Key Takeaways:

[1:40] Millennials are starting their lives with student debt.
[6:10] The average college grad has $36,000 in debt.
[9:40] David paid off his college debt before he hit 30, but he had to work his butt off to do it.
[14:10] David recommends millennials take advantage of the ROTH IRA.
[18:50] Don’t think retirement, think financial freedom.
[21:10] Technology is helping to drop prices in a lot of industries.

Mentioned In This Episode:

http://www.moneyunder30.com/

Tweetables:

If you really want to build true security, you can’t rely on one income.

Maybe I don’t have to be 65 or 70, maybe I want some financial freedom when I’m 45 or even 35.

These college bureaucrats are just ripping people off.

Transcript

Jason Hartman:

It’s my pleasure to welcome David Weliver to the show. He is the founding editor of Money Under 30 and he join us today from beautiful Portland, Maine where Steven King is and George and Barbara Bush. Anyone else famous up there, David?

David Weliver:

I think those are the two we’re known for, yeah.

Jason:

Good, good stuff. Well, welcome, it’s good to talk to you. You know, the millennial generation, generation Y, faces probably unprecedented financial challenges nowadays, but at the same time it’s really an amazing time to be alive. There are so many opportunities. What are you guys writing about and talking about at Money Under 30 nowadays?

David:

Yeah, well, you’re exactly right, Jason. There’s two big things we’re dealing with and one is young people are starting their lives behind with student debt and it just gets worse every year. So, really, people who are graduating today versus 20-30 years ago have years ahead them before they can even get to the place that their parents and grandparents were when they finished school and their beginnings of their career.

So, that’s the bad news. I think the good news is there are more opportunities than ever to build wealth and to kind of take control of your own destiny regardless of what debt you might be started with and things like that. It’s really all up to the individual to say, I want this to be different, I want to, you know, make the most of my life, I want to build some wealth, and if the person has that drive, they can go anywhere, the sky is the limit.

Jason:

Do you have any stats on this? Like, how many millennials are falling for the scam that I call the, government student loan debt industrial complex?

David:

A lot. We actually do..

Jason:
What percentage of that generation is falling victim to that? The only financing debt, the only loan debt that is not dischargeable in bankruptcy, literally no second chance. I mean, I wouldn’t say bankruptcy is an ideal situation, but there are many stories of people and America has – compared to other countries, is pretty forgiving about that and giving people a second chance to start out in life. Now, I’ve never declared bankruptcy. There are many stories of people who have become incredibly successful after a bankruptcy, you know, they came out of it, formed businesses and employed hundreds and thousands of people sometimes. It’s kind of a two edge sword, obviously.

David:

It is, but you’re absolutely right. The numbers are pretty staggering. We recently did a study of millennials between the ages of 21 and 30 and found that of all of those people, so that includes recent grads and people who have been out for a few years, but about half of them, 47% have student loan debt, but when you look at the recent graduates, people that are graduating just last year, according to a group called The Institute for College Access and Success. Among graduates in 2012 the rate of student loans was 71%. So, 71% of all graduates have student debt and we found in our study the average student loan debt of our respondent was $36,000. Of course, I hear stories all the time where the people have doubled that, tripled that. Some people have six figure student loan debt just for a bachelors degree.

Jason:

That is insanity. I mean, with the price – with technology, you know, the cost of education should be plummeting. It amazes me. I used to live a block from ASU when I lived in Arizona for four years, it amazes me that how many of these kids are taking their college courses online. That’s literally almost no cost to the university. It’s completely scalable, you look at all of the price of everything technology has affected has just plummeted, yet college tuition costs going through the roof. This is insane. It’s backwards. You can tell these 12-hour-a-week professors and these college bureaucrats are just ripping people off. I mean, it is crazy.

David:

It is and it’s, it’s crazy and it gets you angry and it also makes you feel bad for the people that are graduating with these kinds of debts, because they have, like you said, for them bankruptcy isn’t even an option. They have two options, they can work and hustle and do whatever it’s going to take to pay these debts off and it’ll take them a very long time or they can basically go underground if they wanted to default and I was reading a column just last week about someone who has done that. Who made the conscious decision to stop paying his student loans and he’s aware that most of society considers him a deadbeat, but he also just was looking at his life saying, I only have so many years to live, do I want to be in this prison forever that I may never get out or do I just want to start doing things with my life that I want to do and that’s what he chose and it’s probably not for everybody, but it was an interesting perspective.

Jason:

Yeah, very interesting. So, in terms of the stats. You talked about the number of college grads, I think, that have student loan debt. I think you said the average was $36,000, is that the average?

