The best advice I can give young people is twofold. First, spend less than you earn. Second, systematically invest your savings for however long it takes you to accumulate twenty-five times your annual expenses. There you go, young people. In two simple sentences, I provided the secrets to getting rich. Now go freakin’ do it.
This advice, or hectoring, is of course unfair to young people. Knowing how to build wealth is only half the battle. You also have to be able to do it. If you barely have enough money to cover your expenses, you aren’t accumulating twenty-five times your annual expenses—unless of course you happen to be a vampire and have a working life measured in centuries not decades.
So there’s the crux of the problem for today’s young people. The difference between the income of the basic American job and the cost of the basic American lifestyle is too small to generate the savings necessary to build wealth. Young people are simply screwed.
Or are they?
First, if a person starts young enough, it doesn’t take a superhuman monthly savings rate to become a millionaire. According to the Millionaire Calculator provided by CNN Money, an 18-year-old who saves $400 a month indefinitely would become a millionaire by age 57 (assuming a very reasonable 7% return). Of course, a million dollars in 2055 may or may not be enough for financial independence. If your annual living expenses exceed $40k on that future date, you’ll have to keep working. But this hardly negates the key insight expressed here. Whether your goal is the millionaire’s club or financial independence, the monthly nut needed to achieve it is quite manageable IF YOU START SAVING WHILE YOU’RE YOUNG.
Second, the average young person in America today can save roughly $400 a month if he or she avoids one huge mistake—becoming a DICK. If you’re young, and you’re a DICK, the odds of you being able to save $400 a month are small. On the other hand, if you’re young and not a DICK, the odds of you being able to save $400 a month are greatly improved.
“Okay, okay,” you’re no doubt muttering. “I see where you’re going here. If I don’t become a DICK, I’ll be fine. Cool. I just have one question. What the heck is a DICK?”
I’m glad you asked. A DICK is a…
Delusional Imbiber of Cars and Knowledge
A delusional imbiber of something is someone who, because he vastly underestimates the cost of that something, vastly overestimates his ability to pay for it. And because he vastly overestimates his ability to pay for that something, he sabotages his ability to save and build wealth. If he’s lucky, he’ll manage to live paycheck to paycheck. If he’s not, he’ll habitually run out of money before he runs out of month and spiral deeper and deeper into debt.
Young people today are most likely to imbibe delusionally on three things: cars, college, and child rearing, So that’s how I came up with the DICK acronym. The car component is obvious. The knowledge component is a bit more nuanced. It refers to college and child rearing in the sense that college is about cognitive knowledge and child rearing is about carnal knowledge. Is that a stretch? Perhaps? But would you take time out of your busy day to read a post that implored young people not to be DICCCs?
Now, if you’re rich or comfortable, or have parents who are rich or comfortable, you can drive a beamer, get a law degree, have a kid or two, and not sabotage your financial future. In other words, you can still come up with the monthly savings necessary to become a millionaire by 60. But not many young people are in this position. I certainly wasn’t. And there’s no shame in that. The real shame is knowing that $400 a month was the only thing that separated you from wealth, and you pissed away that $400 a month on a fancy car, or a phony-baloney college degree, or an ill-timed leap into parenthood. So if you’re just an average schlub like I was at 18, and you don’t want to remain an average schlub, check your ego at the door and remember these three anti-DICK principles.
New cars are for the rich. Two to five-year-old cars are for the comfortable. And a crappy car is for you.
An advanced degree is for the rich. A degree is for the comfortable. And an education is for you.
Children are for the culturally rich and comfortable. And being sexually un-hip is for you.
These anti-DICK principles aren’t fair. But no one—not Donald, Hillary, or even Bernie—is going to liberate you from the cruel reality of economic scarcity anytime soon. And if you want to change your financial prospects and be kind to your future self, here are some suggestions to make our anti-DICK principles a little more palatable.
Start a Crappy Car Club
Cars are expensive to maintain and fix. They’re also expensive to insure, especially if you’re young and male. The biggest drain on your wallet, however, will be a car’s penchant for depreciation. According to Edmunds, a new car will…
- Lose 11% of its value the moment you drive it off the dealer’s lot.
