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4 Financial Truths For The Next 20 Years

by Chris Poindexter

Other than a core of universal basics, the bulk of what we know about investing today is rooted in the last 50 years. Much of the conventional wisdom we share today has been handed down from our grandparents. That’s not all bad as our grandparents were pretty shrewd people; mine didn’t believe in borrowing money, for anything. Apparently that DNA was passed down to me and that mindset has served me well in avoiding the entanglements of the modern debt economy.

Unfortunately 50 year old investment wisdom does not always adapt well to the modern world. The problem with conventional wisdom is that it’s a backward facing metric that tells you what worked over the last 20 years and may not be the optimum strategy for the decades ahead. Here are four mental traps to avoid when planning your financial future.

Mobility Is Worth More Than Stability

We previously discussed the tactical advantage of mobility both in combat and the modern working world. For the past 50 years economic prosperity has been dictated primarily by stability. Get good grades in school, get a good job, settle down, get married, buy a house and start a family. That Ozzie and Harriet mentality still pervades our modern world but the key to success in the new working world is mobility. Being able to pull up and move to where the opportunities are is worth more in the modern world than stability. In fact, the most stable neighborhoods by traditional metrics tend to have the highest unemployment rates.

Debt Is A Financial Anchor

The modern economy is a debt economy. There are even people like Robert Kiyosaki claiming that savers are losers and, in the economy of the past 50 years, he’s exactly right. In the next 20 years, in an economy where mobility is more highly prized than stability, debt is an anchor constantly dragging you down, even if that debt is leverage to generate cash flow, what most people would consider “good debt.” It’s still an anchor that ties to you to specific geography. In a mobile world the person with the least debt and fewest encumberances is the most mobile and has the widest possible array of jobs and experiences open to them.

Don’t Buy Into The Myth of Infinite Growth

The U.S. economy continues to expand at roughly 5% per year and our energy use continues to expand at between 2% and 2.9% per year. China makes that growth look anemic posting numbers between 8% and 10% growth year over year. As a mental exercise we all accept that infinite growth on a planet of finite resources is not possible yet that truth has not modified our collective behavior. We still act like we did in the 1950s, growing, spreading out, consuming more and more of the planet’s resources. Advances in technology and the creative destruction inherent in capitalism has, thus far, kept us from running into any of the hard walls associated with limited resources and allowed our economy to continue to expand. Provided we can avoid a massive systemic breakdown due to a sudden resource shortage, it will be necessary to shift our future expectations from strictly growth to a combination of growth and stability. Continuing the business as usual approach to growth we’ve had now for generations will ultimately be deadly.

Financial Stability Is Modern Liberty

It’s not unusual to see people protesting for political change, holding signs proclaiming they want liberty. Protest, provided it’s peaceful, is a good thing regardless of the cause and so is being active in politics. But blaming the government for a lack of liberty ignores the fact that the most oppressive force in modern life isn’t government control, it’s corporate influence. The problems that weigh down most people on a day to day basis aren’t big government rules, they’re the mortgage servicer, the utility bills, credit card companies and the unending parade of petty corporate chisels, at work and home, that drain checking accounts and leave people feeling violated and frustrated.

If it’s liberty you want, then financial stability can be the most powerful liberating force in your life. Being debt free means no mortgage servicer to deal with, no credit card companies and enough savings and cash reserves to manage emergencies. The combination of financial stability and mobility provides the means to pursue new career opportunities anywhere they might arise, freeing you from staying in a dead end job or dealing with a horrible boss because of bills or encumbering obligations.

If you really want to be free, really want liberty, then the best way you can get it is to be smart with your money and don’t become entangled in the debt economy.

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