This post may contain affiliate links. Please read our disclosure for more information.
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.
Procreate Mindfully
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.
Final Thoughts
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.
Great article, Mr. Groovy!
“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.”
I personally find buying a new car worthless. It’s not an investment at all. I can get a better value going with a use car. Thanks for sharing!
Thank you, Francis. You’re very wise. I didn’t figure this out until I was almost 40.
Great post Mr. Groovy. My daughter is looking at schools now, and we are having to deal with this issue. I’ve convinced her not to go to a much more expensive school, and we are determined to do it with little/no debt. I don’t want her struggling to get out of debt when she is really just starting in life. Thanks for a great article.
Thank you, KC. It’s a very tough problem. You want your kids to go to college because it will give them more opportunities. But you don’t want your kids to be taken advantage of by the college-industrial complex. My advice to young men and women is to go to college locally (if feasible, of course), live at home, work part-time, take school work seriously, and avoid student loan debt like the plague. Best of luck to you and your daughter, KC. Our colleges talk a good game about how much they care about young people and America, but their business model says otherwise. Sigh.
A wise man once told me “the two easiest to aquire in life are debt and dependents”. So this post nails his wise words
Thank you, Jeff. I’ll have to remember that quote. “The two easiest things to acquire in life are debt and dependents.” Very wise, indeed.
Wow, great post. You took on some sacred institutions in the country and skewered them nicely. I’ll be passing this to a niece who is paying $31,000 in student loan debt and $350/month for a NEW LEASED car on a gross salary of $39k.
Sorry for the late reply, Mr. G. Uuggghhhh! I feel for your niece. I was very lucky. College was still affordable when I was going. I went to Buffalo University for five years (1979-84) and my student loans totaled less than $6K. My loan payment was $69 a month for 10 years. Sigh. Today, young people have to be extremely careful with education and cars. I’m sure your niece will do fine. But she’ll make her life a lot more easier if she looses her taste for new cars. Hopefully this post will help. Thanks for stopping by, my friend.
College. The cable tv bundle of education. Just cause I want to watch ESPN does it mean I want 900 channels that I will never watch. Learn and Pay as you go with MOOCs. (massive online open courses)!
Exactly, PRTitan! Nailed it. I love that description: “College, the cable TV bundle of education.” I don’t see how the current business model continues for another generation. How can the big education elite, who are supposedly far more “ethical” than the Wall Street banksters, ask young people to pay for 40 classes when 20 or 15 classes would do? College right now is a scam, and more and more ordinary Americans are coming to that realization.
I love my 12-year-old Camry. Have no fear of it getting dented in a parking lot or stolen. Maintenance costs are tolerable and it’s very reliable. So what’s not to love? It’s not a chick-magnet. And it doesn’t have that “annoying New-Car-Smell.” But I can deal with those negatives. Thanks for stopping by, Xyz. I forgot got all about the infamous new car smell! LOL.
love it! What a cool twist to this article, I really wasn’t expecting this. I like my 10 years old cars! At least they don’t have that annoying New-Car-Smell right 😛
It’s good you later explained what a DICK means: Delusional Imbiber of Cars and Knowledge’.
😃I was initially feeling uncomfortable.
A good piece though. Thx.
Agreed. I was worried that the title might be too off-putting. But I decided to roll the dice and be a little daring. Thanks for stopping by, Sikasem. I’m glad the title piqued your curiosity and not your revulsion.
Exactly!!! You nailed it, Javier. A car is “no more than a tool used to get from point a to point b.” Beautiful. It makes no sense to go broke or sabotage your retirement for a car. Meh. Thanks for sharing my post with your kids. I hope it helps, my friend.
I have been trying to get my kids to look at a car as no more than a tool used to get from point a to point b. Don’t know how many different ways i have tried. You have explained it better that I ever could. This is a must read for them. hopefully it sinks in before it is time to buy…thanks for another great post
Good stuff. Buying a nice car seems to be a mistake a lot of young people made. Well, my generation anyway. Buying a BMW Z3 was one of my biggest financial mistakes. It was a great ride, but the maintenance cost was ridiculous. We sold it and got a Mazda 5 when the baby came along.
