Thursday, June 30, 2011

June Generation Y Total Debt Update

Up to this point in time, the following are the total debt for Echo Boomers. Although this information is slightly technical, you can see that overall, the average Echo Boomer isn't performing too poorly in matters debt-related.

Males Females All
Average $10,004 $10,709 $10,633
Median $1,000 $3,000 $2,200
Standard Deviation $21,237 $20,613 $21,090


Due to the economic situation, the Millennial generation may not possess the debt level of their parents, as credit guidelines have grown more strict since the housing collapse. However, due to Millennial trust in education, I still expect to see these debt levels increase over time due to student loans.

Wednesday, June 29, 2011

June Generation Y Employment Update



The employment rate for Echo Boomers increased, while the number of stay at home parents and unemployed shrunk. Currently, the same percentage of Echo Boomers are going to school or are going to school and working. You can read details on Millennial employment figures to understand what everything means.

Tuesday, June 28, 2011

June Generation Y Retirement Update

How many Echo Boomers have retirement accounts? The actual percentages:





Keep in mind that a good portion of the Millennial generation is currently enrolled in college, so even if all employed Echo Boomers enrolled in a retirement plan, about 66% of Echo Boomers would have them. However, 22% is below what I would expect.

Monday, June 27, 2011

June Generation Y Housing Update





Echo Boomers increased homeownership 3% from last year (2010); currently male Echo Boomers own more homes than female Echo Boomers, but expect this trend to decline as female Echo Boomers report "buying a home" as a financial goal more often than male Echo Boomers.

Since the last housing update, there's been a slight (2%) increase in Echo Boomers living with relatives (ie: rent free). However, expect this trend to drop if the employment situation improves.

Friday, June 24, 2011

"Will Lower Gas Prices Help the Economy?"

Each Friday, The Echo Boom Bomb will feature a common question among Echo Boomers and/or their parents concerning economics or finance for the Millennial generation. These questions are often asked by Echo Boomers and/or their parents that I survey or can be directed to my email at echoboombomb [at] gmail [dot] com. If you email a question, please be sure to keep it concise and direct.

Question: You've pointed the the rise of gas prices hurting any housing recovery. Since I've seen them go down some in our area, will housing prices improve?

Yes and no.

Yes, in the sense that Americans will have more money to save for a home or to put toward a payment toward a home. Lower gas prices might also help lower the cost of food (due to transportation) or other necessary goods. Keep in mind, this yes assumes that Americans don't adjust their behavior and start justifying unnecessary driving (which they were more likely to cut back on with high gas prices).

No, in the sense that uncertainty still dominates the market. Okay, so let's suppose that oil drops to where gas prices cost $2.50 a gallon (a completely dubious proposition). But how does anyone know if that price will remain there and how long. Keep in mind that a commitment to buying a home is long commitment, not some short term quick fix. What will happen with gas prices in five years? Or ten years? Now, consider that many mortgages are 15 or 30 year mortgages.

To add to the "no" above this, no one knows if QE3 will occur. Gas prices being low may be a transient drop as any QE program, like QE2, will cause commodities to rise again.

Thursday, June 23, 2011

Generation Y's 5 Top Financial Plans

In a previous post regarding Echo Boomers and homeownership, I mentioned that the Millennial generation had different plans for their future outside of just "owning a home." What are Echo Boomer's five top financial plans?

I asked Echo Boomers, "What are your financial plans," and they responded by listing their financial plans for the future (counted as "votes"). Echo Boomers could choose as many financial goals as they wanted, so many Echo Boomers had at least two or three goals. The five top winners?

1. Save money 16.9% of the votes (90% of Echo Boomers have fewer than $2000).
2. Pay off debt 14.4% of the votes.
3. Buy a home 13.4% of the votes (12% of Echo Boomers are homeowners).
4. Go to college or continue education 12.9% of the votes (Echo Boomers may still see value in higher education) despite the growing education bubble.
5. Be financially stable 10.9% of the votes.

The biggest loser? Marriage; it received a whopping .5% of the votes! I've written it before: Generation Y does not like marriage. Other big losers were be rich (2%) and buy a car (2.5%). Of course, when you look at the characteristics of Generation Y, you can see that owning a car and making money don't seem high on their list of things to do.

