Go to school. Get a degree. Find a good job. Work hard. Retire happy at sixty-five.
It’s a simple but effective wealth formula that provides a safe route to retirement.
Or does it?
Unfortunately, the formula no longer works for an increasing number of people.
In 2013, Politizane created this short video documenting U.S. wealth inequality.
Or to be more precise, how Americans underestimate income disparity.
The video highlights eyebrow-raising statistics such as:
Beyond the top 20% wealthiest Americans, it's a different picture:
The video concludes that...
"all we need to do is wake up and realize that the reality in this country is not at all what we think it is."
And they're right. But having read these statistics, what now?
You could get angry, throw a tantrum and post your outrage on social media. Might even get a few likes from your friends...
Nothing beats seeing the notifications flash red right?
Or you could do something about it. You could take the time to figure out why this is happening and what the consequences are.
But most important, you could take the time to determine what YOU'RE going to do about it.
How are you going to protect your financial future?
Because a couple of things have changed over the years. First, the idea of a “job-for-life” died decades ago.
According to the US Bureau of Labor Statistics, workers now stay in a job role for an average of only 4.4 years.
And second, middle-class salaries have already peaked. According to a report named “Poorer Than Their Parents”:
70% of households in the 25 most advanced economies saw their income drop over the last decade.
Globalization has been a contributing factor. But it's the rapid advancement in technology that is now wreaking havoc.
Unfortunately, what's perceived to be a bad situation now, is set to get even worse for the middle class.
In advanced economies well paid working class jobs have been in decline for decades. Globalization resulted in well-paid manufacturing jobs shift overseas.
Meanwhile, increased automation in factories has seen many jobs disappear altogether.
White collar work survived many of these changes in recent years. After all, it was harder to automate these tasks.
But, that’s set to change.
Anyone who has been paying attention to the news knows that computers are getting smarter.
We're not at the level of full artificial intelligence (AI) as depicted in the Terminator or HAL 9000.
But the mass introduction of narrow AI and machine learning is happening around us.
Narrow AI is domain specific technology that is excellent at doing single jobs. For example, it's responsible for making sure an Uber is always nearby.
Or, it enables Google to give close to the exact answer that you are looking for in "search" for example.
The leaders in the business community are already aware that these changes are taking place.
Jane Fraser (CGL Citigroup's Latin America), noted at the "Fortune Most Powerful Woman Summit":
"this automation is going to hollow out middle and working class jobs. Technology is replacing those jobs."
Traditional middle-class sectors will be the worst affected by this technological shift. Jobs that act as the intermediary between customers and the services/products provided by businesses will suffer.
Citigroup suggests AI will replace 40% of employment in the banking sector for example.
Meanwhile, online travel giant Priceline suggests ~80% of human customer interaction-related jobs are replaceable.
For corporations, and those who own the businesses, these changes are positive. Robots and AI will complete tasks faster and cheaper than their human counterparts.
Think about it...
Pay issues such as holidays, maternity leave or benefits. All resolved.
And more productivity equals greater profits for shareholders. At least in theory.
The fact of the matter is, the methods of generating wealth are changing. So rapid is the advancement of technology, jobs will continue to disappear.
There are few jobs irreplaceable by machines or artificial intelligence. The mistake is in thinking your job, or your industry is any different.
The changes are occurring at a time when the middle class is already under pressure.
Salaries have stagnated. The availability of high-quality jobs has become more scarce. A trend set to continue.
But, the hardest impact is when the time comes to retire. According to a study by the Economic Policy Institute (EPI):
Yes, I know this is the "average". But, even for those approaching the retirement age, the figures are grim.
Again, According to the EPI, the median savings for people aged 56 to 61 is $17,000. It's nowhere near enough to enjoy anything close to a comfortable retirement.
And these are individuals who have little time to make up the difference in retirement savings.
Fidelity Investments recommend you have 10x your final salary before retiring in savings. So, if your salary is $50,000, you should have ~500k in retirement savings.
As a result, most will rely on social security as their only financial support during retirement.
Indeed, 36% of Americans over the age of 65 are already dependent on social security payments.
The knock on effect is worrying.
According to the Social Security Administrations own data, they are running out of money. Depleted by 2034 if things continue as they are.
The Congressional Budget Office warn the administration shortfall could come as early as 2025.
Once depleted, benefits will shrink to 79% of the current levels. They're expected to fall to 73% by 2089.
The one thing this data should illustrate is that action is not an option, but a necessity.
The formula's broken. What worked for previous generations no longer works. If you are the current middle-class, you can be sure of one thing...
Your retirement will look nothing like you expect.
Of course, there's a silver lining to every dark cloud.
The same technological changes, threatening to ruin the middle-class retirement dream...
... are empowering those willing to take a different path to growing and safeguarding their future wealth.
And this approach is one of entrepreneurship and freelancing.
Technology means it's never been easier to generate income in this way.
More and more, people are using their 9-5 skill-set to break into freelancing.
Leveraging their expertise by providing help to clients across the globe.
According to a 2014 study by the Freelancers Union:
The Internet has changed the game. Made it easier for freelancers to compete with the services of white collar workers.
From marketing to sales, design, accounting, programming, etc., all are in high in demand.
Part of this increase in demand is due to the rise in the number of start-ups.
Startups run on an agile and lean model. Thus, hiring permanent staff doesn't hold much appeal. At the same time, they still need the expertise offered by white collar freelancers.
Larger businesses are also shifting towards a more outsourced and flexible employment solution.
A 2016 study by Deloitte said that, in the next 3-5 years...
51% of large organizations will increase the use of flexible and independent workers.
So, whether you are currently in a full-time job, or...
you're looking to shift into a more flexible role...
...freelancing offers an excellent opportunity to start building meaningful wealth nest egg.
Of course, this extra income has other wealth-building benefits. You can use this income to upscale your skill-set. Thereby affording you the opportunity to charge a higher price for your services.
Or as an alternative, you could establish a long-term investment portfolio. A portfolio that capitalizes on the current technological and AI trend for example.
Look, you can't continue to ignore the current trend.
By accepting and embracing these trends, you stand to be a beneficiary, rather than a victim like so many others.
Whether you like it or not, the changes I speak of in society and the global economy, are inevitable.
The formula that once worked to provide a comfortable retirement is gone...
and beyond repair!
It's time to take matters into your hands...
Time to take advantage of the new opportunities presented due to technological advancements...
Time to follow a new path to securing long-term wealth.
James is a digital marketing consultant and online business strategist. He helps coaches, consultants, and solo professionals market their business online so they establish authority positioning and predictably generate 5-20 high-ticket, new clients every month.