David:

Yeah, that’s right.

Jason:

Wow, when you’re just starting out and maybe your first job is going to pay you $18 bucks an example – I mean, granted in Seattle you can go work for $15 an hour at McDonald’s, but your McDonald’s meal might cost you $64! You know, obviously that passes right through the consumer, which few people seem to understand. I mean, that is an incredible burden, but what percentage of generation Y, you know, you’re looking at 80 million Americans here, the largest demographic cohort in American History. That’s a big swath of people. It’s slightly bigger than the baby boomer generation, which is about 76 million. What percentage overall has the student loan of that, you know, 80 million for example, do you know that number? That’s what I’d be really interested in knowing.

David:

Yes. That’s what we looked at in our survey which we did, which was of about 400 21-30 year olds across the country. It was a random sample that we got. So, we found the number of recent grads about 71%, but it falls when you take that whole ten year demographic to about 47% presumably because people five years ago even were graduating with less debt and have paid that off. So, or some people may pay that off by the time they’re 29 or 30, but that’s still half of these 80 million people. That’s 40 million people that are dealing with student debt.

Jason:

They could be buying their first rental property. You know? They could be using that money to start a business. It’s just crazy. You look at all these stories like Zuckerberg, Jobs, Gates, et cetera, they all dropped out of college. Now, granted, when Gates and Jobs went to college it was much less expensive back then. I mean, you know, not with Zuckerberg. Maybe that was part of their success secret is they could get their parents to invest in their business rather than investing in their college education, you know?

David:

That’s an interesting point, it may very well be, but as you were saying, you know, if they didn’t have, if these 40 million young Americans didn’t have student debt, they could be buying rental property, they could be starting a business and whether that’s their ambition or whether it’s simply to start saving some money and maybe buy a house for themselves, that’s become increasingly hard and they’re going to have to put that off because of these student loans.

You think about somebody who, you know, wants to get a mortgage and if they have a thousand dollar a month student loan payment and they have a modest income, are they even going to qualify for that mortgage? So, these student loans are deferring people’s financial goals. You know, both their ability to start investing and start building wealth, but also just the goals we have for life.

Jason:

Very interesting. Well okay, so you know, we’ve talked about the problem, certainty, what should generation Y do about the problem? Or is there really nothing to do? Just work hard and pay your debt? You’re certainty not going to bankruptcy out of it, you’re a debt slave, there you go.

David:

Yeah, certainty there’s an opportunity for teenagers and people going into school to look at it very carefully what you’re going to borrow and hopefully not borrow and maybe make some other choices, but for the people who are already out, the options are pretty limited and it really comes down to work your butt off. You know, that’s what I did when I was in my mid 20s. There were a few years where I started my own business, but it was – it took a few years to really ramp up and really do anything, but I was working on my business. I had a full time job and I also had a part time job, but you know, nights, weekends, I was serving coffee.

So, I took all that extra money that I could earn at the second job and eventually when my business kicked it from that and I put it all towards my debt. So, I was able to pay it off before I turned 30 and I think, you know, for some people, if people have that average, that $35,000 or $25-35,000 of student loan debt, maybe that should be your goal to say, alright, by the time I’m 30, I’m going to bust my butt and pay this off. Just of kind of do what it takes. It’s not fun. The unfortunate part about it is you’re kind of working really hard through some of the best years of your life if you want to look at it that way.

Jason:

It’s character building.

David:

But it is! It’s character building and then, you know, by the time you’re 30, you still have a heck of a lot of life ahead of you to now be able to begin investing and to be able to pursue other goals. So, that’s kind of the reality is you’ve got this debt, now you have to hustle to get out of it.

Jason:

So, what do you think millennials should be doing? Should they be investing, should they be doing a startup? Should they go to work for a company? What..of the different paths to financial success out there, you know, maybe define what path you see working from your followers, your readers and so forth?

David:

The interesting thing is, you know, you mentioned all those things, you mentioned work for a company, starting your own business, investing in real estate. I think really what’s going to work is trying to do all of them. I think, because one, it comes down to the individuals.

So, you know, I choose the entrepreneurial root. I started a business and it kind of comes naturally to me and I think, oh, why doesn’t everybody do this? But I have enough conversations with friends and readers of my blog to know that there are a lot of people who have no interests in starting a business.

They like their supposed security. I don’t think necessarily working for a company is more secure than running your own business, but that’s the feeling they get, is that, oh, get a paycheck, it’s more secure. I can clock out at 5 o’clock and not worry about it till Monday morning, but I think that everybody needs multiple sources of income at some point in their life, because if you really want to build true security, you can’t rely on any one thing.

