Things that have worked well in the past aren’t necessarily going to work well in the future. This is something I have been thinking about for a long time, but this week it came up in a conversation I had with my uncle. I told him the pace of change is accelerating and the conventional rules of work, education and investing are becoming obsolete. These changes are benefiting some people, but most are resistant to change and getting left behind.
1. Employment is Changing
The conventional wisdom for career success has been to go to college, get a job with a good employer and climb the corporate ladder. This advice is still relevant and useful, but it’s definitely not a sure thing. For starters, some college degrees don’t add enough value to a career to even pay back the student loans. Also, many of the rungs on the corporate ladder are starting to disappear, leaving employees with nowhere to go. The days of working for one company for an entire career and retiring with a pension and a gold watch are long gone. Workers starting a career now may have a dozen jobs and a couple of career changes.
Challenges Facing Employees
- Companies are flattening out and reducing middle-management
- Entire industries are being lost overseas, along with those jobs
- Most new jobs created in the past 5 years are low-paying retail jobs
- Jobs are less secure and employers aren’t as loyal as in the past
- The public sector is over budget and many jobs will be eliminated
- Retirees are continuing to work and competing with young workers
How to Prosper
- Save more income to buffer career changes and job loss
- Develop side-income to augment employment income
- Become self-employed to control your future and income
- Keep job and career skills up-to-date for future demands
- Develop a strong professional network to share opportunities
- Select growth areas, such as medical, technical and energy
2. The Economy is Changing
There is no honest way to put a happy face on the economy. It’s in shambles and there is no easy way to fix it. In the past, the economy rebounded quickly after each recession and people went back to work. But, that isn’t happening this time for a number of reasons. First, housing is still too expensive, based on real wages. Second, the government’s misguided easing and stimulus increased the deficit, but produced no jobs. Jobs are created by companies and investors, not by economists and politicians. Most companies are afraid to hire new employees because of economic uncertainty. The government could help the economy a lot by cutting regulations and presenting a balanced budget. But, they are too busy pandering to special interests and trying to get reelected.
Challenges Facing the Economy
- Artificially low interest rates and misleading inflation rates
- Decline of American influence in the world economy
- Stifling government regulation and massive public debt
- Complex and unbalanced methods of federal taxation
- Permanent loss of construction and manufacturing jobs
- Enormous amount of foreclosures and underwater homes
- Rising costs for food, energy, education and health care
3. The Market is Changing
There has never been a consistent strategy for investing in the stock market that delivers future performance, based on past results. The reason is that investors quickly adopt any profitable strategy, which undermines its effectiveness. Recent examples include tech stocks, hedge funds and index investing. The investors who will win in the future will anticipate new trends, instead of following old ones. Dozens of S&P 500 companies will disappear in the next decade and you don’t want to be invested in their stock.
Challenges Facing Investors
- Super-fast computer networks and program trading
- High fees and spread skimming by investment companies
- Massive leverage from derivatives and other instruments
- Millions of baby boomers withdrawing their life savings
- Inadequate regulation and oversight by the government
How to Prosper
- Avoid treasuries and accounts yielding less than inflation
- Invest in rising industries, such as alternative energy
- Accumulate real estate during the weak housing market
- Increase the percentage of global equity investments
- Choose investments with the lowest possible fees
The Bottom Line
The bottom line is that the future is a scary place. The gap between winners and losers is growing rapidly. Anyone counting on the status quo is in danger of sliding into the loser’s bracket. The future will belong to the courageous.
“Change brings opportunity.”
Nido Qubein – President of High Point University
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This post was featured on the Carnival of Personal Finance over at Invest it Wisely. The week, I made the Editor’s Pick. If you aren’t familiar with the Carnival of Personal Finance, you need to check it out.