Is the American Dream Now Completely Dead?

Is the American dream dead for young people? A lot of experts think so. And I'm betting a lot of you watching this video right now think so too. Why does it seem like life was so much easier in the past? Well, today I want to give you some actual numbers on what your future looks like. And I promise you, some of it is going to surprise you. Some of it's going to challenge you. So let's investigate this in two parts. Part one, the real truth behind the major problems young Americans are facing today. And part two, the exact strategies to use so you can come out on top. Let's get into it with part one, the root problems. Yes, what you're feeling is real. Times are tough. But why are things so different for Gen Z and young people compared to previous generations? Let's break it down. First, the cost of college education has skyrocketed. Since 1980, the average cost of getting a college education in the US has jumped 1,200%. Let me put it in perspective. In 1980, a person could get a four year degree for a little under $12,000 when adjusted for inflation. But today, it would cost you an average of $39,000 to get a four year degree at a public university. Americans aren't taking on student loans because they want to. They're doing it because they they have to. And after four years, they graduate with debt. In fact, the median amount of student loan debt for college graduates in 2023 was between $20,000 and $25,000. Now, carrying student loan debt can affect other areas of your life, like paying for daily necessities, saving and investing for retirement, affording rent, which we're going to talk about, and buying a house. That is a steep prediction price to pay compared to what it used to cost in the prior generations. Next, housing costs are historically unaffordable. My parents came from India to America for a better life. They knew that if they worked hard, they could save up, buy a house, and probably retire comfortably. Guess what? This is really difficult to do today, especially on one income. Forty years ago, if we look at housing costs, a house would cost roughly 3.5 times your household income. Do the math. If you take your income and multiply it by 3.5, could you buy a house for that amount? Of course not. Because today the median house costs almost six times your household income. Think about it. This is not about avocado toast. This is about big structural changes. Let me give you some perspective. In 1984, a couple with a median household income of $22,000 would buy a costing about $80,000. Well, guess what? In 2023, the median household income was $80,000. But the median house sold for $426,000. In other words, houses have almost doubled in price from 40 years ago. You're not going to buy a house by saving money on pickles. This is about something bigger, something larger than you and your decisions to eat chips and salsa. What this means is that housing is historically unaffordable. And all this has made it really tough for first time homebuyers to buy a house. Remember, rent is also expensive since lots of young Americans and even older Americans are turning to rent. That means more demand for rent, which means less supply, which means higher rent prices. In fact, even rents are growing faster than income, which is creating a massive dividend. Now why is this happening? People point at all kinds of crazy cockamamie ideas. Oh, Blackrock, Blackstone, greedy landlords, the government. Let me tell you exactly what's happening and it's very simple. People bought houses in the 70s and 80s. They then rigged local governments to actively prohibit building more housing from being built. They use something called zoning. This means that in your neighborhood it is probably illegal to to build duplexes, triplexes, row houses, skyscrapers to build any kinds of housing besides single family homes. And there's only a limited amount of space for that. America has therefore systematically under built housing for 50 years, which means less supply, which means housing is historically unaffordable, especially for young people, poor people, middle class people and people of color. So with all these major problems working against young Americans, is it possible to get ahead? My answer is yes. In fact, absolutely. Up next, I'm going to share the exact five steps that young Americans should follow to build wealth. All right, now let's get to part two, how to build wealth. And let me take you underneath those numbers that I just shared to show you what other people won't report. You know how I talked about how college is expensive? Well, we need to also look at what college gets you. And guess what? College degree holders earn an extra million dollars over their lifetime compared to those without a college degree. With the median loan amount being 20 to $25,000. This is actually a no brainer for many people. Maybe we should realize that only about 25% of people actually pay the full tuition for a public university. Do you understand what I just said? The majority of people do not pay the sticker price for college. I went to a very expensive colle. They are happy to give out tons of scholarships, tons of grants, tons of financial aid. And you also have lots of different options, including community college. The most important thing to consider when you are considering college and your lifetime earnings is actually choosing the right major that makes a huge difference. All of this can be researched online, and you absolutely should, because it's one of the biggest financial decisions of your life. Now, let's go on to housing. Remember how I told you that housing is historically unaffordable? And it is. You should also go beneath the numbers and realize that it's often cheaper to rent and invest. In fact, in 100% of the top US metro cities, it is cheaper to rent than to own. And I have personally made way more money renting and investing the difference for the last 20 years than I would have by owning. Owning a house. Please remember this. You are not a failure. If you rent, it is okay. And actually it can be a superior financial