Introduction
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The world is broken. We live in a time where Baby Boomers have accumulated vast amounts of wealth in property and assets, while their Millennial children struggle to make ends meet, let alone buy a property or save for a pension.
Millennials vs Boomers
Those aged 16–34 in the UK make up around 30% of the total population, yet have only 14% of the total wealth. Those aged 65 or over similarly make up around 30% of the population, yet have 36% of the total wealth – 2.5x more!¹
This problem will be exacerbated over the years to come because Millennials are renting properties in proportions that haven’t been seen since before the Second World War. Private rented housing has grown almost twofold over the past decade.²
FACT
Over 30% of Millennials now expect to rent a home for their whole lives!³
Common sense financial advice has always been to buy a property as soon as you can because anything paid in rent is dead money. Sound as this advice may be, Millennials are not able to save the deposit required to get on the property ladder, consigning them to rent for years or even decades to come.
And who are they renting from? You guessed it: the Boomers. As a result, this wealth divide is only set to grow over the coming decade or two. Millennials will continue to pay rent to the Boomers, making the Boomers’ pots larger and larger, while the Millennials continue to struggle to pay the rent each month (let alone save anything for the future). According to the UK Ministry of Housing, Communities & Local Government, the Boomers are expected to acquire even more rental properties, pushing house prices up further and continuing the cycle.⁴
A Bleak Millennial Future
This issue has emerged in the years since the turn of the millennium and is one that governments and policy makers have yet to fully take hold of. But just imagine the world 30 or 40 years from now when most Millennials should be retiring.
The problem is that none of them have any savings to retire for the next five minutes, let alone what could be five decades. (Yes, rising life expectancy means if you’re 30 today, you might plan for a 50-year retirement.)
During their 20s and 30s Millennials were too busy enjoying life and/or struggling to make ends meet to really think about saving for the future. They just got by and enjoyed life where they could, taking holidays and experiencing the world as and when the opportunity presented itself.
During their 40s and 50s – when previous generations were waving goodbye to children and the real saving started – they were still struggling to pay rent. They never did manage to save a deposit and there’s little hope of them doing so now because they have two children (born when the parents were in their mid-30s – evidence suggests Millennials are having children a lot later in life).⁵
As they enter their 60s and 70s, now the children have left home (if they can afford to that is), finally some saving can start. But it’s too late: not only do they not own a home, so they’re still paying rent, but they’re saving so late in life there’s no time for the power of compounding (where interest earned on money then earns more interest) to work its magic. As a result, they have to keep working to make ends meet.
As they move into their 80s and 90s (yes – reaching the age of 90 will be commonplace by the time we Millennials get there), their health starts to fail. They’re no longer able to work and so they have to retire, but they have very little to retire on. They are reliant on the state pension or social security (if these even exist by then) and have to cut back on everything (food and heating included) just to get by.
Does this sound like a future you want a part in? I didn’t think so.
The other big issue we have is the media making this all much worse. The media loves to run stories about how Millennials will never afford a home or be able to retire, and on how the Boomers are taking over the world with their burgeoning buy-to-let property and share portfolios.
Millennials are resigned to a life of financial strife. They have submitted themselves to never owning a property, never having substantial assets and possibly never being able to retire – and this message of doom and gloom is being propagated by the media every single day.
What’s worse is that Millennials are starting to accept this as the status quo. They’re hanging themselves out to dry and thinking, why bother?
Something has to give. Something has to change.
Having read all of this, you may have reached the conclusion I have a problem with the Boomer generation. In fact, this couldn’t be further from the truth. I love the Boomers. They’re the clients I work with every day and who I’m fortunate enough to help with their retirement and estate planning. They’re the reason I have a business and the reason I’m well on the way to achieving my Freedom Figure by the age of 35!
The Boomers I work with all have a fascinating story to tell. They’ve often come from humble beginnings, they’ve suffered and strived to get where they are today and I believe they deserve the wealth they’ve accumulated. They also happen to be the people who pay my bills and I could not be more grateful to the clients who’ve chosen to work with me.
