Sunday, June 18, 2017

8 Myths About Money Millennials Are Being Told

I can't believe how much money advice out there is being given online that is plain wrong.  Most of this advice is being offered by Generation X'ers or Baby Boomers who have lived conventional lives and want those same conventions to be adopted by younger generations, namely, Millennials and Z'ers.  Vendors too are responsible for misleading the youth.  The mutual fund industry is trying to keep itself from dying out by aggressively advertising to Millennials.

Millennials and Investing

I know I'm not super rich myself, and cannot purport to have all of the answers on money.  But I can tell you that I'm not part of the conventional contingency of bloggers and financial writers out there trying to convince you to play it safe.  I've also had my share of life lessons i.e. mistakes and close calls that have given me better perspective than those who would tell you to set your money making and hoarding on automatic and forget it.  So I want to take this opportunity, my young amigos, to give it to you straight.  To share with you what I know about life and all things money, and to dispel some of what's considered dogma out there in the financial advice world.  Let's start with myth number one below:

1.  Retirement is the end all be all.  Ha!  T. Boone Pickens, Warren Buffett, Carl Icahn, Carlos Slim...I can go on, but what do they all have in common?  They're all over 70-years old and extremely wealthy.  They have amassed enough money to pay for thousands of people's conventional retirements.  But why do they keep working?  Because retirement is a myth being sold to the common man (like you and me).  Retirement is for boring, middle class people who never aspired to be rich.  Once you get that becoming rich (and leaving a legacy) is the goal, not retirement, you'll gladly "work" until you die.

2.  Save, save, and save.  In the words of Robert T. Kiyosaki, "Saving is for losers!"  And he's absolutely right.  You're told to save, and invest your savings to scratch out more money with the aid of compound interest and time.  What a bunch of baloney.  Rich people save to buy assets that produce profits that get put right back to work to buy more assets.  Or they build a business that produces profits that they use to grow the business and make more profit or buy additional businesses.  The average American makes their chump change with amplification via compound interest and time.  The rich take their savings to make deals that amplify their gains a lot faster than compound interest can ever produce.

3.  If you invest X money and assume a 6-8% annual return over Y number of years, you'll have saved $Z in your account.  Life has taught me that shit happens.  No one person stands a 100% chance of staying in a given career for 30 plus years, not moving around the country, or encountering situations that require money decisions that could be counterproductive.  This is why this often used scenario in financial articles is just ridiculous.  Therefore, believing you will be able to sustain 30 years of investing a given amount of money and on average earn a 6-8% return over those years, in this day and age where the average person moves jobs a handful of times, is either fired or let go, panics and sells at the wrong time, etc., is beyond stupid.  Try doing it and you will become a slave of society and money.  Money is to be used!

4.  Strive to be debt free.  This is a half myth.  If you have bad debt (credit card, student loan, etc.) then striving to kill off this debt is good, but NEVER at the expense of an opportunity to invest in a deal.  Herein lies the problem for most of you Millennials.  You went out and consumed a whole bunch of bad debt by attending college and quite possibly graduate school.  No matter how great you're at budgeting, you're going to kill several years of your getting rich potential by putting all your disposable cash to servicing these loans.  Then you'll consider yourself or others who have bragged about it, a hero for doing so.  Meanwhile, you have nothing else going for you except a career that keeps the carrot in front of you.  You need to take drastic measure to overcome your ball and chain situation.  What can you do?

A.  Move to a developing and growing city and get involved in house flipping or figure out how to build homes.  Or you can start a business in the area that is needed by the current residents.

B.  Find a partner that's willing to go 50-50 on a new business venture with you.  Borrow the money if you can (i.e. take on good debt).

C.  Fund a speculative investment after carefully considering all of the risks involved and vetting the people carrying out the deal.

5.  Diversification is the only free lunch.  Here's an example online article of this at The Simple Dollar.  Okay, so you grab a basket of low fee Exchange Traded Funds or mutual funds like a Total Stock Market or even a Target Date.  Now what?  Well, you work your ass off for 35 years adding little increments of available cash to these accounts until you save barely enough to call it quits at your job.  Does this sound exciting?  I'm sorry, but you have to try to hit the occasional home run investing in individual stocks.  Risky?  Yes, but even riskier is pretending you'll one day have no more financial worries because you invested safely by diversifying.  Yet again, more middle class propaganda.

6.  What are you waiting a home!  The mortgage and real estate industries want your money something bad.  They keep feeding you with lies about how important it is for you to get a home of your own so you can leave your parents alone finally.  Buying a personal residence at an early age is a great way to cut off your chances of ever becoming rich.  Servicing your principal and interest will shackle you for any future risky venture because in the back of your mind you'll always have that pesky home loan to consider.  If I were you starting out in 2017, with some of my investing money I'd buy a rental property in an area that has high rents and where homes are cheap.  The U.S. South and Midwest are great candidates.  I'd leave off buying myself a home until I had the assets to do so.  This is only if I didn't have any other moves.  I'd look to do A, B, and C from above before going with this route.

7.  There's no getting around taxes.  There is so!  It's called stop making your income from a career, i.e., job.  If you desire to make a life out of career and pay advancement, you will work like a slave for a very long time, giving away an incredible amount of your earnings over to Uncle Sam.  The rich get richer largely in part because they pay a lesser percentage of their earnings to the Tax man.  And it's their legal right to do so.  The tax code favors the rich and you may be someone who complains about this.  Why not do something about it?  Make money from investments and businesses.

8.  Lift yourself up by your own bootstraps.  If you think you stand a chance of ever escaping the rat race alone you are in for a rude awakening.  Find like minded people who are desperate to be "out" just like you.  Find mentors who can guide you as you make business or investing decisions.  Find money players with entrepreneurship experience and latch onto them like the little fish that swim around great white sharks feeding off the scraps.  (When you fatten up you can move on and be a shark yourself).  I can assure you, you'll never do anything if you rely on yourself to know or do everything.  You need people who know more than you!

For Example...

Last week my wife and I were in Nevada.  We were assessing a small town outside of Las Vegas for its real estate potential.  We want to partner up with my father-in-law and build homes.  We met with an entrepreneur/investor there who has multiple lots for sale, and also has several buildings he leases out all around Nevada.  The man cash flows millions of dollars every year.  He gave us the tour of the town and we gained more insight from this than we could've ever gained from RE agents.  Why?  Because the man is an investor/entrepreneur, sells lots to builders all the time, and he understands the business.

I have a mortgage, kids, a traditional career as a teacher, and for all intents and purposes, taking on a venture like this is pretty risky, right?  But there is never a perfectly safe scenario.  If I don't take risks in life, I will give up my shot at ever becoming rich.  I'll give up way too much power over to my employer, and my life will be but a mere routine.  Is this how you want to live your life?  I realize this post does not offer you hugs and caresses.  The biggest myth of all is that life can be lived wearing helmets and seat belts.  Life is turbulent, embrace it and live it freely!

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