Nonetheless, it is fascinating to see what concerns Echo Boomers in a financial manner. These five goals indicate what industries will win with Echo Boomers, but also what industries will lose.

Wednesday, June 22, 2011

Generation Y Employment: Understanding the Terminology

After reflecting over my Generation Y Employment, I realized that I failed to specify the categories. To make things easier in the future, these terms will also be added to the page How Do Echo Boomers Manage Money?



Employed: this category means that an Echo Boomer is receiving money for work of some kind. It may be under the table (not taxed) work, it may be part time work, or it may be flat out illegal work (drug dealing, prostitution, et cetera). But if Echo Boomers state that they are receiving pay for any kind of work, they are considered employed.

The government and most research organizations do not share the same definition. This means that my study will always have a lower unemployment rate than those organzations since someone receiving unemployment while working for "under the table" cash would be employed.

Unemployed: Echo Boomers who are not working.

In School: Echo Boomers who are in school only and doing no work on the side. In other words, Echo Boomers who babysit or mow lawns on the side while in school would be In School and Employed category.

In School and Employed: Echo Boomers who are in school and also receiving money for some form of work.

Stay At Home Parent: an Echo Boomer who does not work for money. This does not mean they don't work (as parenting is work), but that their partner financially provides for them and they don't receive any money directly for staying at home with children. Keep in mind that a parent who reports being "stay at home" while babysitting other people's children would be considered Employed.

No Echo Boomer can be a part of two categories; they are limited to one.

Tuesday, June 21, 2011

"College Wasn't For Me"

The Echo Boom Bomb now features a monthly story of an Echo Boomer, who decided to not go to college, but still found financial success in other ways. The particular discussion does not capture the exact quotes, but the general strategy and advice of the individual.

So you didn't go to college, but still earn a decent income and have amassed more wealth than the median amount in the United States. How did you approach a career?

I focused on a specific skill: welding. I learned it through a friend's father and once I mastered that skill, I sought ways to increase my income based on welding. It turned out that under water welding paid a good amount per month, so I learned that skill. Sure, it was dangerous, but that only meant it paid more than traditional welding.

Basically, I entered a field with little competition so that I would make more money.

Once you found a decent career, did you add anything on the side to increase your income?

No, but I saved money. It seems that one strategy few people use to make money is to save money and wait for opportunities (four examples of creative saving: 4 Heteroclite Ways To Save Money). You can't do that when you toss money into index funds, buy new cars, or own and decorate a home. Cash can do anything, whereas you can only hope that those other things can be traded for something valuable.

Did anyone warn you that you should go to college?

Yes, mostly family members. I'm sure you have heard it again and again: "you'll make a million more dollars if you go to college than if you don't." They always promoted the successful college stories, but not the ones who failed to make it after college. Four years of your life is four years of your life - you don't get that back, and most young people aren't getting paid large incomes in college. They're hoping that after school they'll make more money, yet I still make more money than all my "educated" friends. Some of them now are in graduate school wasting another year or two of their life on a hope.

Other than follow the crowd, I don't know what college teaches people.

Any future plans?

Retire at 30. Under water welding is dangerous, so I've had a life time of living on the edge, at least more than most people. I've enjoyed the adrenaline rush though.

For young people who want another alternative outside of college, what would you suggest?

Realize that without a degree, you won't overestimate your worth, so you'll prepare better than the educated. Find a specific skill that's needed and master it. Then save as much money as possible and wait for opportunities to expand your wealth.

Friday, June 17, 2011

Generation Y Employment

In the future, this will be updated during data week. However, since I've never posted the employment figures, I thought I would add it this week. This will also be added to the page How Do Echo Boomers Manage Money?



Remember that my employment rate will always show higher than the government for the Millennial generation because under the table jobs are considered employment, whereas Echo Boomers might not report these to government officials (if they're counted). So, for instance, if some Echo Boomers were collecting unemployment, but working for cash, that would be considered employed by my study, but unemployed by the government.

As time goes on, I'd expect to see the unemployment rate on this graph rise some, but not as much as the government's data.

Student Loan Average Balances Decrease for Generation Y

Student loan average balances in 2011 have decreased among the Millennial generation. For male Echo Boomers, student loan average balances have decreased 29% (from $6,465 to $4,548); for female Echo Boomers, student loan average balances have decreased 8% (from $6,672 to $6,107). The median student loan amount for both male and female Echo Boomer still is $0.00.