- Depreciate by 15%-25% a year for the first 5 years.
- Only be worth 37% of what you paid for it after 5 years.
You can’t play this game. The average new car costs $33,560. In five years, it will be worth around $13K. That’s over twenty grand down the drain. So forget new or gently used cars. Just get a crappy car (10 years or older) and embrace it. Start a crappy car club with your friends. Have a cruise-in or an eyesore-in and share the trials and tribulations of crappy car ownership with friends and neighbors. It will be a blast. And here’s a potential anthem for your crappy car club.
Fight the College Industrial Complex
College is a scam. On the one hand, it bills itself as the only viable path to middle-class and upper-class skills. But on the other hand, it won’t let you purchase the training for these skills unless you’re willing to purchase a lot of unnecessary crap. Here are just some examples of its egregious shakedown operation.
- Full-time professors who teach only two-three classes a semester
- Minor league sports
- Resort-like dorms and recreational amenities
- Administrative bloat (how did college students learn before there were deans of inclusion or sustainability?)
- Withholding its certification of a student’s abilities (the vaunted bachelor’s degree) until that student purchases at least 20 classes that don’t pertain to his or her major.
The current higher-education business model is only suited to the rich and comfortable. You can’t afford the senseless overhead and waste built into the system. You need an education, not the “college experience.” So do whatever you have to do to avoid student loan debt. Do not go away to college. Choose a state school over a private school. Go part-time and cash-flow your tuition bills with a job. Granted, it’s not fun missing out on the “college experience.” But it’s also not fun being tens of thousands of dollars in debt for a piece a paper that only guarantees you a job interview.
For a more radical response to the college shakedown, try this: boycott any class that doesn’t pertain to your major. Tell your college you can’t afford to be well-rounded. You just want to take the twelve to fifteen classes necessary to grasp the fundamentals of accounting, nursing, or whatever. Remember, college needs you and your classmates more than you need it (you don’t need college to learn programming or read Shakespeare). So instead of occupying the president’s office for some bullshit cause, you and your classmates should start un-occupying the bullshit classes you are forced to take for a credential.
Procreation is not just for the wealthy and comfortable. But to do it right, to be fair to yourself and your future children, you’ve got to approach it from a culturally strong position. Children, after all, are very expensive and very time-consuming. So before you procreate, ask yourself some important questions. Do I have enough money to cover my expenses while I’m unable to work? Is my partner reliable? Is he or she committed to me? Does he or she believe in marriage? Is he or she allergic to work? Is he or she a good person? Will he or she be a good role model for my child? Will my family be a blessing or a curse to my child? Can they be counted on in a crisis? Do I have any reservations about placing the care of my child in their hands—even for a few hours? And what about my partner’s family? Are they stable? Are they free from drama and chaos?
If you answered no to any of these questions, keep it in your pants or cross your legs. You’re not ready for parenthood yet. Give yourself time to hone your skills and establish a career. Wait until you have your financial act together. Wait until you have an awesome partner.
Sadly, there’s no chewing gum out there to make chastity bearable. So if you can’t forego sex, at least frown upon the hook-up culture. Frivolous sex degrades both participants. Don’t have sex with people you hardly know. Only have sex with people who are marriage material—people who are kind, have a great work ethic, and are committed to you for the long haul. Eschewing the hook-up culture will mean a decidedly un-hip sex life. But it will also mean increasing your odds of procreating mindfully, of having kids when you’re emotionally and financially stronger.
If you’re a young person, remember $400 a month. That’s all that separates you from living paycheck-to-paycheck and building wealth. And all you have to do to start building wealth is to avoid being a DICK. Is that hard? Yes. But it isn’t brutal. Driving a 12-year-old Honda Civic, going to the local state college, and foregoing parenthood until your late 20s or early 30s are hardly the definition of abject misery. Life will still be freakin’ groovy.
Saying no to being a DICK is saying yes to what truly matters.