“Our generation was less spoiled.”, “By the time I was your age, I’ve managed to save for a car and lived by myself” - how often do you hear such things from your parents and/or people from their generation? If you are a millennial, the chances are that this topic is discussed in every major family gathering.
Then there are personal finance advisers, bloggers, and public figures, who try to encourage you that your financial success is solely in your own hands and you can be whoever you want.
One of the points held by those advising us on our finances is that we, millennials, spend too much money on unnecessary things. There is even a theory, the so-called “latte factor” that states that you can effectively become a millionaire in a few decades if you stop buying your daily latte “to go.” While being a good argument, this theory doesn’t have any real proof. Of course, if you start brewing your morning coffee at home, you can save somewhere near $20 for your emergency fund, but that won’t make you appear on the pages of Forbes.
Another, much bigger and more believable piece of advice is that your finances are under your own control - you can earn as much as you want to as soon as you believe in yourself. Sure, there are unplanned expenses, like a car breaking down, illness, injury, or something of this kind, but that’s why you have your emergency fund. Break open your piggy bank and deal with it, and once you are back on your feet, keep on believing that you are a millionaire and soon you’ll become one. However, the truth is there is a huge array of factors that, sadly, may prevent you from big financial success in spite of all the hard work and planning you’ve done.
In the following, we will discuss examples based on the USA; however, while some numbers might be different, everything said is true, to some extent, for most other countries.
First of all, if you haven’t heard about income and wealth inequality, you definitely should. The truth that’s finally been making its way to the politicians’ talking points, is quite shocking: since 1993 and up until 2015 1% of the population has doubled their income, while other 99% American citizens increased their income by merely 15%. If this is not enough to amaze you, here is another “fun” piece of financial trivia: richest 0.1% of Americans have as much money as poorest 90%, essentially a quarter of all the nation’s money.
Not being a part of the richest 1% of Americans isn’t the biggest problem you might have, as while inequality is rising social mobility is doing just the opposite. If you are a 30-year-old, you should know that in 1980 you would have an 80% chance to make more money than your parents; however, according to 2016 statistics, in the modern world, you have only a 50% chance of doing so. A number of factors affect this, one of the most influential being slow wage growth that started after the Great Recession.
Up until this point, you might be thinking “Wow, this is bad. Thank God I’ve got my good education,” but as you’ve probably already guessed, there is also a catch. Sure, a considerable number of years ago, getting a college degree would mean that you are, most certainly, going to get a good job with a good amount of rewards, but unfortunately, in the recent years, education has dramatically lost its value. For starters, getting a degree is extremely expensive and may get you into a big financial pitfall on its own. Besides, having a good education is no longer a guarantee of getting a well-paid job but rather a pass to an entry-level which won’t be paying enough to cover your student loans. And here it goes, we are stuck in a vicious circle: spending enormous amount of money to get a mediocre job to get some money, just enough to pay for our education.
Having said that, I strongly believe that people, who are keen on teaching us how to lead our way to big money, should take into consideration that there is more to it than just your inner desire to be rich. Socio-economic inequality and failure of social mobility should be explained and covered more because, unfortunately, no matter how financially sharp you are, if you are born into a poor family there is little to no way to get out of that situation. This is as true for middle and wealthy classes - if you are one of them, the chances are that you will remain on that step of the ladder. And as for the social mobility, rags-to-riches and similar national ideas, they are no more than another great American myth, like “discovery” of America by Columbus.
If you have read this article up to here there is a big chance that it has spoiled your mood completely, which is totally understandable given the situation our society is currently in. However, I am not trying to get everyone depressed, feeling doomed to be stuck in the socio-economic class they were born into and completely give up on craving for the financial success. There surely is a way to break free into the world of wealth other than being born into a wealthy family. However, what I am trying to say is that you shouldn’t always feel down if you are not able to keep up with all the financial advice everyone gives you.
The point is to understand that we live in a system that is designed to keep you from climbing a success ladder. Moreover, due to the financial inequality we’ve discussed earlier, some people might have a hypothetical ladder that is enormous and partly broken, while others just get an elevator. What I mean is, sometimes you may do everything possible and impossible, rush into every opportunity, and still fail to keep up with your dream lifestyle that you’ve seen on someone’s Instagram (which, by the way, is often fake, but that’s a whole other discussion).
At this point, you should be asking a reasonable question: “What CAN I do?” And the answer is rather easy. You still should plan a budget, minimize your debt, and cut back on eating out. Put money into your emergency stash if possible. However, you should remember our flawed and unjust system and fight it whenever possible. Don’t be apolitical, your choice and support of the progressive people and policies might make a difference. Don’t be afraid to speak up, research your privileges, and support local businesses and causes you to care about. And furthermore, rushing for financial success, don’t forget to enjoy your life!