While average balances decreased, the amount of Echo Boomers possessing student loans has increased (approximately 5%). Remember, a note on averages: a few Echo Boomers could have paid large sums on their student loans and brought down the average. The key statistics here are that half of Echo Boomers don't have student loans, and student loan usage has increased for Echo Boomers while the average balance has decreased.

Recall that no one born before 1980 or after 1993 is included in this data.

Thursday, June 16, 2011

Do Echo Boomers Like Debt?

According to a study, younger Echo Boomers seem to perceive debt as a positive circumstance:

Researchers found that the more credit card and college loan debt held by young adults aged 18 to 27, the higher their self-esteem and the more they felt like they were in control of their lives. The effect was strongest among those in the lowest economic class.

Only the oldest of those studied -- those aged 28 to 34 -- began showing signs of stress about the money they owed.
If you continue reading, you'll note that affluent Echo Boomers didn't receive an "esteem boost" from having high levels of debt.

These data indicate that among young Echo Boomers, the financial consequences of debt have not been understood. For the most part, nothing in this study refutes what I've experienced when talking to Echo Boomers - the affluent tend to acknowledge how difficult it is to amass wealth and avoid debt, while the poor Echo Boomers tend to think that borrowing money is the way to a good future. However, a school environment tends to provide people with inflated expectations about their future salary (one which was ubiquitious in college: "a college graduate will make a million more dollars in their lifetime than a high school graduate"), so the positive view of student loans remains unsurprising.

Keep in mind that the average U.S. born Echo Boomer holds over $11,300 in debt, but the median is $3000.00. Even if Echo Boomers underestimate how long it will take them to pay off their debt, the balances aren't large enough to draw concern (see the percentiles in the below table).



For the record, the above statement is true for poor customers of all generations. Many poor customers will ask to apply for a loan because they "can't cover their basic bills," but when I ask how they intend to pay for their loan in the future, they admit that they won't be receiving more income or lowering their living costs. In other words, they are willing to add a bill to get a "quick fix," only to hurt their future more.

Don't worry: most banks seldom lend in these cases (payday loans or cash advance companies, by contrast, do!).

Wednesday, June 15, 2011

Default Documentary: the Student Loan Interview

The responses to the interview questions may not represent the views of The Echo Boom Bomb's author. These interviews are provided to inform readers of information from field experts and provide these experts with a medium where they can answer questions without any content changes. You can also read other interviews at this link.



I recently had an excellent exchange with Aurora Meneghello of Krotala Films behind Default: the Student Loan Documentary. A documentary covering student loans has been missing for a while, and I think this film will help shed some light on a very dark situation for many young people. If you've been wondering about this area, check out their site and join the movement - they are doing a great job by helping young people understand this important situation.

1. What caused you to produce a documentary on student loans? Do you think this issue is receiving enough attention?

We started working on this documentary 4 years ago when there was not much written in the press on the issue of student loans. I have student loans and at the time I was trying to learn more about my private student loans. It was starting to dawn on me that my school had provided very good information on federal loans, but not on private loans.

One day I saw an article about student debt on the front page of the San Francisco Chronicle and in it I read about StudentLoanJustice.org. When I read some of the stories posted on Alan Collinge’s site, I felt it was outrageous that I had never heard of this before (I am a bit of a news junkie). As I found more and more information, I talked to Serge (Serge Bakalian, co-writer and producer of Default: the Student Loan Documentary) who suggested making a film about the issue. A lot of our friends were graduating with student loan debt and they were completely unaware of their lack of rights. They also felt embarrassed and scared and wouldn’t talk about it, feeling ashamed about their debt. I remember calling a credit counseling service and asking whether they offered counseling to student loan borrowers. The person on the phone wondered why I was asking, since, she said, student loans are actually “good for you!”

So our intention from the start was to educate people on student loans: how they work, what happens when you cannot pay them back, etc. And to open a dialogue about debt, so that future students could find an alternative source of information, apart from their school’s financial aid office. We also wanted to break the taboo that one doesn’t talk about debt. This is a problem affecting millions of people directly and our entire economy indirectly. It’s not just a personal issue of financial literacy or responsibility, it is a systemic problem.

