MILLENNIAL APOCALYP$E Why You and Other Millennials Are Headed for Financial Disaster and How You Can Avoid It

By Zane E Brown and Dr. Donalee Brown

MILLENNIAL APOCALYP$E Why You and Other Millennials are Headed Toward Financial Disaster and How to Avoid It

Millennial Apocalyp$e offers clear perspective about why MILLENNIALS are on a path toward FINANCIAL AND PSYCHOLOGICAL DISASTER. Investment professional Zane Brown and psycholo

• Language: English
• Publisher: Zane Brown Analytics, LLC
• Release date: Dec 27, 2022
• ISBN: 9798986849706

Book preview

Millennial_Apocalyp$e_Front_Cover.jpg

Copyright © 2022 by Zane Brown

All rights reserved. No part of this book may be reproduced or used in any manner without written permission of the copyright owner except for the use of quotations in a book review. For more information, address: Permissions, Zane Brown Analytics, LLC. 10453 Goose Haven Drive Lafayette, CO 80026

First paperback edition September 2022

ISBN 979-8-9868497-2-0 (paperback)

ISBN 979-8-9868497-0-6 (ebook)

Contents

Section I: What You Can Expect From This Book

Summary: The Book in a 2-minute Read

Finding Personal Relevance

Who Wrote This Book and Why?

Section II: Does This Apply To You?

Traits That Influence Your Financial Destiny

Section III: Blame It On The Internet

Consequences of Being a Digital Native

Overconfidence: Annoying, Yes. But Financially Harmful?

A Short-Term Perspective Can Damage Your Wealth

Why Bother with Face-to-Face Communication?

Section IV: Scarred By Recession

Economic and Psychological Distress

Aversion to Risk—Safety First is not a Successful Investment Mantra

Distrust and Missed Opportunity

The Do-It-Myself Mindset: I’ll Do Me—What Could Go Wrong?

Section V: Social Conscience

Values-Based Living to Create Global Change

Can Socially Conscious Investing Align with Retirement Goals?

Section VI: Financial Apocalypse

Your Retirement Reality

Section VII: Avoiding Apocalypse

Crafting a Personal Solution

Clearing the Path to Retirement Success

Section VIII: Conclusion

What’s Next?

References for Millennial Apocalyp$e

About the Authors

Section I

What You Can Expect From This Book

Summary

The Book in a 2-minute Read

As the largest and most educated generation in American history, you and other millennials are equipped to shape the economy and control your destiny more effectively than any of your predecessors. Defined by Pew Research as those born between 1981 and 1996, your generation is larger than Generation X, who preceded you, and Baby Boomers, who fostered you. With greater diversity and gender equality than previous generations, you present a hopeful opportunity to shape our country with decision-making that is more collaborative and leadership that is more inclusive.

As powerful as these demographics are, even more impactful will be the generational characteristics that differentiate you and other millennials from your predecessors. Characteristics that differentiate you have been created by your upbringing, your engagement with the internet, and the impact of two recessions. These factors formed an environment that shaped your priorities and preferences differently than previous generations. Compared to other generations, you and other millennials show greater preference for immediate gratification, are more averse to risk, exhibit greater overconfidence, and often maintain a do-it-myself mentality. You are also more socially conscious than other generations. Collectively, these characteristics are reshaping the composition and direction of the economy and the country.

Unfortunately, these characteristics also lead to poor investment decisions and unattractive investment results. This is important for a generation that, because of excessive student debt and poor job opportunities, lags previous generations in terms of savings, investments, and financial well-being. Catch-up will not be easy. Retirement may have to be delayed. Retirement lifestyle expectations may need to be reduced. The potential lack of Social Security could further compromise your future economic prospects. Understanding those characteristics that are unique to you and many of your peers, and how those characteristics influence savings and investment decisions will be vital to making changes now to ensure your future financial security. This book is designed to heighten your awareness of today’s financial realities and of the generational characteristics that make it harder for you to build wealth for retirement. Hopefully, this book will help you overcome deep seated detrimental behaviors and shift your direction toward a better financial destiny. For readers who are not millennials, this book will help you better understand the economic and social situations that millennials have inherited from older generations—and perhaps offer support.