decision. Now, I want to show you exactly what I would do. And actually this plan to accumulate wealth and to start living a rich life is not theoretical. It's actually exactly what I did. Step one. Understand that you are in control. The first step to prevent yourself from falling down the vortex of doom is. And thinking that every dream you have is out of reach is to realize that you actually have more control over your financial future than you realize. Now. You got to be careful if you're following people who tell you life is horrible. Americans are living paycheck to paycheck. First of all, that's a lie. Americans are not living paycheck to paycheck. The median household has a net worth of $193,000. But if you only listen to people that tell you, life is doom, life is misery, you have no control. Give up. Guess what? That's exactly where you're going to end up. Yes, we need to acknowledge basic facts. College education is more expensive than ever. Housing is more expensive than ever. Those are out of your control. That is not your fault. However, let's accept it. Let's internalize it. And that allows us to start seeing the things we can change to give ourselves a better future. Step 2. Decide what's important to you. Don't tell me everything's important to you. Oh, Ramit. I love mattresses. I love guacamole. I love vacations. I love flying on an airbus. I love eyeglasses. I love cameras. You have to decide what's important to you so you can spend extravagantly on it, as well as knowing how to cut costs mercilessly on the things that are not Important. What this means is you have to come up with your own point of view on your rich life. What do I mean by that? Do you really want to own a house? Why? Have you even asked yourself why? More than three times? I go, why do you want to own a house? Because that's how you build wealth. Why? Hansel and Gretel? What? They just start saying words. Rapunzel, what the F are you talking about? Why are you going to spend over a million dollars on the biggest purchase of your life and you can't even tell me why you want to do it? Do you understand opportunity costs? Do you understand rent versus buy dynamics? Do you understand amortization? No. You don't even know what that word means. I'm supposed to be helping people here. Slow down, Ramit. Do you really want to own a house? Maybe you do. All right, whatever. Where do you want to live? That's important. Do you want to live in a coastal city? Do you want to live on a farm? Do you want to live in suburbia? That's important to know. What is important to you? This is the big things. Do I want to be married? Do I want to have children? This is even the small things. Do I want to have a king size bed or a full size? It's important to know what your rich life looks like. You don't have to spend your money doing what everyone else does. Graduate from college, move to some desolate suburban area, go to work, come home, go to Home depot, fast forward 40 years, move to Florida, get skin cancer and die. You don't have to. You could if you want. I guess some people like it. You don't have to do that. You can choose. In order to live your rich life, you do have to track some numbers. There are four key numbers that you need to know. First, fixed costs, which is any basic expense that you would use to live. Things like rent or mortgage. Any debt that you owe. Groceries, things that you pay every single month. Those should be 50 to 60% of your take home pay investments. This is long term investments, particularly retirement. 10% of your take home pay at least. Ideally more savings. Things like an emergency fund. Saving for a down payment, Even saving for a vacation. 5 to 10% of your take home pay. And finally, guilt free spending. Going out, traveling, buying a round of drinks for your friends. 20 to 35% of your take home pay. That's a lot of money. That means you can use money like Tetris and you can make it fit within your vision of a rich life. Once you Decide how much money should be allocated to each bucket. Move on to step three. Make your money work for you. The single most profitable system you ever set up in your life will be automating your money. Let me show you how to do it so you never have to worry about money again. Make a list of all Your accounts, their URLs and your logins and passwords. And now link your accounts together so that you can start to set up automatic transfers from one account to another. I want you to think of your money as everything coming into your email inbox. That's your checking account and from there, money flows where it needs to go. Let me show you what I mean. When you log into any of your accounts, you'll find an option called Link Accounts Transfer or Set Up Payments. Let me show you the exact links you need to make. Connect your PayCheck to your 401k so you can automatically fund it each month. Connect your checking account to your Roth IRA or other investment account, savings account, credit card, or any regular bills that can't be paid using a credit card like rent or loan payments. And now you can see here how your paycheck and your checking account and your credit card each fund different accounts. In personal finance, we always fight for simplicity with this setup. Each account has a specific purpose and that's it. Move on. Now that all your accounts are linked, it's time to automate your money. This step is really simple, but it's going to make all the difference. The way we talk about money is the same way we talk about climbing up a mountain. Like, it should be difficult and you should be exhausted. But that's not how I talk about money. When I talk about money, it's calm, cool, relaxed and simple. That is why I use the technique of automation with my money. On a given month, I spend around an hour a month total. I'm not transferring money, I'm not looking at how much I spent on tomatoes. Money automatically flows from my paycheck, to my investments, to my savings. And even so that I can go have a nice dinner and not worry about the price, I want to show you how to automate your money so it's calm, cool and collected. One