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
Image by Tony the Misfit
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
For the first time in months, my house is quiet and peaceful. The summer guests have left; there are no parties to host or attend; and I don’t have any house or car maintenance planned. It’s times like these when I reflect on my goals and plan for the future. During these quiet times I rise above the daily activity to get some of my big-picture ideas. This is a time when it is practical to look ahead and safe to dream.
Why Dreams are Critical
Image by Hamed Saber
The first step in any endeavor is a dream. The dream is the seed of everything great ever accomplished by mankind. Man dreamed of flight, great cities, space travel, electric light, radio, television, telephones and medical miracles. It was only because of these dreams and the courageous few who pursued them that modern life became possible. For those who have no dreams, life is limited to the mundane survival and existence.
I have a dream to one day escape the rat race and chart my own financial future. I love my job and enjoy my profession. But, I would like to have more control over my life, my time and my income. I know this is a common dream and many have made it a reality. Through hard work, vision and persistence, they have shaped their daily reality to match the essence of their dreams.
When we look off into the future, what we see is our dreams.
Why Reflection is Critical
Change happens quickly. What used to take days, months and years now takes hours, minutes or seconds. What worked for our parents and grandparents won’t always work for us. That is why it’s so important to reflect on our actions to make sure they are still relevant. What was once a sound plan may become impractical. What was once the cutting edge may become obsolete. If we don’t evaluate our direction constantly, we may end up on a path that leads nowhere.
Five years ago, I was evaluating my retirement plan and I realized it was vulnerable to low interest rates and stock market fluctuations. The massive government debt is sure to keep interest rates low at the same time millions of baby boomers are starting to withdraw their savings from the stock market. Speculation and derivatives are only going to make the stock market more volatile. Since I was almost 20 years into my plan, it was a painful realization. But, I still have 20 years until I retire and I have developed a new plan that is more secure. Had I failed to visualize the flaws in my plan, I could have wound up with a pretty frugal retirement.
Reflection allows us to identify problems or mistakes and change course.
One story that didn’t seem to make any of the mainstream news is the results of the recent audit of the Federal Reserve. This is a huge story and it has been either buried or ignored, depending on how you perceive it. As it turns out, the Federal Reserve lent out over $16 trillion during the financial crisis in 2008 and then refused to provide any information to the public. Thankfully, the Dodd-Frank law required an audit of the Fed and the results were nothing short of unbelievable. This was the biggest and boldest swindle ever devised.
I want to send a special shout-out to my Mom for forwarding this story. If it wasn’t for her, I may have completely missed it. I read the financial news and dozens of financial blogs every week. Nobody is talking about the results of this audit.
Millions of Americans were appalled at the way bail-out of the financial sector was crammed down our throats. But, I don’t think anyone realized how much money was involved in this scam. Everyone was told the bail-out would cost around $800 billion. And, we were told most of the money was quickly repaid. Both of these statements were complete fabrications.
The bail-out was sold to the public as being critical for people on Main Street. But, it’s obvious that it mostly benefited people on Wall Street. Banks and other recipients simply pocketed the money and no relief trickled down to taxpayers. There was very little permanent hiring from all of the squandered stimulus. And, banks stifled the loan modifications they promised to Congress. US corporations are sitting on mountains of cash, much of it coming from our treasury, and they have no intention of hiring any new employees.
Foreign Interests
One surprising finding of the audit was over $3 trillion in assistance was used to bail out foreign banks and corporations. Most Americans, including myself, had no idea how much of this money went offshore. Countries from Scotland to South Korea received hundreds of millions of dollars in financial assistance. And, there is no clear indication how much of this money is still outstanding. I’m positive this wouldn’t happen with approval from voters. And, I’m positive Congress and the President wouldn’t have voted for it while the details were being made public.
There is an unlimited supply of advice on how to become successful. Most of it was created to enrich the author, not the reader. I am about to share with you a simple yet reliable method for accumulating wealth for people of average income. It has been used by millions of people to become millionaires, yet only a small percentage take advantage of this amazing system.
