Should You Take Your Parents’ Financial Advice?
This is an interesting and very personal article to write. I grew up in poverty. It didn’t seem like it based on my surroundings, but statistically our household income was in the federal poverty bracket. I was never taught about finances other than observing what my parents did and what they said growing up. I love my parents, but I don’t take their financial advice. I want to share with you why you probably shouldn’t either, where it will lead if you do, and what to do instead.
Why shouldn’t you take advice from your parents? Well, first off, it’s not just your parents. It’s your friends, it’s your family, it’s your teachers, it’s your mentors and anybody else who is not in the financial position you desire to be in. If you don’t want to be in the same financial condition they are in, you shouldn’t follow their advice. If you’re my age, your parents are baby boomers. At best, they may be upper middle class, with a home that could be mostly paid off if not paid off already and they may have $3–5 million in retirement accounts and a rental property or 2. They live a good life and have a good $8–10,000 in monthly income. Sounds nice right? Here’s the problem- they didn’t work in the same economy you did. You parents could buy a house for $40,000 while raising kids. They could save money in the bank at 10%. They had pensions. They had a lower cost of living and less inflation. They had less opportunity and less industrial disruption. They didn’t have the same environment you do now. Their advice worked 20–50 years ago, but since 2008 the economy is entirely different. If they had to restart in the environment you’re in, their plan wouldn’t work.
You were taught to get a go to college, get good grades, get a good job, buy a house, work for the same company until you retire and pay off your house.
Go to college?
College is no longer a viable option. Most graduates are graduating and not getting careers in the fields they got a degree in. They are swimming in student loan debt and if they do get the job in the field of their degree they are not going to make enough income to make ends meet…let alone build wealth. My average client regrets going to college in a big way. This may have worked pre 2000’s, but it is an outdated concept.
Get a good job?
What is a “good” job? Your parents said it was a job with a company that’s been around for a long time and is established. Why? Because they relied on staying in one spot, with the same company, and retire on the company pension plan. Today, a good job is with an expanding company that has large revenue goals, a hungry leader, and is willing to take risks. You probably won’t be with them your entire career and you may not use your degree. A good job will pay your for production and you will have to rely upon your own financial literacy to make wise decisions from there.
Buy a house?
Buying a home is something that was pushed in the industrial age by employers and banks. Employers wanted your parents not to move so they wanted your parents to buy an address they’d be locked into for 30 years. A bank wants money and that’s what a mortgage does for them. In 2008, everyone who owned a home found out that a home was a bad idea. Equity is dead and not an asset. Your parents didn’t buy a home because they thought it was an asset. They bought a home because they were advertised to. Inflation over the last 40 years has caused the dollar to reduced in value and therefore a home requires more dollars to buy. Your parents thought their home went up in value, rather than realizing it was only their dollars going down in value. You can’t fall for the same trick. If you buy a house, you will probably not invest as soon and you will probably not be able to save any real money for a while. Plus you will spend time taking care of the house instead of your family’s finances. Btw, the only benefit of the home is the tax deduction you may be able to get, which is why you would NEVER want to pay off your house.
Retire with the company plan?
Your parents had a pension. You don’t. It’s not the same thing. Your parents were told they would get guaranteed income paid by their company for the rest of their lives if they use the retirement plan. You have no pension. You have a 401k. With your 401k, there is no guaranteed income. There is 1 guarantee though! Fees! That’s right! On average, 20–30% of your overall 401k balance will go to fees. On average, 20–30% of your overall 401k balance will go to taxes. On average, 20–30% of your overall 401k balance will be eaten away by inflation. That means you will LOSE money by the time you access the plan for income.
76% of Americans are paycheck to paycheck. 65% of retirees have less than $30,000 in their retirement account. 1 in 4 retirees will have to postpone.
You can follow your parents advice if you want to. And if you do, you will be in the same exact financial position they are in themselves. Is that what you want?
If not, you will need a different plan. Click here to get access to a FREE financial plan I’ve developed to help you get on track!
Own Your Potential,
Grant Cardone Certified Coach
Jerry Fetta helps his clients gain more financial knowledge, make more money, keep more of it, and multiply what they keep.
If you feel like one or more of these areas is costing you money and opportunity right now, then get more information about Jerry Fetta and Wealth DynamX by going to www.WealthDynamX.com/contact
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