So, I encourage people to try things out, to go buy a rental property, to invest in mutual funds, to start a business on the side. In addition, the be an entrepreneur you don’t have to quit your job. It’s what I did. I was working my full time job and starting to work on my websites and my business on the side. You don’t have to quit your job to get that second source of income and I really think that the most successful people in the coming decades will be people that try all these things, find the ones that work, and then kind of snowball and get behind the ones that are working for them and that they enjoy.

Jason:

Yeah, definitely So, okay. So, what are some of the best investments? I mean, we talk about real estate a little bit, but taxes are the largest expense anybody will face in their life, you know, certainty income property is the most tax favorite asset in America, but there are other strategies out there. What are you recommending for people?

David:

Yeah, so you know, real estate is a good one. I’m not the expert– you know far more about real estate investing than I do. You know, the one, and I’ve seen it work wonderfully for some people. I think some people get – they don’t realize you have to be smart to – it’s not as easy as it sometimes seems, but certainty if you have the drive and the knowledge or the desire to get the knowledge required, it can be an incredible way to go.

The biggest thing that anybody could do regardless of their business interests, their real estate interest is to take advantage of retirement accounts that are tax favored, because, like you said, taxes are just going to kill you over the long run and I think the ROTH IRA for people in their 20s who may not be earning a significant amount yet, but hopefully will build wealth over time, you know, when they retire that money is going to be tax free and we can only imagine that taxes are going to go up between now and 30 years from now and someone who is 30-40 years from now, someone who is 30 might be retiring.

So, that’s one I think it just kind of a no brainier that I think everybody should take advantage of and then once they get that covered they can look at other opportunities.

Jason:

Yeah, you know, most people don’t really get savvy about taxes until they are maybe in their 30s, mid 30s I think, right? Or their finances in general. You know, by the way, I want to get your opinion and this may be a little bit of a heated discussion on this, but is there any difference in terms of the genders? You know, in terms of who’s doing it better, who’s paying better attention to this stuff? You know? If you care to comment. I have an opinion about this, by the way. Or different locations or socioeconomic backgrounds or you know, even like immigrant versus non-immigrant populations? I mean, certainty it’s been said that immigrants appreciate all the things America has to offer more than those who just handed it to them by luck of the genetic dice, right?

David:

Yeah. No, I think, you know, anecdotally, I don’t have data to support this, but from what I’ve seen, I think you’re right. I think there are some differences and again, individuals are all going to be different, but I have seen, I would say, more men that I’ve known get into managing their money sooner. For whatever reason, maybe they tend to be more quantitative.

Jason:

Yeah, so that’s interesting that you say that, because I was kind of thinking the opposite and I’ll tell you why. So, I agree with you, of my podcast listeners and, you know, I run a network of 20 shows, so we’ve got a wide variety of shows and topics, but mostly personal finance and investing and it’s definitely skews male. Okay, just no question about it. I say it’s a good anecdotally 70% men for my listenership, at least those who reach out and contact us and those I see, but you know, it’s long been said that girls grow up faster. They are kind of a little more responsible, a little more careful, maybe; more risk adverse. I think males generally skew toward being a little more quantitative, that’s true. So, yeah, that’s maybe, I don’t know, do you agree with that?

David:

Yeah. I think I might – well, the interesting point about that, the converse point about that, so that’s what I see, you know, I see males being a little bit more quantitative. However, my blog actually skews female, not by the same margin, but it might be close to 60/40 and you know, that’s something I haven’t really explained yet, although I think the male readers who are, they get really into, let’s say, real estate investing – investing in general, whether it’s real estate, stocks, what not. My website is really catering towards a big picture view of the basics for everybody who is just getting into managing their money.

So, they kind of graduate from my site, they might go on to, you know, listening to your podcast about real estate or to go on to some other investing sites, so I don’t know if the kind of beginning nature of it appeals to more women than men or these men that are kind of quantitative and really obsessed with the numbers are kind of graduating to other sites, but I’ve always found that kind of interesting too.

Jason:

Yeah, it is interesting. Okay, what else do you want people to know, David? Maybe a question I didn’t ask you?

David:

You know, I think it comes down to figuring out what you really want to do with your life and hat it’s going to take to get there, because one of the challenges I face, I think, writing for 20 somethings and it certainty it was me when I was 22-25 is we talk about retirement and so much of financial information out there, the goal is retirement, but to someone who is 25 that means almost nothing, because, you know, your view of retirees or your grandparents who might be sitting on their boat in Florida and it seems so far away and so different than the reality you are now that you just can’t relate to it, you can’t get excited about saving for it, certainty.