I completely agree with you about having kids later too. Most people just aren’t ready to have kids in their early 20s. I’m glad we waited.
I too had car-itis when I was younger. I used to think cars were important. If you didn’t have a good one, you were a loser. But thankfully I woke up. Now I have a 12-year-old car. No one’s looking at me when I drive down the street. It’s just a functional boring car. And, yes, I have my share of maintenance issues. But those issues are a lot more tolerable when you don’t have car payments. Give me a crappy Camry over a hot beamer any day. Thanks for stopping by, Joe. It’s always great hearing from someone who’s got his head screwed on right.
Excellent point. Young people are “catching on to the fact that owning a car is nonsensical.” I’m sorry I neglected to mention that trend.
Thanks for stopping by, Kurt. And thank you for correcting my oversight. I owe you, my friend.
Young people appear to be catching on to the fact that owning a car is nonsensical. A combination of cycling, walking, carsharing, Uber, transit, and conventional rental car is an excellent substitute for car ownership. And for most, it’s simpler and cheaper.
I really appreciate that you mentioned kids. So many PF blogs just totally ignore this subject. 40% of kids in America today are born to unmarried parents. And in most cases, that means the dad is either completely unattached or only marginally attached to the kid(s). Having kids outside of marriage is almost always a disaster, financially and in so many other ways, for parents and kids alike.
Agreed. And I blame men more for this state of affairs than women. Where’s the honor? What kind of a man fathers a kid and allows the mother and the kid to flounder economically, socially, and spiritually? It’s freakin’ pathetic.
Thanks for stopping by, Mysticaltyper. And thanks for backing up my proposition that irresponsible procreation is a recipe for financial disaster.
I agree with everything in this post except the weird moralistic stance on sex.
Irrelevant. With the wealth (ha!) of birth control options available, children don’t need to be a consequence of casual sex. The suggestion that you “only have sex with people who are marriage material” doesn’t belong in a personal finance post.
People can have sex with whoever they want. This has nothing to do with their finances.
Et tu, Bridget? Remember, I’m just a little ol’ country blogger. But hear me out.
My moralistic stance on sex is not in the “fire and brimstone” sense, it’s in the financial sense. Consider someone who smokes. Such a person isn’t evil. Nor should such a person be sneered at by society at large. But I will rail against the habit. Why? Because it poses a threat to one’s long term financial health. Investing thousands of dollars a year in cigarettes rather than stocks and bonds is pretty dumb.
Now let’s consider unwed teen mothers. These girls aren’t evil. And no one should look down on them. But they’ve really saddled themselves with a formidable financial albatross. Some will beat the odds and recover from this hardship. But most won’t. Their lives will forever be haunted by economic scarcity.
I firmly believe that sex is awesome, whether it be of the staid variety or the freaky-deaky variety. I am Mr. Groovy, after all. But humans have been known to fornicate themselves into financial ruin. And all I want my fellow Americans to do is to develop a healthy respect for sex. Yes, it’s great. But if not approached wisely, it can seriously damage one’s long-term financial health.
So there’s my defense of my “weird moralistic stance on sex.” I think I have this stance because I care. But who knows? I may just be a sexually-repressed curmudgeon.
Thanks for stopping by, Bridget. I really appreciate your taking me to task.
Some time ago I read an article by Morgan Housel on Fool.com about a possible way of going to college and not ending up with crippling debt.
He called it “a blanket college plan for the average non-rich American graduating high school” and the article can be found by following the link below.
http://www.fool.com/investing/general/2014/01/08/how-to-go-to-college.aspx
I don’t know how valid this plan is today but it is certainly worth looking at it, imho. If you can get your degree by following this or a similar route then go for it, I’d say!
Don’t worry how all the lenders will survive – they’ll manage without you.
Regards, Pinch
Awesome, PTP. I just perused the Morgan Housel article and I wholeheartedly concur with his plan. Don’t start college right away. Go to a community college for two years. Transfer to a state college. Simple, effective, and probably the best approach to higher ed for most Americans.
