In my first column, my 10-year reunion was on the horizon. Now it has come and gone. It was nice running into old friends that have been traveling and living their lives these past years. It's amazing how fast that decade has gone by.
Looking out into the future, it's hard to believe that in that same span of time most of us will be parents, be well into our careers, will want to own a home and will probably be struggling to make ends meet.
Many of us will continue to move ahead through life status quo, not knowing that there is a storm on our doorstep.
I recently had the opportunity of reading Robert Kiyosaki and Donald Trump's new book "Why We Want You To Be Rich." It's decent (3 out of 5 stars), if you don't mind the 180 pages of them droning on about how great they are.
Although one may not agree with everything they write, Mr. Kiyosaki's analysis of the coming financial crisis this country will face was right on the money (no pun intended). We are slowing becoming a country of "haves" and "have nots" all the while with our citizens asleep at the wheel. My fear is that most of those who I know and love will not know what's coming until it's too late and will not have time to prepare.
In this book Mr. Kiyosaki describes his vision of the future and why the middle class needs to be concerned. Here is a quick summary:
1. A growing trade deficit
Basically, our country is spending more money than we have. According to Mr. Kiyosaki it's like a family that earns $5,000 a month, spending $6,000 a month.
2. A growing U.S. national debt
No matter what party has been in office, it has been our government's policy to borrow enormous amounts of money from other countries to finance our outrageous spending. Between the years of 2000 to 2005, the Bush administration borrowed $1.5 trillion. This leads to the next problem.
3. A falling dollar
Because our dollar is a currency, it is just like an IOU. The higher our national debt goes, the more dollars our government prints. More dollars causes the value of the dollar to go down. This is why money in the bank is actually LOSING value. The value of the dollar is falling faster than the 1% interest you're making at the bank.
4. Baby boomers without money
75 million baby boomers will be retiring in the next 5 - 10 years. All of them drawing on their pensions and social security. There is no evidence that our government will be able to afford all of these programs that were designed over 50 years ago when life expectancy was not nearly as high as it is today.
5. An entitlement mentality
As more and more people lack the financial aptitude to afford basic costs of living they will expect the government to take care of them. Most likely the way the government will try to solve this problem is by borrowing more money, thus devaluing the dollar even more.
6. Higher oil prices
With our current dependence on foreign oil, it does not seem likely that in the next 5 - 10 years we will be energy independent. When oil hit $70/barrel earlier in the year, things were bad. Imagine if they go up to $100/barrel or more.
7. Tax breaks for the rich
It is no secret that the very wealthy learn how to pay as little taxes as possible while the middle class ends up taking the brunt of the financial hit. This doesn't seem likely to change in the future as well
These problems are going to be left for my generation (Generation X). If I take a look at how we currently run our finances (high credit card debt, lack of financial education), my guess is that we will be in a much worse predicament in 10 years than we are now.
It will be up to individuals to financially educate themselves out of what looks to be a very serious situation.
I start 2007 with this topic not to be depressing, but to hopefully light the fire of those who are sitting on the fence, who are looking for a wake up call. It is not too late to start preparing and educating yourself.
As always, I appreciate your feedback and comments. I recognize that I don't have all the answers and love to hear different perspectives.
