom!

  2. You’re obviously fired up about this and it shows. Keep the passion burning man!

    And btw the dotcom bubble was in the late 90’s and ended arojnd 2000/2001. But only us crusty older folks who lost some money remember the exact dates 🙂

    1. It is definitely my biggest passion! I am not kidding when I say I eat, drink, and breathe this stuff!

      Hahaha I can only imagine the pain that some of you all endured during that time…

      Thanks for stopping by and reading!

  3. Love the movie references and really good content! His name was Robert Paulson…..sorry couldn’t resist!

    I agree that the idea of solely relying on social security is not a good one. In fact, I don’t even factor it in right now in my projections. That way anything that we do get down the line is just a bonus.

    1. It’s all good, I appreciate the support!

      That is a great strategy. Everyone preparing for retirement should not factor Social Security into their plan. That way you will be forced to build up your nest egg and if you end up recieving Social Security down the road, then that will be icing on the cake.

      Thanks for stopping by!

    1. It is a great movie!

      You are 100% right. TIME is our biggest advantage and combined with compound interest, it can turn any young person into a multi-millionaire.

      Thanks for taking the time to read the article!

  4. Good stuff. I think it’s hard for any young person of any generation (I’m gen x) to think of their future selves when they are so young, but those years go by FAST…and you don’t want to spend a lot of time playing catch up. It’s SO much easier to start young and you only have to contribute a little to get the ball rolling.

    1. They definitely do go by FAST!

      It is even crazy for me to think I have been out of college for 4 years already! I have found that my life got a lot easier when I got ahead of my finances, and got the snowball rolling down hill.

      Thanks for stopping by!

    1. Glad to hear It!

      The message needs to be spread across our culture and fellow “soldiers” like you with certainly help;)

      And that is awesome! That moment is going to be AMAZING for you and your family!

  5. Good advice Sean, I agree debt is the number one problem for most people. I have a quote beside my desk on a sticky note “Savings are a gift to the future, Debt is a burden on it”. I do not know who wrote it but a very wise person.

  6. Great post and images! That’s a great Brad Pitt Flight Club picture.

    Getting rid of debt is huge! I’m leaning towards having only 5 figures in my mortgage in a few months so I’m pumped!

    1. That would be an amazing accomplishment! Fight Club has ALOT of great lines in it that can be applied to regular life.

      Thanks for stopping by!

  7. Hi FMM,

    Just ran across your blog, and I must say, looks great.

    I am in a different boat. I just retired. So I am living the experience of having done what I did (and not done what I should have done) in my youth. Some of the things I did right was to save AND invest. What I didn’t do that I should have is start earlier. Now I live with what is, not what could have been.

    I take responsibility for my actions and behaviors. And I write my experience at my blog.

    1. Thank you for stopping by and reading, I really appreciate it!

      And congratulations on your retirement. That word (retirement) isn’t guaranteed anymore, the way it may have used to be in the past.

      You raise a GREAT point to my audience. We millennials are in charge of funding our own retirement, and the one thing we can’t ever get back is TIME. It is the most valuable variable in investing.

      Thanks for taking the time to read my post!

  8. “Cry havoc and let slip the dogs of war!”

    Great freakin’ post, my friend. Let’s hope the majority of your fellow Millennials don’t sit this war out.

    In some ways, right now is the best time to be a young person. Travel has never been easier, information is basically free, and starting a business can be accomplished with a few mouse clicks. But in other ways, right now is the worst time to be a young person. The federal government is $20 trillion in debt, the cost of the most respected credential in the labor market (i.e., the vaunted bachelor’s degree) is ridiculously high, and pensions are going the way of the dinosaur.

    My only advice to Millennials is this: Trickle-down economics isn’t going to save you. And neither is trickle-down government. The only think that will save you is trickle-down selfonomics. Take extreme ownership of your future and contribute as much as you can to your retirement–be that via a 401(k) or a Roth IRA. The baby-boomers may have abandoned you, but the power of compound interest hasn’t.

    Love the way your mind works, Sean. This is definitely a Rockstar-worthy post.

    1. You make an excellent point on the unique state that millennials are in. At no other point in time has it been easier to access information. You can learn how to practically do anything on the internet or YouTube.

      I believe we have hit a point where 18 year olds who wish to obtain their college degree are going to increasingly begin at 2 year community colleges to avoid the rising tuition costs at universities. My alma matter alone raised tuition rates by 6% last year. It isn’t good when there is a reasonable argument that could be made that for some students, depending on your major, college actually could set you back instead of forward.

      Then you also brilliantly raise the point of how to take your future in your own hands. Why trust a government with your $$$ that is $20 trillion in debt itself? Would you hire a financial advisor whose Net Worth was in the negative? No…Rely on yourself and fund those retirement accounts as much as you can in your working years!

      Thanks for your detailed comment, although I am not sure it’s Rockstar worthy just yet!

  9. Awesome post! I love how you’re passionate about starting early and slowly building wealth.

    I am so glad that you went to read the investing for dummies book. I couldn’t agree more than it changes your life. Did you also read millionaire next door? That book changed my life lol.

    Btw you are absolutely dead on about retirement. I don’t believe anyone should ever rely on a single penny from government. Every time someone talks about social security, I ignore because the only person you can rely on is yourself. No one should even care about retirement aid by government (or even companies) cos ya know… $hit can happen!! 😱

    Anyway I love how your posts encourages others. Keep it up. 😁

    1. The Millionaire Next Door is definitely in my top 3 favorite books! My FAVORITE book is actually The Richest Man In Babylon. It’s a quick read but teaches how basic money principles have been the same for thousands of years!

      Thanks for stopping by!

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