Student loan debt is not something to approach lightly. If one takes on too much of it, one’s financial life could be screwed up for decades. And this is the main reason why I want to revamp the requirements for a bachelor’s degree. Forty courses is overkill for most fields of study. Fifteen or twenty courses would suffice. College students don’t need all the academic fluff. And they certainly don’t need any more debt than necessary. Like you said PTP, “the lenders will survive.”
Thanks for stopping by, PTP. I really appreciate that link.
How about DICK Head. Delusional Imbiber of Cars, Kids, and Heady Knowledge:)
LOL! Best comment of the month by far. DICK Head is far superior to DICK. I may have to steal that one from you, CoupleofCents. Thanks for stopping by, my friend. You made my day.
That POS video is hilarious!
I’ve discussed higher education before and I wouldn’t be where I am without my degree, nor could I get this job. However, I will agree that college isn’t for everyone, and there are plenty of nice paying careers out there that require zero college credits.
If you’re just a delusional imbiber of knowledge – going to school not even knowing why you’re there, then yes, that’s a waste and should be avoided. I myself did 3 years of that in my undergrad program…
When I r ealized I didn’t even know why I was in college I took off a year, planned a hiking trip and used that trip to figure out why I should be in college and/or what I would do without a degree. I ultimately went back to school, but this time it was with a plan and focus. It led to my current position (one more degree after my undergrad) and I have no complaints.
My degree more than paid out its costs, but I do have many friends that are still paying off their student loans for a history degree or something else that they got – just to have a degree that isn’t even being used.
I really think we need to question the signaling value of a bachelor’s degree. Consider this admittedly odd example. We have two engineering students. Both students go to the top engineering school in the state. Student One takes 15 engineering courses and gets As in all of them. He then has to drop out for family reasons. Student Two takes the same 15 engineering courses and gets Bs and Cs. Student Two also takes all the non-engineering related degree requirements and is awarded a BS.
Now is Student Two really more qualified for an entry-level engineering job because he has a BS and Student One doesn’t?
All I’m saying is that we need a new credential. The current definition of a bachelor’s degree is outdated and serves college administrators and professors more than the students.
Until we come up with a better credential, though, I’m with you Mr. SSC. If one doesn’t know why one wants to go to college, college is best avoided.
Thanks for stopping by, Mrs. SSC. Your contribution to the conversation was as compelling as ever.
Mr. Groovy, You had my attention until you dissed higher education. As a multiple degree holder who has benefited from fellowship/scholarship education, it’s not the ‘delusional imbiber’ of knowledge who gets into trouble, unless such knowledge has zero practical value. Even so, if that knowledge was acquired without taking on debt, it is still better than not having that knowledge. Nobody who pursues knowledge is delusional. But new cars, houses and buying stupid stuff – absolutely delusional.
Hey, TFR! I love it. I’m just a little ol’ country blogger, and, admittedly, some of my ideas are out there. So let me try to defend my position on higher education.
First, the law of diminishing returns applies as much to higher education as any other endeavor. Paying $100 for a SOC 101 course is fine. Paying $2,000 for a SOC 101 course is not fine–especially when you can acquire the knowledge that this course has to impart for much less. After all, you can go online and find out what books are used for the course and then simply buy and read those books. And in some instances, the professor may even have his lectures on YouTube.
Second, the current definition of a bachelor’s degree–40 courses over 4 years of study–was formulated over a century ago. And for many years, this definition has worked. But does it work today? Incomes for the middle and working-class Americans have stagnated for a least a generation. Is it really necessary for our young people to take 40 courses for a credential when 15 or 20 courses would do? Can the average American afford the extravagance of 20 or 25 non-major related courses?
I’m all for higher education. I just think students should have a choice when it comes to taking courses pertaining to well-roundedness. Many if not most students have neither the money nor time for well-roundedness. These students would be perfectly happy with only the trade-school aspect of college if given the choice. That our colleges refuse to unbundle the BA and force students to pay for well-roundedness strikes me as rather unethical.
So there’s my defense of my diss of higher education. Does it work?
