The Principle I’d Love to Discuss with Every Member of Generation Z

Sep 1

I love the people who are part of today’s younger generations! I’m concerned, however, about a mindset that millions of them have embraced. This mindset compels them to spend money on so many items that depreciate and keeps them from investing in items that appreciate. So, here is a conversation I urge you to host with young people.

Where We Throw Our Money

Each of us, regardless of our age, places our money in three categories. Most of that money is spent on consumables and items that depreciate. Here’s how I break it down:

Consumables: items like food, water, and monthly bills. We often need these items to live, but we use them up like commodities. They’re here and gone.
Depreciating items: things like cars, clothes, entertainment, and most furniture. They may last a while, but they don’t go up in value; they go down.
Appreciating items: things like homes, property, gold, silver, or retirement accounts. These items don’t scream for our attention, but they usually go up in value over time.

The first two categories feel necessary, and they scream for our attention. The trouble is, they represent spending, not investing. They are for here and now, not the future. Spending on such items feels pleasurable today, but may diminish my pleasure in the future. It’s the difference between consuming and compounding. When I was 23 years old and a new member on John Maxwell’s staff, he said to our team, “You can play now and pay later. Or you can pay now and play later.” It was some of the best advice I’ve ever received.

We must encourage our young people to do whatever they can to invest, not just spend. And start now. Setting aside funds to invest in items that appreciate over time guarantees they’ll enjoy the days ahead more. The young adults I know who’ve done this are already happier, knowing they’ve made decisions that promise a brighter future.

This decision, however, required them to make sacrifices.

What Does Sacrifice Mean?

When I’ve said this to young adults, they often reply, “But we ARE making sacrifices!” We gave up a trip to Europe, a new car and that necklace I’ve been wanting.”

My response? “You may feel you’ve made sacrifices, but that may just illustrate how far we’ve drifted in our definition of the term sacrifice. My parents’ generation made greater sacrifices than my generation did, and our definition continues to morph over time. Millions of us have no idea what sacrifice really means. Do we really assume forfeiting a trip or some new clothes is a sacrifice? Forty-five years ago, my wife and I lived in a one-room townhome, had a small black and white TV that sat on cinder blocks and reclined on a sofa that was uncomfortable if you didn’t sit down just right. Our external walls bowed when the wind blew hard. But those were satisfying days because we sacrificed to get ahead. We saved—for four years—and bought a small house when I was 25 years old. Nine years later, we sold that house for twice what we paid for it, enabling us to buy another one, then another one, and later another one. We made trade-offs on behalf of the future. Young people today often want to start from where their parents are now. It usually doesn’t work.

“But times were different then. You could get more for your money!” a young person may say. “We can’t do that. We will never be able to afford a house in our day.”

It’s not true. Sure, inflation has made this harder. The gap between salaries and the cost of living is wider. But it’s just a different trade-off. When my wife and I married, the issue was mortgage interest rates. They were at historic highs, with the annual average for a 30-year fixed mortgage reaching around 16.64%, and weekly rates peaking higher at over 18%, driven by rampant inflation. It made homeownership extremely difficult for many.

But my dad didn’t let me think of myself like a victim of the system. He taught me to work hard, save up and use as much of my money as I can for things which appreciate. It doesn’t have to be a house. It could be gold or retirement accounts. Something that gets bigger after you initially put out the money. I know two Millennials who came from middle-class America. Their parents didn’t have the money to pay for their college, and certainly could not help them buy a house. But they did five years ago as a married couple. On their property, they have two Airbnbs and a chicken coop so they can sell eggs. They are making it happen. But they sacrificed stuff today, on behalf of tomorrow.

The Washington Post published research by two economists that found, “When people conclude that they will never be able to afford a home, they put less effort into their jobs, tend to spend more on luxuries and do less long-term saving, and are more likely to invest in riskier assets...” As they consume more, the wealth inequality widens over time.

The formula I live by is simple: Earn all you can, give all you can, invest all you can. Think contribute, not consume.