You might also be thinking I’m about to go on a socialist rant and demand the world’s wealth be divided up fairly between the generations. Let’s tax the rich and give it to the poor! Again, you would be very, very wrong.
I believe in capitalism and the free market. I believe that hard work, ingenuity, innovation and value creation are the reason people become wealthy in the majority of cases – so why shouldn’t the people who’ve added the most value benefit from their life’s work?
The Boomers have invested a significant amount of blood, sweat and tears to accumulate their wealth. They’ve often lived fairly simple, frugal lifestyles in order to scrimp and save during their working lives. They have foregone the fantastic experiences and travel adventures that some Millennials take for granted in order to build their nest egg, so why should they be deprived of their life’s work?
Is this also the solution for us Millennials, then? Perhaps we need to stop enjoying the world, stop eating out, stop enjoying experiences and adventures, too? Perhaps we should all live at home until we’re 30, eating baked beans so we can save a deposit, do the sensible thing and buy a house and live out our days scrimping and saving every penny so we can carve out a reasonable retirement. Doesn’t appeal? Didn’t think so!
The genie has been let out of the bottle on all of these things that Millennials love to do, and I’m sure it would be pretty hard to put it back in.
Once you are used to a certain type of lifestyle it’s very hard to scale it back – and let’s be frank, who would want to? Why would you want to stop travelling and enjoying the world? Who doesn’t want to enjoy different experiences and take in different cultures? Why would you want to sit there with the lights off, shivering, just so you can save a house deposit? I would rather not, thank you very much!
There Is Another Way
I believe there’s a third way. Somewhere between the extreme saving of the Boomers and the extreme spending of the Millennials. I believe there’s a new world order. One where people can enjoy fantastic experiences on a regular basis, travel the world and see all it has to offer, eat out with friends over wine and laughter at the weekend yet STILL be able to buy a house, accumulate a nest egg and STILL enjoy more of the same during their retirement (if that word even has a meaning anymore).
You might now be kicking yourself you’re not a celebrity or a YouTube star or some other special person. After all, what normal people achieve True Financial Freedom by the age of 40, while still enjoying fantastic experiences, travelling the world, taking extended sabbaticals and so much more? Surely this is just fairy-tale land?
The truth is there’s a growing, underground movement of Millennials doing just this. These are not pop superstars or the latest Instagram sensation. They’re normal people with normal jobs who’ve decided to do things differently.
They’ve decided they can have it all – the house, the lifestyle, the retirement – all while doing the work they love every day. They’re using a simple tool (one we’ve all grown up with and is still under our noses) to create income streams they never thought possible while sitting on a beach sipping margaritas.
So, at this point you have a choice. Do you subscribe to the self-fulfilling prophecy of Millennial doom and gloom? Do you bury your head in the sand, spend every penny you earn and then live a retirement on fish finger sandwiches with the heating turned down (if you can even afford to have it on at all) in your rented apartment? Do you believe the media who tell you you’ll never have a house or a retirement, because it makes you feel better about yourself?
OR, do you take matters into your own hands? Do you decide right here and right now to do something about it? To craft a life of True Financial Freedom, one where money works for you and not the other way round? A life where you can do the work you love every day because you want to, not because you have to? A life where money is your friend, not your enemy? A life where you are truly free?
If the latter appeals, join me as we start on this most amazing of Journeys.
Matthew Smith
London, February 2021
1 www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/
2 www.gov.uk/government/collections/english-housing-survey
3 www.bbc.com/news/business-43788537
4 www.gov.uk/government/collections/english-housing-survey
5 www.forbes.com/sites/ashleystahl/2020/05/01/new-study-millennial-women-are-delaying-having-childrendue-to-their-careers/?sh=127fbcf7276a
1
Meet Our Protagonists (Spenders vs Savers)
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As I’ve moved beyond the Big 3-O, I’ve found myself reflecting more and more on my childhood and the way my parents handled money. You see, I think my parents actually had things pretty much bolted down when it comes to the financial game of life.