Finding Personal Relevance

Individuals born during the same generation share similar experiences and mindsets. They naturally develop common characteristics. The effects of shared life experiences tend to persist throughout life. Those who grew up during the Great Depression, which began in 1929, valued thrift throughout their lives. A penny saved is a penny earned was their mantra. Veterans of World War II prioritized marriage, family, hard work, and home ownership. The resulting economic growth and the baby boom earned them the moniker The Greatest Generation. Likewise, common characteristics among millennials will affect their decisions throughout their lives.

One defining characteristic of millennials is the tendency to make flawed investment decisions. Left unchecked, these decisions could compromise the financial wellbeing of an entire generation. We will explore how millennials’ financial decisions have been shaped by cultural and economic factors, including their upbringing, the internet, and the recessions of 2008 and 2020. These experiences have led many millennials, possibly including you, to delay life decisions of marriage, home purchases, and having children. Subsequently, many have postponed their decisions to save and invest, which will likely lead to negative financial outcomes.

Consider this scenario. If a couple marries, has children, and buys a home at age twenty-five, they will be able to pay off a thirty-year mortgage and launch their children by about age fifty-five. This will give them another decade to seriously sock away money before retirement at sixty-five. By comparison, if the couple delays those life decisions by ten years, as many millennials have had to do, then they would be in their mid-sixties with no time to save for retirement. They might have to work well into their seventies. This is probably not the life scenario that anyone has in mind.

In addition to affecting life decisions, these cultural and economic factors have created several common characteristics among millennials: overconfidence, aversion to risk, a preference for immediate gratification, a tilt toward self-reliance, and a shared social conscience. Each characteristic can lead to specific investment behaviors that produce poor results. When combined with decisions to delay important milestones in life, such as marriage and children, they predispose millennials to have significant financial difficulties during retirement. Clearly, changes need to be made now, while there is time to shift to a more positive trajectory.

The book is not merely based on our subjective opinions about the financial crisis facing millennials. We present research that clearly identifies the characteristics that affect millennials’ financial tendencies and the primary factors that shaped their economic outlook. Although these traits are not universal among millennials, they are common. And they can all lead to specific barriers that hinder wise investment decisions.

The characteristics and life decisions that we explore are unique to you and your generation. They are supported by research. Yet they vary in degree among generation members. As a generation, you are overconfident, risk-averse, maintain a short-term perspective, and are socially conscious. Yet, as an individual, you may lack confidence, or you may be a risk-taker, have enviable long-term vision, or care little for the greater good. Accordingly, while this book is relevant to your generation, every aspect of this book may not be applicable to you. If you read this book cover to cover, you will certainly benefit. But if you have specific concerns or interests, the exploration of separate environmental influences and generational characteristics allows you to pursue more focused reading. The solutions to investment difficulties created by separate characteristics are also explored individually to permit a selective approach to reading this book. Thus, if you have special interests, you can read parts of this book, without feeling the need to read its entirety. If you have priorities for specific concerns, you can also focus on those areas first, rather than in the order presented. Whether read in whole or in part, we hope you come away with a better understanding of the factors that align to potentially lead you to financial apocalypse, and the steps that can be taken now to avoid that ultimatum.

Who Wrote This Book and Why?

As an investment strategist with years of experience, Zane Brown became increasingly concerned about the difficulties faced by millennial investors. His conversations with young professionals, their parents, and investment advisors around the country have corroborated those concerns.

In addition, Donalee Brown, a Ph.D. psychologist, has had the opportunity to interact extensively with millennial university students. She has seen their unique psychological traits, which have emerged from their cultural and economic context. As a licensed psychologist, Dr. Brown’s examination of these characteristics and the circumstances that helped to shape them, suggests that millennials prefer to delay major life decisions. That tendency, as stated above, has long-term financial implications.

These two perspectives—one economic and the other psychological—complement each other. We believe that by writing together we can offer a more comprehensive understanding about the financial wellbeing of millennials than other books on this important topic. We hope, therefore, that we can offer unique solutions designed to help our readers avoid future financial hardships.

We hope you come away with a better understanding of the factors that could lead you and your peers to a financial apocalypse, and that the book will inspire you to take steps to avoid that outcome.

Section II

DOES THIS APPLY TO YOU?

Chapter 1

Traits That Influence Your Financial Destiny

I don’t think we’ve ever been through anything as traumatic as what we’ve been through.

Ariana Grande

Just as the Great Depression shaped older generations’ preference for thrift, and just as the post-World War II economic boom affected their homeownership and consumption patterns, so too the events and circumstances of your life are shaping your priorities, behavioral traits, and personal characteristics. These environmental influences include the internet, the recessions of 2008 and 2020, and an increased concern about social justice.

