The Future You Are Saving For Does Not Exist

25 Comments

When I read personal finance blogs and news sites across the web, I often come across articles with titles like, “Why I will not pay for my children’s college” written by twenty-somethings who aren’t even pregnant yet. Others talk about diligently saving to retire early at age 50, even though they’ve barely started their careers. We talk about our futures and our finances like they are so predictable.

They’re not.

One of the most dangerous things you can do for your finances (and your happiness) is to plan your life under the assumption that everything will remain as it is. It won’t. I think we intuitively understand this, but you don’t know what you don’t know, and that makes imagining anything different extremely challenging. But these perspectives and biases can hinder us by limiting our flexibility to adapt to an ever-changing world.

Most of the resources intended to guide our futures come from the past.

This is a big cognitive bias you should make an effort to overcome: just because something has worked previously, or is “the way we’ve always done it”, doesn’t necessarily mean it’s right for you or your money.

This is a big hurdle. Most of our advice comes from our parents and mentors sharing their good-intentioned wisdom from their own experiences. They believe in what worked for them because it worked for them. They want it to work for you, too, but it’s possible it won’t. The world we live in is much different than the one our parents occupied, and it will continue to change in ways that challenge our current strategies.

If you’re diligently putting money towards yesterday’s dreams, you’re going to get left in the dust.

We are in an education bubble

The “go to college, get a good job” narrative needs to be put to rest. As post-secondary tuitions and fees continue to rise, so do student debts. Meanwhile, a stagnant job market leaves many millennials struggling to recognize any adequate ROI on the degrees they paid so much for. Accessibility to education is an important piece of an equitable and productive society, but the job market is becoming so saturated with Bachelors degrees, these credentials no longer guarantee the salary bump they did in the past — even though they cost much, much more to obtain.

The average student now graduates owing more than $35,000 in student loan debt, but many individuals are saddled with six-figure balances. Meanwhile, the average starting salary is only $45,000, if you manage to find a job. Unemployment for university graduates has been rising since 2006. We often quote the statistics that a college graduate will earn as much as $1 million more in their working lifetime than someone with only a high school diploma, but as the cost of education continues to rise and well-paying jobs continue to disappear, this statistic will not hold true forever. We shouldn’t even be using it to lure new high school grads into post-secondary right now.

Related Post: Was My University Education a Waste?

I don’t write blog posts about whether or not I will pay for my children’s post-secondary educations because such a huge part of me hopes that they don’t go. I don’t think they will need to. Instead, I hope they pursue whatever is working in their present, not is what currently working in mine.

The Freelance economy is already here

By the year 2020, 50% of the US workforce will be freelancing in some capacity. We are a generation of Uber drivers and bloggers and Instagram stars. You do not have to make your way up the corporate ladder anymore because you don’t have to be corporate anything.

Initially, most jobs that have become obsolete by technology have been primarily in manufacturing and trades, but as our technology becomes more sophisticated, more jobs are at risk of disappearing. Creative work is one of the best defenses against these changes. Of course, Millennials are already on board, with as many as 60% describing themselves as entrepreneurs.

One of the best ways to approach your career is with the understanding that your job might disappear, and to work as hard as you can at ensuring you have an alternative. Creating a job for yourself might seem intimidating and difficult, but it’s easier than living without any work at all.

You might not retire at age 65, because you might not retire at all.

The current life expectancy in the US and Canada is approximately 80 years old. But with advances in science and medicine, Millennials might live to be over 100 — and there’s nothing to say that number won’t be even higher in the future. 65 became the retirement age when life expectancy was only 62. If the current age of retirement had kept pace with increases in life expectancy, no one today would be able to apply for Social Security until the age of 83.

Don’t retire. There’s no good reason to leave your career in the middle of your life, when you will likely have so many more years of value to offer. Accumulate mountains of cash so you have choices in the future, but think about more than your escape from the workforce. Find or create a job you love, and do it until the day you die.

Homeownership in many urban centres is a pipe dream

The more time passes, and the more I continue to watch the ludicrous real estate markets in cities like Toronto and Vancouver, the less I believe home ownership should have a place in everyone’s financial plan.

The idea that home ownership is a cornerstone to long-term wealth accumulation is a belief that belongs to our parent’s generation. We don’t need to subscribe to it. For many young people who bankrupt themselves to scrape together a pitiful down-payment, then forego retirement savings in order meet inflated mortgage payments, being a homeowner can do more harm than good for their finances.

For many young people living in moderate or cool real estate markets, home ownership can still be a good long-term play. But for those of you living in cities like Toronto or Vancouver, San Francisco or New York, it’s time to shed the stigma around renting and accept that home ownership might simply not be in the cards for you. Know that you can still become financially secure without it.