We went on good holidays, had a nice home, good food, and hosted events for friends and family. It’s easy for children to take all of this for granted. It becomes part of their day-to-day life. It’s not until you’re much, much older that you start to appreciate the financial cost of this wonderful lifestyle.
Before you start picturing me in a mansion with a silver spoon in my mouth, let me be clear: my parents were not rich. We were comfortably middle class, distinctly average, but certainly not rich.
My mum stayed at home to look after my brother and me for the majority of my childhood, before returning to her job as a school chef once we were a little older. My dad was a sales and marketing manager and used to travel to all sorts of exotic-sounding places for work. Perhaps that’s how I caught the travel bug – I was always curious where Dad was going on his adventures.
We lived in what you might describe as the average 4-bed detached house in a village on the outskirts of town. Our old family home would probably be just above the UK average house price, but there were certainly no electric gates, sweeping driveways or Range Rovers on the drive!
For a significant part of my childhood, my dad drove a Toyota Picnic (perhaps one of the worst cars Toyota has ever made) and my mum had a clapped-out Ford Fiesta that had a choke to get it started (Millennials – Google it if you don’t know what a choke is!). So you see, we were comfortable, but certainly not rich.
As a child, money seems to grow on trees, doesn’t it? Children are always asking their parents for the latest gadget, the newest pair of trainers or the next must-have collectible toy or game, but they never pause to think about the pressure this puts on their parents. As kids, my brother and I were no different.
FACT
A whopping 6 in 10 parents admitted to buying their children the latest gadgets or toys just so they could fit in, according to a report from the Skipton Building Society.¹
What I didn’t appreciate back then (and have only come to learn later) is that while all this fun was going on, behind the scenes, my father in particular was preparing a nest egg for the future.
He had a philosophy of Spend Half, Save Half when it came to any excess income and I guess in this respect he was rather unusual, both back then but over time as well. He found a balance many people never achieve. He was enjoying his money now while also making sure he had something put aside for the future.
Perhaps this is because he was in the generation between the Boomers and the Millennials: Generation X. Meanwhile, each week, my mum would keep tabs on our family budget using an A4 ledger book and she still does this to track her budget to this day. Some might call it a little old-fashioned (I prefer Microsoft Excel myself), but it is the principle that matters – those who track and monitor what they spend generally have a better handle on their finances.
As children, we received a small amount of pocket money each week, but if we wanted anything extra, we had to earn it. My parents would usually have a couple of little jobs to do around the house for me to earn an extra pound or two, but these jobs always ran dry before I was done earning (I guess my love of finance started at an early age). Dad would always tell me that if I wanted to earn more I had to go and find ways to make more – and that’s exactly what I did.
Aged eight, I started my first business washing cars on our street. I would gather up a group of friends and go knocking on doors along the road asking if people wanted their car washed for £5. This worked great for a week or two, but then people got tired of being asked and the business dried up. That was my first experience of how the world of business and money really works.
Dad would often set us little challenges, though, and in doing so he instilled a work ethic that remains to this day. The pocket money we received was sort of like social security, a small weekly payment that you received regardless of your effort. The jobs Mum and Dad had available in the house were the low-hanging fruit, the easy money, but they were always limited. If you wanted to earn the big bucks, you had to go and innovate something that would generate cash.
I was incredibly lucky to have these money lessons so early in life, but the truth is that many people don’t have any financial education at all.
Spender or Saver?
Most people fall very heavily into one of the main money archetypes: the Spender or the Saver. They happily assume one label or the other and think it defines them. They never see the other side, and this makes them rather dysfunctional with money as a result.
Spenders tend to live for today and throw caution to the wind. They don’t care about saving for tomorrow. Savers tend to save for tomorrow but sacrifice their enjoyment today. Clearly, neither delivers the happy middle-ground that many of us seek.
Developing the habit of spending is very easy when it’s not your money you’re spending and you can just ask your parents for all the things you desire (not that you always get them, mind).