thing you want to pay attention to is picking the right dates for your transfers. If you set up automatic transfers at weird times, it's going to create more work for you. When my goal is actually to create less work for you. The easiest way to avoid all this is to get all your bills on the same schedule. Here's when to set up the transfers, assuming you get paid on the 1st of the month. On the 1st of the month, part of your paycheck is automatically sent to your 401k and the rest automatically gets deposited in your checking account. On the 5th of the month, you have automatic transfer set up from your checking account to your savings account. I would recommend you save at least 5 to 10% of each paycheck. I also want you to set up an automatic transfer from your checking account to your Roth IRA on the 5th of every month. Ideally, it should be about 10% of your take home pay minus the amount you send to your 401k. And remember, make sure that the money you send to your investment accounts is being invested, not just sitting there in cash. On the 7th of the month, you will auto pay any monthly bills you have. That includes regular ongoing bills like cable, utilities, car payments, student loans, et cetera. You'll also need to set up an automatic transfer to pay off your credit card. And that's it. This is how we automate our money. And the best part is, you set this up once, you will barely spend any time managing your money going forward. And here's a pro tip. The first time you set this up, I recommend you leave a buffer amount of money, like say 500 bucks in your checking account just in case a transfer doesn't go right. You can cash that buffer out after a couple of months when everything is running smoothly. Up next. Step four. But before we get to that, make sure you hit subscribe so I can keep sending you these helpful tips on growing your money. Step 4 Build your financial moat. You know what I want for you? I want you to build a system so that your back is never against the financial wall. That means having enough savings. So even if something bad happens, like getting laid off or an emergency expense, you can cover it. Now I Recommend you have 3 to 6 months of an emergency fund saved up. What does that mean? You take your fixed costs, or basically what it costs you just to keep the lights on every month and you multiply that by 3 or 6. For example, if you spend $2,000 a month for rent, groceries, etc. Then you should work on saving 6,000 to $12,000 for your emergency fund. Now you want to be able to get this money quickly in case something happens, like if one of your parents gets sick or your car breaks down. But you want this money separate from your checking account so you're not going to go out and freaking spend it on Carbone one weekend. I personally use Capital One 360s performance savings to keep my emergency fund. But really, you can use any savings account you like. And yes, saving three to six months can take a while. That's okay. Sometimes it takes years to build that amount. But it's important to have that money being automatically transferred every single month. Step 5 start investing now. This is where true wealth is created. And that is why investing is so important. You do not create wealth from simply saving money. Saving is not enough. You do not create wealth from winning the freaking lottery. I don't know what's wrong with people thinking they're going to win the lottery, win an insurance settlement. Stop it. It's investment. It's really simple. It's not that complicated. So can we just do this and be done with it? If you are young, you have the single best advantage on your side, which is time. If you're not young, you could still keep watching. I'm going to show you how to do it. But if you're young, you really need to start investing. Because the earlier you start investing, the more your money will grow. That's because time and compounding are on your side. If you are in your 20s, 30s, even 40s, it can feel like, how am I supposed to have money to invest? I'm just trying to get by. But if you start early, you can invest less and still end up with millions of dollars. Let me show you the numbers. If you invest $400 a month starting at age 23, and you continue until you're 65, you don't even add a single dollar. You just have $400 a month. That's it. No raises, no getting married and having dual income. None of it. You'd end up with $1.1 million. That's just the starting point. Now again, if you didn't start at 23, that's okay, let's start today. But the important thing is to realize time matters. So how much should you invest? Well, I recommend investing at least 10% of your paycheck. Take home pay. If you can't start there, how about 8%? How about 5%? How about $50 a month? The point is to get started. Just like starting to go for a walk, then a jog, then a run. And you can always turn it up later. Do you know that it's easier for me to grow my investments than for me to brush my freaking teeth? My investments just happen. I could be on vacation, my investments are flowing. I could be sitting outside, my investments are flowing. That's what I want you to do. I want you to start talking like this confidently. Yeah, I'm investing. Of course I'm investing. What the is wrong with you? You're not investing. That's how I want you to get. And here's a trick to increase your wealth even faster. Take your contributions and increase that number by 1% every year. In other words, if you have 5% of your take home pay getting invested every December, put a calendar reminder and increase it by 1%. 5% turns into 6%, 6% turns into 7%. That single decision alone will make you hundreds of thousands of dollars over your lifetime. Forget about coffee, forget about cheesecake. Do that and you will make more than all the money you ever spend on eating out in your entire life combined. Remember, you are in the perfect time of life to start building wealth. Do it now. If you are serious about growing your wealth, I made a video showing you the exact three levers you can adjust to easily make millions even on a low salary. Check it out right here.