5 min read
The opinions expressed by the entrepreneur's contributors are their own.
The American dream! The term was popularized by historian James Truslow Adams in his 1931 book The Epic of America and described "the dream of a land where life should be better and richer and fuller for all". After World War II, the American dream turned to home ownership, a happy family, and summer vacation. Some people even went for a degree. The G.I. Bill helped make the dream possible. This generation, known as baby boomers, expected their children to get better.
Why the American dream is fading
In the past few decades, the concept of the American dream has deteriorated. While upward mobility once seemed achievable for almost everyone, in today's economy people struggle to afford basic needs, let alone save for their future. "Only half of today's 30-year-olds earn more than their parents when they are the same age," said Visual Capitalist. Having a good job with benefits no longer means owning a house and having a family with two children, a car and a dog.
What caused this shift? For starters: stagnant wage growth, unequal income distribution, increases in the cost of living and erosion of benefits. Younger generations are being forced to rethink and accept the American dream that a 9-5 job is not enough. Americans should focus on building passive income that complements and ultimately replaces their current wages. Let's take a look at the factors that prevent upward mobility.
According to an article by Venture Capitalist, the average hourly rate was $ 22.65 in 2018, compared to $ 20.27 in 1964 after inflation adjustments. This corresponds to an increase of only 11.7% over a period of 54 years, which corresponds to an annual increase of 0.2% compared to inflation.
A 2014 analysis by the Economic Policy Institute found that actually fewer people in the lower and middle class are climbing the economic ladder today. In return, they did less than their parents. As Intelligence Squared reported, "Over the past 30 years, wages in the top 1% have increased 154% while the bottom 90% has only increased 17%." What made this phenomenon happen? Unequal distribution of income, with the top receiving much more than the bottom.
Some of the causes of income stagnation and unequal distribution of income are technology, automation, offshore resources and independent contracting. More and more companies are pushing governments and workers into a gig economy by allowing them to hire contractors and avoiding worker protection. The recent adoption of California Proposition 22 opens the door to other companies using independent contractors rather than hiring employees.
Related: Is The Gig Economy Killing The 9-to-5 Job?
Stagnation in wages would not be a critical issue if prices had increased with the rate of inflation, but that was not the case. According to a 2018 survey by the Kaiser Family Foundation, health premiums rose 3% each year above inflation for a 10-year period. This does not take into account the independent contractors, who would often have to pay out of pocket at a much higher premium than when working as an employee.
Related: New Study: Healthcare is the number one concern of freelancers
The average annual cost of tuition, room and board at a four-year facility increased from $ 16,590 in 1995 (in 2017) to $ 27,357 in 2017 – a 2.3% annual increase against inflation. Median property prices have increased from $ 200,000 to $ 300,000 over the same period. This corresponds to an increase of 1.8% compared to inflation. We see similar price developments for children's cars, gasoline and cars – all of which have increased dramatically since 1990, while wages have remained practically the same.
Create a new dream
However, all hope is not lost. While previous generations might be complacent about their future, today's millennials and younger generations need to take a more proactive approach to securing their dreams. As mentioned above, this requires a change in mindset. Instead of just focusing on maintaining a 9 out of 5 job and saving up for retirement, it would be wise to build a passive income. Passive income can help you not only to preserve your wealth, but also to grow it and save it for your future.
There are many ways to earn passive income. My personal expertise lies in turnkey rental. Owning a turnkey single family rental is a great and quick way to generate passive income while at work or when you retire. When investing in a turnkey property, you are buying a rental home or apartment that has already been repaired and rented by a property management company. You buy it, managers run it, and you collect the profits.
Related: 10 Strategies for Earning Passive Income
The American dream is still alive. It just requires a change of mindset and a more proactive approach. While previous generations may be more complacent about their futures, action today must be taken or your standard of living could easily slide towards poverty. Acquiring passive income is the surest way to ensure your future success.