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The Great Divide April 29, 2008

Posted by shaferfinancial in Uncategorized.
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In 1950 our country was a very different place.  The great divides were about workers pay, race and gender.  Only 7% of folks had a college degree.  People really did things together, not that white and black folks did, but take away that divide and people really did do things like bowl or attend service clubs (lions, elks, rotary, etc.) together.  Main street entrepenuers and factory workers shared much including a common culture. The workers demanded and received massive increases in pay, decreases in working hours, and increases in pension funding.  Corporations made profits while their CEO’s made 12-15 times what their workers made.

The middle class was increasing at a dramatic pace.  Blacks, Women and other minorities were increasingly allowed into the work world pushing the size of the middle class even larger.  Sure there were struggles, civil rights, women’s rights, etc., but the overall trajectory of the country was to be more inclusive, to a enlarging middle class (Blacks went from 4% in the middle class to 60%).  This produced an income distribution that looked like thisupside down diamond.  Not perfect but considerable better than what it looked like before. 

Then it all stopped.  If you are looking for a year it was 1973.  That is the year income for the middle class peaked.  That is the year the porportion of Americans in the middle class peaked.  Since then wages has stagnated for the bottom 80% of wage earners.  The middle class shrunk.  While college education percentages went up to 25%, the cultural divide was even more dramatic.  At first the income divide was between the college educated and the rest.  But lately, even among college educated we see a divide occuring between highly compensated and average compensation.  But even more importantly we stopped doing things together across income categories.

Where are we heading?  Try an income distribution that looks like this:

 

Knowing all this is one thing, but helping people cross the divide is another.  Mutual fund salespeople are working with the assumptions of last century as do most financial planners.  But many people understand it, at least emotionally.  While others deny it despite the daily evidence of its occurence.  I have gotten much feedback from my website (www.shaferwealthacademy.com), most of it positive.  Occasionally, I hear from an individual who labels me arrogant and mentions how some people just want to live a comfortable life with their current income situation.  They distrust folks in the financial services industry (I would too!), but think that they can save enough to have a comfortable retirement as long as someone else doesn’t take their money (usually meaning banks and commissioned sales folks).  They couldn’t be more wrong.  The stakes are higher now than ever.  Being on the bottom of the hourglass is going to be tough.

How do you get your place in the top of the hourglass?  You have to demonstrate 21st century thinking.  You have to exhibit an investor/banker mentality.  I am willing to show you the map.  But remember there is no actual recipe, it is totally up to you how you get there!  But at least after attending the Shafer Wealth Academy (www.shaferwealthacademy.com) you will have a plan.

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Comments»

1. BawldGuy Talking - April 29, 2008

The fear and mistrust is what holds so many from the superior retirement within their grasp. Yet because of either knowledge gaps or bad experiences with so-called pros who really didn’t have the where-with-all to get things done, they’re hesitant to try again.

The clock reminds us time stands still for no one. Once you retire with a fixed income, with very rare exceptions that’s the income with which you’re going to your grave.

In many cases people will be discovering, much to their bitter chagrin, they didn’t give themselves a nice retirement, they gave themselves a life sentence. And it’s a national shame if only because the positive alternative is so doable for the average person.

Great stuff, David.


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