Do you have what it takes to become successful? Then, read on.
Don’t skip down to the bottom or you’ll miss all of the good stuff.
It’s Not what you Earn
Image by Meddy Garnet
I met a lot of fun and interesting people in college. I also met some people who were fairly obnoxious. One particular guy in my Physics class was extremely arrogant. He kept interrupting the lecture to add his own comments. And, it was obvious to everyone he had no idea what he was talking about. Our professor, who was a brilliant Physicist, took this all in stride and kept on with his lecture. This student kept trying to prove how smart he was, but he wound up making a fool of himself.
One day, I was talking to a couple of my classmates at break and he blurted out, “How much do you make?” Even though I considered it fairly rude, I told him my salary. He immediately shot back, “Last year, I made $250,000.” I said, “Wow, that’s great. How much did you keep?” His response was, “Huh?” I said, “If you are a single guy and made a quarter mil last year, I sure hope you saved some of it.” The look on his face was priceless. It was obvious he had blown every penny. Instead of looking smarter than the rest of us, he looked pretty stupid.
No one gets rich by spending all of their money as fast as they earn it.
It’s Not what you Buy
Some people buy expensive things to look rich, when they aren’t. Some people want the finer things, even though they can’t afford them. Some people have no idea why they buy things they don’t even need. Some people hide their spending from their spouse, because they know it will cause a fight. In all of these cases, spending is a problem. Not only does it jeopardize that person’s financial future, it lowers their quality of life.
I know two people who loved to drive Cadillacs. Even though they both had working class incomes, they traded in their sweet Caddy for new a one every four years. Both of these people wound up broke at retirement and had to sell their houses. One moved to a trailer park and the other moved out of state. I appreciate a fine ride as much as the next guy. But, it’s a pretty heavy price some people pay to drive expensive cars. For people who can afford new cars, it’s not a problem. For those who can’t, it’s a financial disaster.
No one gets rich buying fancy things, but they sure can become poor.
The S&P 500 fell almost 4 percent last week as politicians in Washington argued about the debt ceiling. The Republicans and the President are finally close to cutting a deal to keep the government from defaulting. But, the deal smells more like a ploy to avoid the problem until the next election than a serious attempt to control runaway spending. As I was checking my portfolio amidst all of the political bickering I had a sobering thought; these are mostly the same fools that mishandled the financial crisis in 2008 and they are just as clueless about the debt ceiling.
How to Get a Balanced Budget
I love Warren Buffett because he has such simple and practical solutions to the most difficult problems. Although it sounds far-fetched to kick politicians out of office for running a deficit, it’s the best solution I have heard so far. Last year, the California state budget was over 100 days late and many government services were shut down. Angry voters passed an initiative that cut off paychecks to state congressmen if they miss the budget deadline. So, the California Congress, not wanting to miss a paycheck, passed an unbalanced budget and hid the deficits. The budget was declared unbalanced by the Controller, the Governor refused to sign it and their paychecks stopped. They were literally freaking out, because they run their personal finances as badly as the state’s and many members can’t afford to lose a paycheck. Before the next payday came around, a balanced budget was quickly delivered and signed.
Ending Deficit Spending
One interesting piece of news that has gone largely unreported is the Republican’s proposal, which passed the house this week, contains the requirement to vote on a Constitutional Balanced Budget amendment. This part of the bill was included to get support from Tea Party and other freshman congressmen, who were sent to Washington with a mandate to cut spending. I believe it’s a long-shot to pass at this time, but it’s a huge step in the right direction. If the 2012 election turns out anything like the 2010 election, I wouldn’t want to be the congressman on record voting against a balanced budget amendment. Voters have had enough of the arrogance and incompetence in Washington. Anyone up for reelection in 2012 is in real danger of losing their jobs.
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.
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