2. How can people get involved with your movement to inform others and seek solutions to this problem?

We have a very active Facebook page and Twitter feed where we post relevant content every day. And our website has a list of sites that can be helpful in learning about student loans and to get involved.

It’s important for people to act individually and in groups. You can get a better grip on your finances and share your story to help other students avoid debt. You can also pay attention as to what legislation is being considered in Congress, sign petitions, become more vocal in your community. Find a group of like-minded people, organize screenings, protests and talks. Different website and groups offer different approaches: choose what works best for you.

3. If a young person was considering college, how would you advise them?

First of all, I would ask them whether they need a degree to practice in their chosen career. I am a photographer and although I learned a lot in school, nobody ever asks me whether I have a degree. It’s all about the work I do. You will find this is the case in many professions. If that’s the case for your chosen career, avoid getting into debt: either find alternative ways to learn (see Anya Kamenetzs’s book DIYU) or choose a college that is less prestigious, is affordable and still gives you the education you need.

If you are looking into professions that require a degree, if you want to be a doctor, a lawyer, a teacher, then I would advise trying to get that degree incurring the least amount of debt possible. Again, watch out for quick but expensive degrees (especially at for profit colleges), or for very prestigious but very expensive schools. Check out how much you can expect to make in your first year, paying close attention to the average in your area and to the lowest possible salary in your field as well. Basically, stay away from overly optimistic estimates such as $160,000 out of law school. Also, find out what is required of you after you graduate. For example, if you want to be a Marriage and Family therapist in California, you have to put in 3,000 hours of supervised work, which are often unpaid. Are you ready for that commitment? Research and plan for the worst, while doing your best to succeed. Graduating with unmanageable debt might prevent you from taking the chances you need at the beginning of your career.

Being realistic doesn’t mean giving up your dreams. If you stare reality in the face, you will be better able to find ways to achieve your goals.

Let me also say that I think education is important in and of itself and it is very troubling to me that we think of universities only as monetary investment in a future career. So, no matter what you decide to do, read, learn, explore! Grow as a person by educating yourself. Nowadays we have more access to information than ever before. Don’t let the high price of college deter you. Why isn’t education free or low cost? I think this is another topic, but one where we all need to be actively engaged.

4. Final question: based on your interviews with college students and graduates, do you think the unquestioned zeitgeist of "attend college no matter the cost" is changing?

It’s always hard to generalize, but in the past four years, I have seen the topic of student loan debt explode in the press, thanks to the tireless work of activist and borrowers willing to speak up. The students who contacted us to screen our film and whom I have talked to are concerned and want to do something about the rising cost of tuition and the lack of consumer protections for their student loans. So I think at the college level things are definitely changing.

Unfortunately though, there is still enormous pressure on children and teenagers to go to college at any cost. Having a college degree is definitely an advantage, but might not be so if one graduates with insurmountable debt. So I would like to see more of this type of debate at the high school level. Finally, I personally feel no matter what job you have, you should be able to make a living wage. We need to think of ourselves as part of a community. Not everyone can be a lawyer or a CEO. Some will always need to serve a latte or to sell us a pair of jeans. Anya Kamenetz shows in our documentary how the advantage of having a college degree is such only because the income of those not having a college degree has actually deteriorated. We cannot make an expensive degree the only way to make a decent living. I think we need to look at the bigger economic picture and question why we pay some people so little for the work they do that they can barely survive.

But that is another story ...

Friday, June 10, 2011

"How Can I Stay Safe From the Higher Education Bubble Collapse?"

Each Friday, The Echo Boom Bomb will feature a common question among Echo Boomers and/or their parents concerning economics or finance concerning the Millennial generation. These questions are often asked by Echo Boomers and/or their parents that I survey or can be directed to my email at echoboombomb [at] gmail [dot] com. If you email a question, please be sure to keep it concise and direct.

Question: You recently wrote about the higher education bubble popping, but I wondered what to avoid when this bubble bursts as far as investing and career advice?

This post is intended solely to inform people of industries that may experience trouble in the future if the education bubble pops.

You can avoid losing money when the education collapse occurs by not investing in companies involved in education, and I'm not just referring to online colleges. Textbook companies, educational supply companies, et cetera all will suffer when the education bubble collapses. Think about who these companies do business with as well, and you can see how widespread this bubble may end up becoming.