I don’t pretend to know what the future will look like in 20 years,

I only accept that it will likely be much different than the present I currently live in.

Imagine being asked at 10 years old what you wanted to be when you grew up and you said social media marketer or cyber security specialist. These careers didn’t exist. The platform they currently exist on wasn’t even invented yet.

That’s what the future will be like.

It is safe to assume there will be plenty of careers that we cannot imagine right now because the technology they will rely on has not yet been invented. The problems they will solve are worries we’ve haven’t yet experienced. The needs they satisfy are ones we don’t even know we have.

Your future will be marked by economic uncertainty, widespread environmental destruction, impressive technological advances, and more opportunity than you can presently imagine.

You can’t predict anything, but you can still prepare for it. Pay your debts, save cash, and be open to non-traditional paths to building wealth.  The future will be much different than the present, but that doesn’t mean you can’t achieve your goals.


25 Comments

  1. I went to school to become a biologist, and so I like to think of personal financial management as going through phases of evolution, just like living things. We are all here today because of successful strategies our ancestors implemented, consciously or unconsciously. Those strategies may have worked for those guys, but when the environment changes, those same strategies can sometimes become maladaptive, and even downright harmful to the point where a species can go extinct. The only way that the species can continue is if they develop new adaptations to deal with the changing environment. Flexibility is a better adaptation than rigid thinking for any given situation.

    • hahahaha I LOVE this! And I agree completely. If we can evolve to meet the challenges of external pressures, we’ll have a much better shot at success — and not going extinct!

  2. This was an amazing wake-up call. As somoney whose parents keeps pushing the buy-a-house narrative in a market where I can barely afford a shack, this means a lot to me.

    You’re so right about the future being uncertain and unimaginable. Before I even went to college, I assumed I’d never retire given the problems with SS here in the US, but I also never thought about the longer life expectancy. Thank you for reminding me why I’m carving out my dream job and working so hard to pay off debt/save on my own. This was a much needed motivator.

  3. What an awesome article, so many people keep doing what they have always done thinking they will get something different. If you are just prepared for the changes that may come you will be more prepared for whatever it is that is coming.
    Get out of debt save money and create a life you enjoy don’t plan for something that may not exist when you reach that goal.

  4. I’m a big fan of blue sky dreaming my future, then using the details of that day dream to inform my financial needs and action steps in the present. That said, my vision of the future is something I am CERTAIN will change. I think there’s a big difference between specificity and rigidity, and the best course of action is to set yourself up for anything.

    Now what that means in terms of the next generation and what scripts to raise children with – I have no idea. I agree, college is no longer the silver bullet for career or financial success. I don’t know what is though. My bf and I have been very successful in untraditional ways, but by the time my potential children are my age, what we’ve done might not work either. I think maybe that realization that the keys to success are always evolving and being open to that change is maybe what’s most important.

  5. This is such an excellent point and I agree completely! I feel like too many people have one specific vision that they hope will come to fruition. But if anyone told me that I would find myself in Alaska, with three kids, working in economics, and blogging, I would have told you that you were a crazy person. But isn’t that wonderful? Life is unpredictable. The money you save can get you where you want to go… but it won’t be where you predict. Also, I agree that education and employment is changing so drastically. I need to teach my kids to acquire skills and know how to find answers and think outside the box more than I need to push structured advanced education. Thank you for the reminder.

  6. Good article Bridget, it was eerily similar to one I wrote a little while ago (shameless plug: https://jordandetmers.com/2014/08/06/boomer-metrics-how-education-became-a-best-seller/)

    There is already a great deal of attention on the fact that university isn’t what it’s cracked up to be, and I’m curious to hear what your thoughts are on the future of university education. Thanks!

  7. YOU’RE THE BOSS.

  8. Erin

    I love your point about retirement; it’s the perfect balance between save everything, retire early and don’t save, work forever. Because we have NO IDEA what things are going to look like in the future. Find work you care about — work that doesn’t make you count down the days until retirement — but also save a decent chunk of money. Don’t save everything, enjoy your life now, but understand that the death of a partner, illness or disability, infertility, etc. comes with much more than just an emotional cost, and you need the $$ to deal with the shitty stuff that can and most definitely will happen. I guess what I’m saying is, don’t plan on retirement, but prepare for it financially anyways.