Thanks for stopping by, TFR. I really appreciate the blowback.
J. Money! Thank you for your kind words. I’m honored. I think the POS car video really makes the post. I don’t know who those guys are, but I crack up every time I watch it. And you’re not alone when it comes to my thoughts on college. I got ripped a new one from a bunch of bloggers last week for claiming college is a scam. But that’s life in the rough and tumble world of personal finance. Thanks again for stopping by. You made my week.
Oh my gosh this is good, haha… Not sure about the college one, but you kept my attention the entire time 🙂 Very fun/interesting.
This ‘smart sex’ part of your post reminded me of George Will’s 5-point plan to eliminate the high cost of healthcare in this country: 1) don’t smoke; 2) eat good for you; 3) exercise; 4) wear your seat belt; 5) no unprotected sex outside of marriage.
He posited that these 5 things would eliminate 85% of US healthcare spending. They are all 100% voluntary, require no education or training, and do not depend on any government funding. Sometimes the simplest advice is the best!
Hey, Mr. FS. I think Mr. Will is on to something. I have a compilation of his syndicated columns in a book called, The Leveling Wind. Haven’t read it a while. Thanks for reminding me of George Will’s wisdom. And thanks for making a great point.
I liked your point when it comes to cars. People are continually moving towards masking how much they are actually spending on vehicles because they are only worried about the monthly payment instead of the total dollar amount. That is why we are slowly seeing car loans extending out past 5 years – so they are able to better manage a monthly payment, and so a car salesman can get you to buy a lot more car than you need!
I’m not sure what podcast I was listening to. It may have been Stacking Benjamins, So Money, or Radical Personal Finance. But the show’s host was talking about car loans and how a shockingly large number of these loans are for periods of 7 or 8 years! That blew me away. I guess that explains why the average new car or truck costs over $33K. If the max duration of a car loan were 4 years, there’s no way new cars and trucks would cost that much. You are so right, Thias. It’s all about the monthly payment and masking the true cost of a car. Thanks for stopping by.
A lot to digest there. I think you hit on two key points early on: a general lack of personal finance knowledge and a lack of discretionary income for many. Once the education is achieved, it is critical that people search for ways to decrease expenses and increase sources of income to make more money available for savings/investments.
Hey, James. This post was definitely weird. I was trying to have a little fun and make my key points in a novel way. Mrs. Groovy thought it was weak but she didn’t exercise her veto power. Oh, well. Not every post is going to be hit out of the ballpark. I like the way you put my two key points in your comment. You did a much better job than I. Thanks for sharing, my friend. I always welcome your feedback.
Lots of really interesting thoughts here. The education piece is fighting cultural expectations, in a way. It’s also worth investigating before you enroll what exactly is expected of you. As a liberal arts college graduate (I know, I know), I had to take a few gen eds but those served me well for my teaching certification. A few tests are specialized content knowledge, but the first test is almost like an ACT of sorts.
Hey, Penny. Thanks for stopping by. Whenever I vent on college lately, I have you in the back of my mind. You’re a teacher and I have tremendous respect for what you do. So I hope you don’t think I’m anti-education. I like to describe myself as anti-schooling. I don’t understand why we’re making it so hard for people to acquire skills or satisfy their curiosities. Microsoft, for instance, has a free download called Visual Studio Express. This programming tool allows you to build applications for mobile devices, the web, and desktops. It doesn’t have all the bells and whistles of Microsoft’s pay-for programming tool, but it has everything you need to learn programming and develop apps. Why can’t our colleges do something similar and offer an “express” degree? This degree wouldn’t be free. It would just be a scaled-down version of a bachelor’s degree. And in order to get it, you would just have to take the 12-15 classes that pertain to a major in a typical BA or BS degree. Many people can’t afford to be well-rounded. And many people don’t believe that higher education’s definition of well-roundedness is beyond reproach. The express degree strikes me as a fitting compromise. Would employers frown upon express degrees? Perhaps. But I don’t see why employers would penalize a young man or woman because he or she could only afford the meat-and-potatoes of a college education. Am I being totally naive here? Would love to hear your thoughts.