Foremost among these influences is the internet. It has shaped your lifestyle, your decision-making processes, and your social values. Your experience with two recessions is a second influential force. The 2008 recession and the inequities of the subsequent recovery likely had a devastating effect on your family and your ability to launch a career. The 2008 recession impacted investments, home values, and the availability of jobs. All of this shaped your economic values and beliefs. The 2020 recession reinforced those beliefs. Third, you and your peers probably have a passion for social justice and equality, which contrasts sharply with the self-advocacy priority of previous generations. Collectively, these distinguishing traits of millennials are impacting the economy and influencing politics.

For example, your internet engagement has restructured the retail sector of the economy, changed the way we all consume entertainment, and developed a global ridesharing industry. Two recessions have delayed your ability to own a home, increased distrust of financial institutions, and generated a more risk-averse approach to investing. Your heightened sense of social conscience has redirected corporate priorities, refocused marketing toward environmental and social benefits, and created corporate brands that emphasize making contributions to the greater good. These three traits will, for years to come, influence your generation’s impact on the economy, our country’s leadership, and our collective values.

Individual Financial Consequences

Beyond the society-wide impacts, these traits will impact your personal financial future. Decisions involving financial security have been important to all generations, but millennials face some unique circumstances. Previous generations have had the safety nets of a corporate pension plan (a defined benefit plan), which guaranteed a retirement income. They had a nest egg of substantial home equity. They had a meaningful Social Security program. If previous generations made poor financial decisions, they could use these financial options to rescue their retirement lifestyles from disaster.

These options no longer exist for millennials, at least not at the same level of security. Defined benefit plans have been replaced with defined contribution plans, which means they are based on individual contributions, i.e. your contributions. Home equity will be lower for millennials because home purchases have had to be delayed, reducing the time to build home equity. Social Security might be available in some form when you retire, but access may be unavailable until age seventy or later. In addition, the program’s cost-of-living adjustments could be reduced and the availability of funds could be means-tested or otherwise limited. Therefore, without the same availability of these safety nets, your retirement lifestyle will be largely dependent on your ability to save and invest. You cannot afford to make poor financial decisions. Unfortunately, as this book explains, the unique characteristics of your generation makes you all prone to behaviors that work against long-term investment success. We will briefly address each in this chapter.

Internet Engagement

The internet creates an illusory sense of empowerment, which can promote overconfidence. It provides immediate access to information, which can lead to short-term thinking or to a belief that everything should happen quickly. The internet can also make people more averse to face-to-face meetings and more favorable of digital interactions such as texting.

From an investment perspective, these tendencies are counterproductive. Overconfidence consistently leads people to make high-risk decisions, such as frequent trading, poorly informed decisions and market timing. Short-term thinking (immediatism) can cause people to overreact to market volatility or to take unwarranted risk in pursuit of short-term gains. Dependence on texting has led millennials to avoid interpersonal discussions, which are much better suited for exploring investment fundamentals, long-term planning, and personal risk tolerances than tweets and text messages.

The Impact of Recessions

Two recessions have also forged characteristics among millennials that work against successful investing. One is a tendency to be overly conservative. The 2008 recession caused many of you to be leery of stock market investments. The 2020 pandemic recession reinforced those concerns. Studies suggest that you and your peers are much more risk-averse than previous generations. Surveys and portfolio analyses reveal that millennials typically prefer ultrasafe investments, such as cash and savings accounts, that generally offer ultralow returns. These types of investments offer inadequate returns for building financial security.

The 2008 and 2020 recessions have also led many people in your generation to distrust others and to prefer self-reliance. From an investment perspective, this often leads you to avoid financial professionals and to pursue do-it-myself investing instead, which can compromise long-term results.

The Effects of Social Conscience

Your propensity for being socially conscious has affected job selection and investment preferences. Many millennials, perhaps including you, would prefer to earn lower compensation at a company with a socially responsible mission, such as a nonprofit, than to earn a higher income at a company that is perceived to make no significant contribution to the greater good. This sense of social responsibility often affects investment decisions too. Studies suggest that many millennials prefer to invest in socially conscious companies, even if they earn lower returns, than to investment in companies without socially responsible goals. The loss of a few percentage points in returns each year