The Rules of Money for Gen Y
The rules of money have changed over time. It used to be that you could go to school, get good grades, get a safe, secure job (with benefits), and retire on Social Security, a pension, and personal savings.
As Gen Y, we realize this isn’t the reality for us. Safe, secure jobs are as ancient as the Romans and we know there is no golden parachute waiting for us in retirement.
So what exactly is the reality we face? In order to understand what’s to come, we must understand what’s happening in the global economy. We can look at the future of money by understanding the timeline of events that have led us to where we are today.
Bottom line: There are new rules of money for our generation.
In order to understand the new rules, we must first understand the 3 Types of Income :
- Earned
- Highest tax bracket. Federal, State, and FICA taxes erase about 50% of your total wages.
- Earned by trading time for money. There are only so many hours in a day, so there is a limit on how much you can earn.
- Portfolio
- Middle tax bracket. Long-term capital gains and dividends are 15%.
- Earned by buying stocks, bonds, mutual funds, CD’s, REITs, Notes, and other securities.
- Passive
- Lowest tax bracket. Taxes can be as low as 0%.
- Earned through wise investments in real estate and royalties.
In our generation, working hard and getting a high-paying job will make you broke. You’ll be working for earned income and pay more in taxes.
Your Goal: To turn your earned income into passive and portfolio income as fast as possible. In an age of rising inflation, the dollar will continue to fall and the only items of value left will be those true assets that you have.