These habits became ingrained and as I entered my early teenage years, with the increased financial responsibility that came with it, I started to struggle. I was learning just how hard it was to accumulate money to buy the expensive things I craved. When you’re earning £3.30 per hour working in the local pub, it takes a long time to save up for the latest iPhone (or Sony Walkman phone as it was back then).
It took so long in fact that I couldn’t wait to get that shiny new phone in all its orange glory. No, I begged and begged my dad to get it for me until he couldn’t take it anymore and agreed I could buy the phone, but with one big condition. He insisted I borrow one of his credit cards (I know, what was he thinking?!) on the basis I would pay the monthly payment and any interest incurred while paying it off.
Brilliant, I thought as I scurried down to the shop to get my phone. This was great as I could get the phone now and only have to pay back £16 per month – what could be better?
I remember that trip down to Dixons to buy the new phone. I felt so grown-up paying with my credit card (with Dad there to supervise of course).
I rushed home with the bright-white box and ripped it open with the excitement of a child on Christmas morning. I remember plugging in the headphones for the first time and playing my favourite album (yes – it was a big deal for phones to play music back then).
However, the joy of those initial moments with the phone soon wore off (as they always do with new purchases), and over time it just became normal. As the years passed, the phone started to become obsolete and eventually I replaced it with the latest model.
The problem with all of this, however, is that I was still paying off the credit card bill. The £16 per month was barely covering the interest, so even three years later the balance had barely changed.
It was only many, many months and years later as I entered my early 20s that I appreciated the gravity of what was happening to me. I had become a Spender. I was spending as much as or, in many cases, more than I was earning. I was reliant on credit cards to fund my lifestyle, merrily adding to my balance as time went on.
This was my first (and last) experience with consumer debt and fortunately the balance only grew to a few thousand pounds, but it could easily have been much more.
The initial joy of the new purchase soon wears off and you’re left with an ever-increasing pile of debt to manage and worry about at night.
I Blame the Parents
Because my parents had never taught me all the lessons about money they were using in their own lives, I only got to see the spending part – and I became a Spender. I yearned for the lifestyle I’d enjoyed growing up and a little bit more. I’d subscribed to the children-should-have-a-slightly-better life-than-their-parents motto and this had pulled me off track.
I’m grateful to my dad for letting me borrow his credit card at such a young age as it taught me so much about how easy it is to spend money and how difficult it can be to pay it back later on. I am not sure if he knew what he was doing when he let me have that shiny rectangle of plastic, but it has been one of the greatest financial lessons of my life and the catalyst for financial success I have enjoyed since.
It’s the reason I’ve made the transition that most people never make, from Spender to Saver (NB – it’s equally hard to go from Saver to Spender). But more than this, I’ve learned to find a happy medium, which is where we’re heading on this Journey.
In order to appreciate how to find True Financial Freedom and true balance in your life, first you must understand where you’re at right now. The vast majority of people fall firmly into the Spender or Saver category and it’s important you are honest with yourself about where you are. Only then can you start to make progress towards where you want to be.
If you’re a typical Millennial (there I go generalising again), then the media would have us believe you’re a smashed-avocado-on-toast-eating, paid-up lifetime Spender, so let’s start with figuring out exactly what characterises a Spender and see if you’re the exception or the rule.
So, What Is a Spender?
A Spender is someone who generally spends as much as, or more than (often much more than) they earn. They will often enter the world with a sense of entitlement and when it comes to a big purchase they will think, why shouldn’t I have it? I deserve this.
Hey, big Spender!
As our Spender grows up, their parents provide nice things and they have a good life. They go on holidays, have the latest trainers and always get a new iPhone when the time comes to upgrade.
After they graduate from school or university they get a job, and at the time the starting salary seems huge. After all, when you’ve lived for three years on a student budget, even minimum wage seems like a big pay rise!
They use this newfound income to enjoy things they couldn’t before. Perhaps they go out to eat more? Perhaps they buy convenience food to enjoy at home? Soon, along comes an opportunity to take a holiday with friends. Why not? they think. I’ve been working hard for this holiday, I deserve