As far as career advice, I would avoid the education profession for a long term prospect, IF it is your sole source of income and your field isn't "required." For instance, I doubt society will ever need less engineers, physicists, or doctors, but as far as humanities are concerned, they tend to produce little wealth outside general knowledge.

Becoming a professor at a small university is a good idea, but a massive university with large costs may place hiring freezes or eliminate staff in they find themselves in a terrible financial position. If you decide to become a professor at an expensive university, use your position to perform side-work so that you still have another income outside of your job.

You will hear "education" is safe, but frankly, if I were working in the education industry, I would be saving at least half my income. The uncertainty rises everyday as student loans balances continue to climb and many young people contemplate whether college is worth the financial risk. It may take a generation or two, but the negative educational stories we hear now will have affects for future generations in the same way the positive educational stories motivated Echo Boomers to always look to school for solutions.

Trade schools, however, may end up becoming the winners. By saving student's time and money, they can get student in and out with a specified skill that can help out. If you plan to work as a trade school professor, you may find that your salary increases (but, as always, be prepared for anything).

None of this is meant to bash education (to an extent, some degrees are quite useful), but to warn some people considering an education profession of some of the potential difficulties that may arise. All professions come with some risk, and timing tends to play the largest factor in all things. Hey, good luck with your career and investment choices.

Thursday, June 9, 2011

What Industries Will Be Winners or Losers With Echo Boomers?

What They Want Now

Echo Boomers are changing our society in a multitude of ways. The Millennial generation doesn't want what its parents wanted, and if you want your business to succeed or if you want to lower the probability that you'll be in the unemployment line, take note of the winners and losers with this generation now and in the future.

Winner: The Rise of the Renters.

I could write seven pages on why Echo Boomers won't own homes like former generations, but I think numbers and graphs tell a better story. Only a third of Echo Boomers express interest in ever owning a home. And the data?



Things may change over the next ten years, but for now, real estate agents will struggle with this generation in selling homes. Of course, if real estate agents focus their energy on landlords they might succeed. Otherwise, if you rent out decent homes or apartments, prepare for a large customer base among Echo Boomers.

Winner: Education Is the New Homeownership.

Yes, I think that education is in a serious bubble. But I doubt that the Millennial generation will recognize this. The reason for my doubt: over half of Echo Boomers state interest in pursuing a degree, and a third of Echo Boomers with degrees already want to go to graduate school or further their education in some way.

The next generation (Generation Z) may see the error in their older siblings ways: too much faith in education. But for now, there's no indication among the Echo Boomers I speak to that they're changing their view on education.

The winners here are the trade schools and community colleges - not only do you save Echo Boomers money, Echo Boomers tend to recommend these places to their friends. In fact, when other Echo Boomers go back to school during an education bubble a community college or trade school will hold the highest appeal. Large universities still attract top students, so for now, they're winning too.

Marriage Is Dead.

If you're in school, and you're considering becoming a divorce attorney or marital counselor, beware: only 21% of Echo Boomers are married! Those may have been the hot professions at one time (especially divorce attorneys), but the future seems dim for them now. Unless those 21% of Echo Boomers line up in divorce court or try to "work things out," the need for divorce law or marital counseling may be history.

But with marriage rates declining, Echo Boomers seem to be putting their money into other places: the fitness industry, the outdoor industry, and the fashion industry. In other words, you still have many other opportunities to have a wide customer base. Keep an eye out for the single Echo Boomers and watch where they spend their money.

Other winners:

1. Technology - if you're in the engineering profession, prepare to work. I have never spoken with an unemployed engineer (unless it was by choice).
2. Medical - Echo Boomers will need more medical care as they age.
3. Innovative Science - the world faces major hurdles in the twenty-first century, and this industry will boom if science continues to overcome these hurdles.
4. Green Energy Industry - Echo Boomers like environmentally friendly companies, and green energy not only saves money, but builds a sustainable world.

Wednesday, June 8, 2011

Marital Correction: Yes, That Applies To Males Too

You wrote in your post, Will Low Marriage Rates Sap Future Housing Demand?, "Second, female Echo Boomers that are unable or disinterested in finding partners tend to express interest in owning a home later in life regardless of their marital status." The same applies to males that are disinterested or unable to find partners.