  9. Great article about solving the problems in front of us and not the ones behind. Often parental advice is simply a solution in search of a problem. And I couldn’t agree more about the college degree–its value has been so watered down as to be meaningless. Employers want to hire people with skills and the ability to actively solve problems. Most college programs teach neither. It’s sad. Google has even stopped requiring a college degree for many positions. And of course Steve Jobs never even completed college. I’m looking g forward to a more rhizomatic education/training system where the people with skills advance.

  10. “Find or create a job you love, and do it until the day you die.”

    I love this.
    Many people in my workplace are still trapped in the mindset that corporate is the only career option.
    I think that this really ends up limiting them and hindering their productivity.

    I also agree with you on the education bubble idea. If I went into college knowing what I know now about the labor market, I would have done it all differently! I should have focused my energy elsewhere.

    I also agree about not necessarily encouraging your children to go to college. I want my future kids to live life how they want, learn some cool things, and feel free to adventure and explore. College does not have to fit in that picture.

  11. Disagree. A lot of people are forced to retire due to health issues and are forced to live on social security. How do I know?

    They were my customers when I was working in customer service and would ask to make payment plans when they owed the company I worked for any past bills.

    Retirement comes whether you like it or not. You must prepare for it.

  12. Stephanie

    I feel this post so much. Thanks for a fresh, practical, disruptive view on things – we need it.

  13. So much wisdom packed into this article, Bridget. It is important to remain flexible with our goals, as the future can change in an instant.

    Your thoughts on college resonated the most with me. College/student loans will likely be the next bubble to burst, which will drastically change the landscape for future generations.

  14. I feel like people should save for retirement anyway because a lot of people retired even when they don’t want to retire. Their health forces them to and they have to live on social security. I used to do payment arrangements for a company I worked for and often had to help seniors with theirs. :-/

  15. Very insightful post. I’ll most likely end up working past 65 but hopefully it’ll be more on passion projects and still teaching those group fitness classes. 😛 I like being busy and get bored easily so to actually go into the traditional retirement mode -such as playing golf or laying on the beach for half the year down south would not suit me at all.

    It still amazes me that a lot of my friends and family (my husband included) are actually using their degree for their careers and have stuck with the same career for many, many years. I know a lot of people are afraid of risk and change, but those two are needed in order to survive, especially in these constantly changing times.

  16. I like your point about the freelance economy; it’s the same over here in the U.K, especially in London. The education system needs to factor this in, asap.

  17. You’re absolutely right about the uncertain future and how people view their future through their ‘past experience lenses’. Part of the reason I invest so much is because of that uncertainty: I don’t know if I will retire early or keep working, if my children will be geniuses and attend expensive private universities, or if someone in my family will require financial assistance due to some unforeseen issue.

    If you are happy with life now and have a surplus of cash, why not invest 50% of your income. I might not be able to invest as much in the future, so better to get it in now.

    Great article with interesting viewpoints on education, housing prices, and freelance work. I think the 50% of the population freelancing in 2020 will be much happier than their corporate counter parts–even if they are making less money. Nothing like being your own boss and doing what you love. No reason to retire if you love what you do everyday.

  18. Great post Bridget and it coincides with my blog post today where I talk about why we should never expect to retire early. I think many people dream up the flowers and stress-free life just because they sock money away in their investments but the truth is just as you point out, we don’t know what the future will hold. I’m prepared to keep on living frugally now that our mortgage is gone and we have a toddler running around. There’s no retirement age today that stops us from earning and there probably never will be. A million dollars only sounds nice but it’s not going to be enough.

  19. Rodrigo

    I’m glad you kept it raw and real in this article! I’ve always felt this way: non-traditional methods for our millennial generation. I’m a recent graduate from the University of California-Riverside with a BA in Linguistics. Applications for a post-bacc in a Master’s of Speech Language Pathology are coming up, and it’s scary to think that a BA for our generation is not enough; we now have to go a step further and obtain a Master’s degree. Even then we are not promised that this will then lead us to obtain a good job; unorthodox methods when it comes to becoming financially aware are needed and I’m happy that I am a subscriber to this blog; it’s solidified what I’ve always thought to be true! Thank you!

  20. I used to create 5 or 10 year plans (because that’s one of the job interview questions prospective employers like to ask right?) but then stopped doing it exactly because of the reasons you mentioned – I just don’t know what 5 or 10 years might look like for me and what my situation might be then!

    I find I’ve been happier and more accomplished when I create shorter-term goals (within months to up to 3 years). It’s easier to work with the shorter timeline and creates more urgency in me. I still can’t predict what 3 years from now might look like but I think I have a better idea than if I had a 10 year plan 😛 great post Bridget!

  21. Tommy

    Very honest and sober article. Among the best I’ve ever read on finances. You have wisdom beyond your years (and more of it than many people twice your age)