So, I like to rephrase it as financial freedom and the freedom to do what you want to do without worrying about reporting for work 9-5. So, once you kind of imagine that, you say, well, okay, maybe I don’t have to be 65 or 70, you know, maybe I want some financial freedom when I’m 45 or even 35, maybe not forever, maybe I’m not going to be ready to, you know, just quit my job and do whatever at 35, but maybe I could work part time or maybe I could take a year off and so when you start to think about it that way, these other opportunities start to make a lot of sense like starting your own business or investing in real estate, because they create additional sources of income and additional pathways to kind of get to that spot of freedom sooner than you could than if you just kind of stayed in the corporate world and in the system of putting away 5% a year.

Jason:

Yeah, definitely. Let’s talk about some of the really things nowadays. You know, we kind of started off on the negative side here, but I guess maybe that just reflects my total disappointment in the way the government has backed these student loans and basically thrown so much money at these universities that they’ve done the natural thing. They sat back and collected the money and raised the prices at 2-3-4 times the rate of real inflation. I mean, it’s absurd. It’s obscene, it’s a scam, but at the same time, technology is amazing.

Like, we are living in an amazing time and history and I don’t know, David, maybe they thought the same thing when the steam engine was invented or the light bulb, but it feels like right now we’re at this inflection point where, you know, because of the networked world and the power of networks through the internet and the cost of things, of some things; certainty not college, is just dropping the accessibility to form alliances with people globally, you know.

The raising three billion is coming online and the possibility of Facebook and Google creating free, global internet access for everybody on earth. Wow! What an amazing time to be alive, it really is and you look at some of the things that are coming down the pike in terms of, you know, bio-tech, nano-tech, just general technology in all its forms, it is truly amazing. The world’s problems are just being solved left and right, you know? It’s incredible the kinds of ideas and innovations out there nowadays.

David:

It is, it absolutely is. It makes you think back to other transformations in history and how it’s so amazing and you can kind of see what might happen in the next five years, but then thinking about what’s going to happen in the next ten years, certainty hundred years, you can only imagine, you know, automobiles are a little over a 100 years old and think about what the world was like before, you know, everyone had cars and now computers and phones and the nano technology like you talk about. I mean, it’s just going to be unrecognizable the world we’re living in 50 to 100 years. It’s crazy.

Jason:

Yeah, it really is, it really is. What areas do you see that, you know, maybe are particularly applicable to generation Y?

David:

As far as technology goes?

Jason:

Or anything. Business opportunities in general, but they all seem to be tech based nowadays, you know.

David:

Yeah, no, absolutely. I mean, I think, I think you hit on it, you know, the bio-tech and medical advances are going to be huge simply because, you know, we don’t know when the breakthrough is going to come, but this type of stuff is going to be what’s going to cure cancer and what’s going to have these just absolute world changing impacts and we don’t know when or where that’s going to come from, but that’s what these industries are working on and I think the other one, you know, the other one is different transportation methods and energy sources, you know.

The idea of the electric car has been around for a long time and everyone has tried and failed and its never taken off. Now look at Tesla, you know, they’ve created this desirable really nice car that has proven it can run on a battery and so the amount of money that’s just being poured into batteries, that’s just one thing that’s going to attract billions of dollars over the coming decades and really if they’re successful, very much change the world, because if they can get a car to run on batteries that suits our needs as gas cars do now, you know, then what’s going to happen? The batteries will get cheaper and lighter, so you put them in ships , you put them maybe in airplanes someday, they’d have to get really light, but you could just kind of see that direction too, but again, I’m just scratching the surface, like you said, there’s so many areas that are like this, but that’s what you have to think about.

You have to think about technologies and visions that aren’t just going to make a small dent in how we live life and how the world works, but literally solve problems for billions of people and when you find something on that scale, you know you’re on to something.

Jason:

Yeah, it really does feel like, David, we are on the verge of some real quantum leaps in so many areas, so, like I said, all things considered, it is an amazing time to be alive, you know? It really is an amazing time to be alive, but David, please give out your website and tell people where they can find out more and any closing thoughts you have?

David:

Yeah, absolutely, thanks Jason. It’s MoneyUnder30.Com and it’s a free website featuring financial advice from just getting started and figuring out you’ve got student loans, you just got a job, what do I do from here? To starting to invest and starting to think about your next moves whether it’s starting a business or it’s real estate or looking at the stock market, so it’s all there.

Jason:

Good stuff, good stuff. Great resource. Thank you and keep up the good work, it was great having you on the show.

David:

Thanks so much, Jason, yes, you too.

Announcer:

This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email [email protected]. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

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