Thank you for the correction. Males may also be disinterested or unable to find marital partners, though, single males have a tendency to prefer renting. That does not mean, however, that all single males will rent. The major takeaway to that post and other marital posts is that our economy does not need "housing" in order to provide jobs. Single males and females can still put their money and time in other places.

4 Strange Ways To Save Money

How 4 Echo Boomers Bucked Trends and Amassed A Huge Pile of Cash



Note that the following four examples have names changed of actual Echo Boomers. These Echo Boomers belonged in the affluent group of Echo Boomers, so from a marketing and financial perspective, these Echo Boomers reflect the values of wealthy Echo Boomers.

Since many Echo Boomers face major financial hurdles and the economy isn't improving, I decided to post some stories of succesful Echo Boomers and how they've managed to save extra cash while still enjoying life in the way they want. Of course, any person of any generation can look at these stories and consider their value for their financial plan. If you know someone is struggling and may be helped by such stories, send it to them.

A Home Fit For ... Ten

Jessica lives in California, where a house can easily rent for over a thousand dollars a month. But Jessica only made five thousand a month after taxes and didn't want to watch 20% of her income evaporate into thin air. She also had other goals than living expensese: she was saving for a master's degree, an eventual wedding, and a home to call her own.

"At first, I was stuck," she told me. "I am from the Midwest where I could rent a place for $300, and that was a nice place. The first place I was shown in California cost $800 and it was about one-third of the size of my Midwest places."

With many goals, an economy with prices rising, and an expensive location, what did Jessica do? She moved in with nine other girls in a five bedroom home.

"People respond exactly like you did - YOU HAVE NINE ROOMMATES?" she laughed. "I should probably win an award or something." And Jessica does: the home's monthly rent, including bills, cost $2000 a month. But divide that by ten people and her total cost is only $200 a month - 4% of her post tax income.

And Jessica, like many other Echo Boomers, loves to experience a strong social environment, but it does come with its downside. "Let's just say," Jessica laughed, "that there are times when a girl needs some privacy and well, with nine other girls, it's hard to find that."

Chill With The Doers

David dislikes spending on stuff. He watches people buy a bunch of junk that they never use only to continue doing it ad infinitum. But David has one weakness: trying new things.

"It's easy to save money when your cost for event A in dollars is low, but high in time," David said to me, as we discussed his savings' goals. "When you think about it, you need a lot of time to spend money, otherwise, it's just money growing." David's secret involves a group of friends who like to enjoy new challenges. The added bonus is that, unlike David, most of his friends were poorer than him, so everything cost little money (while David admits that when it comes to experiences he doesn't mind spending a few extra dollars).

David's life involves doing many different things when he has time away from work, but never enough time to spend his cash. Within a decade, David will opt for early retirement and continue to do crazy things with his friends. As he said toward the end of our conversation, "A $100,000 will last longer than I intend to live if I'm only spending a $1,000 a year." I think that he's wrong though - this guy will easily live to 180.

No Man Is An Island ... Well Except That Man, and That Man, Oh, and That Man, Oh and That Man Over There ...

Jeremy excelled at everything since he was a young kid. But whether he was "too smart for his own good" or was tired of pleasing everyone, he finally had enough and exited civilization.

"I built an underground home on a 1000-acre property," Jeremy told me. Unlike the other Echo Boomers in my study, I actually knew Jeremy from a friend - he had been an engineer for a while, amassed a huge pile of cash and left for his own land (his financial data are not included in my study as that would not be random; his story, however, is interesting). However, Jeremy accomplished a task that I thoroughly interested me: he built an underground home and completely generated his own electricity. "When I first built the home, it consumed about $10 a month in electricity. Now it consumes $0 a month. So much for inflation," Jeremy bragged.

But what made Jeremy exit civilization in the first place? "I realized that as I was around more people, I was less happy. Their fears became my fears, their hopes became my hopes and in order for me to stop it, I had to get away. But getting away a few weeks out of the year wasn't enough; I needed to exit for longer." Jeremy built his house and planned it for self-sufficiency with a property that produces food, water and a few other important commodities.

