Smart is the New Rich. Christine Romans

and entrepreneurial bunch. You're the most educated generation in U.S. history, and you understand technology in an intuitive way that no other generation can.

      The economy is slowly healing, and you're poised to succeed. I'm more optimistic by the day about your job prospects. Hiring for the class of 2014 jumped a stunning 8.6 percent from 2013.4 Whether they're looking for accounting, computer science, engineering, or M.B.A. graduates, more than half of companies surveyed reported they were stepping up their hiring.

      We'll discuss the job landscape further in Chapter 4, but for the purposes of how you think about money, the subject of this chapter comes against an improving backdrop. The jobs market is healing. The current recovery was among the slowest postrecession jobs recoveries, but finally all the millions of jobs lost in the Great Recession have been recovered.5 Technology will provide new opportunities we can't even predict today. And your generation – innovative by nature – will play a central role in that.

      Yes, there is a considerable problem of too much student debt and too few jobs for recent graduates. But I don't think that all millennials have been permanently sidelined by their student loans, nor have they been permanently left out of the jobs market. We'll explore managing that debt in Chapter 2 and getting a job in Chapter 5, but in this discussion of how you think about money, it's time to relegate debt and jobs to background noise. Repeat after me: You have something to offer the workforce, and you can manage your student loans.

The typical student loan burden can be manageable. According to a report from the Brookings Institution, just 7 percent of households with student debt have a burden of $50,000 or higher.6 About a third of bachelor's degree graduates have no debt at all, and the average debt of those who do hovers around $30,000. There is a rule of thumb in college savings and planning: You can afford to borrow for college about as much as you expect to earn in your first year's salary. If you are the typical business major, that means you can afford to borrow around $50,000. Humanities and social science graduates can afford to borrow less.7 The average starting salary for the class of 2014 rose 1.2 percent from the prior year, to $45,473, according to the National Association of Colleges and Employers (NACE),8 with wide variations by discipline (Table 1.1).

Table 1.1 Average Salaries by Discipline

      Source: National Association of Colleges and Employers

      If your student loans are getting you down, remember this: A college graduate will earn, on average, a million dollars more over the course of a working career than a high school grad.9 Handling student debt diligently will be a key part in your strategy for building wealth. The vast majority of college borrowers with less than $50,000 in student loan debt can certainly be moving forward in their financial lives and using their best asset – time – to work for them. Don't let anyone tell you it's impossible to plan for the future while still paying off the past. It can be done. (Chapter 3 will help you organize your approach to managing debt.)

      This is not a book for defeatists. It's a book for young people of any means who want to build wealth. Whether you have loan debt, were fortunate enough to graduate debt-free, or are considering college or studying now, it is critical to save early and train yourself in habits to make your money grow.

      Most of us didn't grow up reading the Wall Street Journal, and many high schools teach rudimentary economics if anything at all. In grade school, children still learn to count change, yet there is little if any real preparation for the dizzying array of college financing schemes, prepaid debit cards, peer-to-peer loans, and countless other accounts millennials get pitched every day. Financial literacy is not something the United States does well, and most families would rather talk about religion or politics than money. There's no shame in getting started now. The old cliche that it is better late than never does not apply here. You are reading these words now, and you have the most valuable ingredient you need: time.

      In the workforce and in the headlines you have undoubtedly heard and read those old clichés attached to the newest generation. They don't work as hard. Consumer technology makes them lazy and entitled. They are selfish. However, a seminal study of millennials by the Wall Street research firm UBS found something very different – and very exciting – for any member of this generation looking for success. That study found that millennials have learned the lessons from the financial crises during which they grew up and are now primed to save more money and build wisely for the future. Think of your generation as being as powerful as the baby boomer generation – you will have an equally huge impact on the economy once you hit your stride financially.

      “Millennials shatter stereotypes, believe in hard work, worry about parents' financial health, and define success as a combination of money, healthy relationships, and enriching experiences.”10

– UBS Investor Watch

      The UBS study found this generation more likely to save, more frugal, and more resilient than prior generations. UBS found that words like entitled and lazy don't fit the reality.

UBS asked millennials to define success: How do you know when you have arrived?

      Emotional (39 %)

      • Having a happy family (45 %).

      • Having a deeply meaningful relationship with my spouse/partner (37 %).

      • Staying true to the values I believe in (18 %).

      • Leading a calm, simple life with people who care about me (17 %).

      Financial (30 %)

      • Having financial freedom (48 %).

      • Being able to provide for future generations of my family (15 %).

      • Being well-compensated for what I do (14 %).

      • Owning things I aspired to have, such as art, a second home, a boat, and so on (12 %).

      Experiential (24 %)

      • Living a full life with a wide variety of experiences (37 %).

      • Enjoying the work I do (29 %).

      • Being someone from whom others seek advice/opinions (4 %).

      • Knowing interesting, creative people (2 %).

      Achievement (7 %)

      • Achieving more than my parents or my peers (7 %).

      • Reaching a very senior job position, such as a C-Suite position (7 %).

      • Owning my own business (5 %).

      • Source: UBS

      In fact, money matters to millennials, UBS found, but they fall short of the “greedy” tag one might apply to their elders. Success to millennials means hard work (69 percent), saving and living frugally (45 percent), and a good education (37 percent). And success is not just about money. This generation's definition of success is more nuanced, adding emotional and relationship factors to the formula and not just traditional measures of financial health.

      Achieving that success takes some simple first steps. And the most critical is the monthly budget.

      Pay Yourself First

      The first key to building wealth is to live below your means. The money you don't spend you put to work. For many years, it was the American way to spend more than we earned, using credit to pay for the rest. Millions of Americans burned through their money, justified by the false assumption that the

4

National Association of Colleges and Employers, Job Outlook 2014 Spring Update.

7

Mark Kantrowitz, senior vice president and publisher of Edvisors and author of Filing the FAFSA.

8

National Association of Colleges and Employers (NACE), Salary Survey, April 2014, www.naceweb.org/salary-resources/salary-survey.aspx.