🔴The American Dream Is A Nightmare For The Next Generation
Welcome to the third Monday of summer!
Hopefully, you spent time with your family and enjoyed your extended weekend. Or at the very least your red, white, and blue shirt from Old Navy fits.
After all, there’s nothing more American than going to your rich family member’s house for hot dogs, fireworks, and a highly educational and informative discussion of politics at the holiday party.
What’s something that’s becoming less American? Affordable home ownership.
Homeownership and education used to be a staple of the American Dream.
Today, the cost of homeownership and higher education is a nightmare for the next generation.
Would-be first-time home buyers are spending their savings on little treats and concerts because the idea of owning a home in the near future seems far-fetched.
So they’re missing out on home ownership and the sense of community that comes along with it.
Perhaps higher education can give the next generation hope. Not likely.
Tuition is at record highs:
And those prices have a long-term effect.
On average it takes 18.5 years to repay student loans.
So young people can’t get a house, and the degree they decided on over the summer will cost them hundreds of dollars per month for nearly two decades.
We’re clipping the wings of young people across the country by convincing them to take out massive loans for education before their brains are fully developed. And at the end of their schooling, the college degree they were told would open doors and provide job security provides only a fraction of the benefits it used to.
So, financially, what can we do about this?
Delayed Gratification
Spending money on nice things now isn’t the solution to getting out of a financial predicament.
The least fun option is the answer: delay gratification.
In first grade, I was in a group project where we created an assembly line for a paper shoe.
One person cuts the shoe outline, the next person cuts the shoe strings, the next person glues them together, and the last person finishes the design by drawing with a crayon.
In my group, I was the last person in the production line, which meant I was responsible for the finishing touches to the shoe design.
Crayon in hand, I took my time coloring between the lines and even put additional designs on the side.
The other groups started to finish, and my group was rushing me because it looked like we were losing to the other groups.
We were one of the last to finish.
The teacher then went to the front of the class and held up my group’s shoe and the quickest-made shoe side by side.
The quick shoe had a few Crayon scribbles and was falling apart. My group’s shoe was colorful and sturdy.
She then asked the class Which shoe would you rather have?
The answer was obvious.
Maybe it was the moment where my shoe was held up high for the whole class to see, or maybe it was always engrained in me but from then on I was ok with delaying the outcome for a better outcome in the future.
Studies show that kids who delay gratification grow up to have better life experiences than those who can’t.
The author of The Psychology of Money says, “Saving money is the gap between your ego and income, and wealth is what you don't see. So, wealth is created by suppressing what you could buy today in order to have more stuff or options in the future.”
Budgeting: Daymond John’s 1,2,3
To get out of a financial predicament, you have to pay attention to your finances.
Shark Tank host Daymond John says we should look at our budget as if we have $3.
Our first dollar should go to paying what we need.
Our second dollar should go to investments
Our third dollar should go to what we don’t have but want.
If you don’t spend the third dollar, it should go to investments.
This model works for if you have $3,000 or $3,000,000.
The problem is that we work so hard for our money, we fall into the trap of spending our third dollar on what we want, before spending it on our needs and investments. In that case, we’re racking up debt for our needs and aren’t growing our wealth through investments.
I highly recommend using a free app like NerdWallet to better understand your finances. I open the app no joke about 5 times per week to see where I’m at with my daily expenses, investments, debt, credit score… I can’t get enough of it. It turns wealth-building and budgeting into a game.
Invest
“You’re never going to get rich renting out your time” - Naval Ravikant
A job is renting out your time. Your company pays you to spend your time working for the company.
That creates stability, not wealth.
You have to put your leftover money into a place that increases in value faster than inflation.
Inflation last year was at 8%, the highest it’s been since 1981.
So that means for your wealth to grow, your investment needed to increase in value by more than 8% last year.
The four long-term investments that most investors dabble in are real estate, gold, stocks, and crypto.
As we covered in the first caption, real estate is nearly impossible to get ahold of. You have to put up a massive percentage of your net worth into one property, so your liquidity is minimal and your diversification suffers. Additionally, I feel like landlords and homeowners will eventually face some sort of regulation from the government to help home prices go lower. They can’t become this unaffordable to first-time home buyers without the pendulum swinging the other way at some point, and maybe soon.
Gold has had a run recently but isn’t blowing anybody away. Future generations are not captivated by gold.
My attention is on stocks and crypto. Mostly crypto.
I don’t want to go too deep on my Bitcoin thesis in this edition because I already did a deep dive last year, and everything written there is still how I feel today.
Big caps like Bitcoin and Ethereum may be the go-to investment for young people, like real estate, gold, and stocks were for generations before. They already are for me. As young people today grow their wealth and buying power, Bitcoin and Ethereum may benefit and continue etching their place as serious long-term investments.
Stocks have my attention, as the S&P 500 has returned about 10% per year on average.
Use the chart below as a rough target to get the foundation of your investments started.
What Now?
So, how do you turn all this information into actionable steps?
The formula to live your version of the American Dream is to delay gratification by doing the 1,2,3, budget, and invest your third dollar wisely.
Because the only thing more American than hot dogs, fireworks, and politics is realizing you’re in full control of your actions and have the opportunity today to start from zero and create an incredible future for yourself and your family.
If you’re reading this sentence, please take a moment to reply with what you think about today’s edition.
Did it hit the mark for you? Was it not what you were expecting? Was it helpful in some areas but not helpful in others?
I’m a one-man band and have stayed consistent every week for a year and a half,
Your feedback helps me improve this newsletter :)
Outstanding issue!
One of my favorites!!! 👏🏻👏🏻