And Jeremy said something I won't forget for a long time, "I can live without happiness, and hope and even success. But I cannot live without peace. And I have that here on my own."

Saving Money While Spending $500,000

The economy collapsed. Home prices fell. Everything went on sale as merchants were desperate for dollars.

Enter Jared.

Jared hates frugality. He won't read your frugal blog, your frugal book, or buy your frugal videos. Why? "I came from poverty and there's nothing more 'frugal' than poor." We can agree or disagree with Jared here, but he surprised me in our conversation as he doesn't spend foolishly.

Jared amassed over a half of million in cash (in the study, the top spot is held by an Echo Boomer with $400,000 and you'll see why Jared doesn't hold the top spot). When the economy collasped, Jared saw everything he wanted to buy with seriously discounted prices plus desperate sales people. Jared wanted that silver convertible at a steep discounted price. He got it. Jared wanted a large home with hardwood floors and granite countertops. He got it. Jared wanted nice possessions, like a TV, hot tub and fancy lighting to fill his new house without sparing any desire. He got it.

He also signed up for lifetime memberships at places where most guys wouldn't step a foot in (salons, special fitness clubs, et cetera). "I'd say that I received a $1.5 million dollar value by only spending a half a million," Jared said. "The key was timing." Jared has a point: one might be tempted to call him a materialist, but even if that's true, his desire fell in line with his financial sagacity.

Of course, writing his story without adding that he didn't liquidate any retirement assets might paint a different picture. "Oh yeah, I still have six figures in retirement accounts - I wouldn't empty those." He went on to admit that he's done all the spending he wants (except some travel). He can save the rest of his income without worrying about needing new stuff for a while, or wait until the next recession sets everything on sale again.

"The best way to save money is to spend it," Jeremy said. "You know, when the time is right."

Tuesday, June 7, 2011

How Do Echo Boomers View Their Professional Lives?

Christopher Hill, who's editor at the excellent blog Survival and Prosperity, sent me some interesting information from the print edition of Sunday's Chicago Tribune (June 5th, 2011). Essentially, it covered how Echo Boomers approach working in this new challenging era. A few important points:
  • 83% of Echo Boomers thought that entrepreneurship would be an important part of their career.
  • 27% of Echo Boomers preferred to work full-time for one employer.
  • Over half of Echo Boomers (54%) stated that they plan to telecommute at some point during their professional life.
  • The same percent (54%) think that an online resume is more important than a print resume.
This was featured in Bit By Bit in Sunday's Chicago Tribune Business Section, and the study was conducted by E-Lance.

Monday, June 6, 2011

When Will the Higher Education Bubble Pop?

4 Signs To Keep An Eye Out For



While an education bubble exists, it won't explode until a few of these things occur first:

1. Bankruptcy laws change for student loans. If students can discharge their loans through bankruptcy, lenders will be reluctant to lend money to students for school. At this present time, students have no bankruptcy options for their loans (except in heteroclite circumstances), so lenders see little incentive to stop lending.

2. The perception of education changes. Echo Boomers were inculcated with "get a degree" messages from everywhere. As Echo Boomers mature and make less money than they expected, they will communicate their disappointment with education to the next generation. Unless Echo Boomers look back on education with rose color glasses, the next generation will hold a different outlook on education than their parents.

3. A major recession returns to the United States. If a major recession returned to the United States, and students were unable to pay back their loans (ie: the principal balances kept growing), this event could trigger a collapse in the education bubble. Lenders would fail to receive their money they lent and would struggle with educational institutions over funds.

The problem with this point: the Federal Reserve might bail out these lenders, continuing the cycle of borrowing money for school (like we see for housing). In this case, this sets the stage for an even larger collapse (like we're seeing with housing).

4. Students become overwhelmed by negative news. The education bubble could pop tomorrow if students suddenly became depressed about their prospects and stopped attending school. Ironically, in this case only, students might receive much better prices later if every student in higher education boycotted educational institutions (won't happen). However, if students stop believing that their education is serving them, what's the incentive for continuing to pay?

If any of this occurs soon, the major problem is the actual student loans. Many homeowners "strategically defaulted" when they realized their house was wasting their money. Why wouldn't students just drop out of society if their student loans were high enough? Of course, if these things occur, tax payers will be on the line, just like they were during the housing bubble.