Young, Educated, and in Debt
Many of these highly educated people graduate saddled with student-loan debt, quite possibly the worst of all possible debt. Unlike a car loan, home loan, or business loan, student loan debt is rarely forgiven. A student cannot declare bankruptcy and expect to be released from the loan. Student loan debt is an albatross around the neck of a student for life, accruing interest for life. Many will have problems buying a car, home, or investing for their future until their student loan debt is paid off. The current overhaul of the student loan programs may address these issues and challenges.
Many of these young people are boomerang kids, kids who leave home, only to return to live with mom and dad. This makes many moms and dads, the sandwich generation, people who are now caring for their kids and their parents, often with three generations living under one roof.
Other countries offer free higher education. In America, we create debt slaves out of our students.
Q: Is this why you say everyone needs a second chance? Because some of the rich are becoming poor, the middle class is shrinking, poverty is increasing, and our students are highly educated, underemployed, and deep in debt?
A: Yes. The world is changing and money is changing. Those who are operating in the past, with the old-world rules of money, are being wiped out in the present.
We live in the Information Age. There is an abundance of information, and much of it’s free. But without financial education, a person cannot convert that information into knowledge.
Q: And if knowledge is power, then millions are highly educated but without much power. Is that why millions of people need a second chance… to get their power back?
A: Yes.
Q: The Millionaire Next Door was published in 1996. Rich Dad Poor Dad was published in 1997. What was the difference between the two books?
A: The Millionaire Next Door was about net-worth millionaires. Rich Dad Poor Dad was about cash-flow millionaires.
Q: There’s a difference?
A: A very big difference. Many net worth millionaires were counting their liabilities, such as their home and their car, as assets. When the real estate and stock markets crashed, many net-worth millionaires were wiped out as the value of their liabilities crashed.
Many cash-flow millionaires, millionaires who receive their income from real assets, got richer. They got richer buying the liabilities of the net-worth millionaires at bargain-basement prices.
Q: So without financial education, millions do not understand the difference between the different types of rich people?
A: That is correct. There are many different ways a person can achieve great wealth. For example, a person can inherit wealth or marry into wealth. As Warren Buffett often says, “There are many ways of getting into financial heaven.”
Since my poor dad was poor, a man without assets, I had no wealth to inherit. Nor did I want to marry for money. At an early age, I decided I would gain my wealth my rich dad’s way—via financial education and acquiring assets.
Q: So… without financial education, most people don’t know the difference between assets and liabilities. So their wealth is stolen via a lack of financial education. Is that what you’re saying?
A: Yes. If a person knew the simple definitions of basic financial words, their wealth would increase. The good news is that words are free.
Past, Present, and Future
Q: And that is why millions of educated, hard-working people are losing their wealth? They have become educated slaves to money, much like the uneducated slaves before the Civil War. Is that what you are saying?
A: Yes. Education—or the lack of education—is one of the keys on the key ring of those in power.
Q: What is happening to those in power?
A: The Information Age is causing those in power to lose power. That’s why your personal financial education is more important today than at any other time in history. Desperate people in power are doing desperate things to hold on to their illusion of power.
Q: What do you see in the future?
A: Once again, pictures are more powerful than words. I will show you a few pictures, add a few words, and let you decide what the future holds.
On this one chart, you are looking at the past, present, and future of the Dow Jones Industrial Average. It is not a measure of the whole economy, but it is a snapshot of what has been going on in one part of a complex economy.
Q: So there are three choices for the future: up, down, or sideways?
A: Yes. The choices are always the same.
Q: What do you see for the future?
A: The best way to see the future is to look at the past. In the chart we just looked at you can see the past and an event known as the Great Depression, an event marked by the stock-market crash of 1929.
Q: That was the giant stock market crash of 1929?
A: Yes.
Q: Could a next crash be bigger?
A: Yes.
Q: What would happen if the next crash were bigger?
A: Look at the Great Depression.
The Great Depression, when measured against the Dow, lasted 25 years, from 1929 to 1954. In 1929, the Dow hit an all-time high of 381. It took 25 years for it to reach 381 again. This is an alternative point of view, as there are those who believe it ended in 1939.
Q: Could we be entering a New Depression?
A: Yes. Many people already are in their own New Depression. That’s why food stamp use is up, the middle class is shrinking, students who are loaded with student-loan debt can’t find jobs, and many of yesterday’s millionaires-next-door are broke. On top of this we have the first of approximately 76 million American baby boomers retiring. Many, if not most, of these aging baby boomers don’t have enough money to retire. Advances in healthcare and medicine may mean these baby boomers will live longer, while the cost of healthcare is likely to continue increasing, as is the cost of food, fuel, and housing.
So-So Security
Take a look at the chart below on the condition of the United States Social Security Fund.
Q: What does this chart mean?
A: It means different things to different people. If you are young, it means you’d better not count on the government to take care of you. If you are a baby boomer, it means the money you paid into the Social Security fund is gone. If you are of the World War II generation, your timing was good.
Another interesting chart is this one on the National Debt. It tells another story.
Q: What story does this chart tell?
A: Again, it depends upon who you ask. For most people, and the average American, it means nothing. Without