Why we all must save a little
Last week, the hashtag #MillennialRetirementPlans was trending on Twitter. The tweets offered humour, pragmatism and a range of emotions. The young were persistent in pointing out that what worked earlier won’t work now. Should we be in charge of our retirement or let the government provide retirement benefits and social security? This debate is old, and we have lived through the cycles of one school dominating the other. The baby boomers (born 1946-64) broke away from handouts and expected their governments to only provide the framework for retirement security. The focus moved from benefit to contribution. People began to save early, invest without touching the corpus, and allowed it to grow and fund their retirement.
Generation X (born 1965-80) stepped into their work lives during the period of boom and bust, making money or losing jobs into their adulthood. They were the consumerist generation. They got themselves into debt for homes and used credit cards happily. They worried when conversations turned to retirement, felt guilty about not doing enough, but hoped to begin to save sooner than later. They wished the government offered some social security.
The millennials (born 1981-96) are not sure what the long term holds. The primary marker for the millennials are that they are not in the formal workforce by choice; they like the gig economy instead. They increasingly don’t own homes and cars, for they find loans burdensome.
What would an educated generation that works hard, but finds the uncertainty they have to deal with too high, do? Retirement would be the last thing on their minds. The traditional answer to an uncertain future was savings. The baby boomers denied themselves the luxuries to save for the future. They saw the savings as their insurance against unexpected events.
Millennials’ view of their finances revolves around the balance between spending and earning. Since they are struggling to get past this basic equation of comfort, their ability to have a long-term view is limited.
The inequality in income rankles many who posted on Twitter. They find earlier generations have not only become very rich, but have also eliminated many traditional jobs that paid a steady income.
Health is a big concern, expressed in various ways in which it affects the millennials’ lives. They see themselves as being afflicted by lifestyle diseases, as they keep long hours and eat erratically. They worry about falling ill and losing their jobs. They don’t see themselves prepared, nor do they see solutions.
The distaste for savings is to my mind the core problem, a small and persistent saving as a habit. The modern times are not easy, and the millennials’ stories about uncertain jobs are real. How would you solve a problem you do not control?
It is the nature of economic cycles to not reveal the trends until we are well into it. That one ground rule remains unchallenged through this churn—the precious merit of our little savings that have been invested to protect us when in trouble. The millennials need not kill themselves to save, but holding back on one spend a day will go a long way. Put aside the cost of one meal a day, you will be surprised how it grows with time. Old fashioned, but immensely doable.
Remember the Trojan Horse story? The city of Troy thought that the wooden horse was a victory trophy, but it turned out to be the cause of their destruction. Similarly, in computers, a Trojan Horse is a malicious software program that users willingly run, not realising the damage until it is too late. How many such programs are you running in your professional life, which appear to be benign or even helpful even while it undermines every project and endeavour? Face and neutralise the enemy within yourself to unblock your career.
Logic is your enemy
All your education and work trains you to master the logical construct using which you analyse, explain and solve problems. However, combine strong logic with large fragile egos and what results is an ability to rationalise what went wrong, whose fault it is and how intentions were honest. Logic is meant to focus on problems. When it shifts focus to a person and why you are not really to blame for a failure – it becomes an excuse. Instead of trying to escape blame, simply discard all logic and take full ownership for failures even if it is not justified. Once that is done, focus only on the future with ‘Now what do I do?’ and commit to an action plan for today and this week.
Don’t over-plan or over-think
The 40-70 rule comes from Colin Powell, US Chief of Armed Forces and then US Secretary of State, the first black person in both cases. It says that leaders should make decisions when they have