Millennials: They’ve Become the Ben Franklin Generation

Disclosure: I did not write this post. It is curated from HuffPo – you can find it here:

This post is about Millenials. I’m a baby boomer myself. What are YOU?

Wealthfront – an online financial services start-up targeted squarely and unashamedly at Millennial wallets – raised $64 million last month. That’s on top of $35 million that venture firms plowed into the company earlier this year.

Every sweeping cliché about Millennials – that they are addicted to the itch and twitchof immediate gratification, that they are not interested in participating in the casino stock market – is being sent to the generalization graveyard. Not just because of the success of Wealthfront – who has crossed $1 billion in assets under management – but also the growth of Betterment, LoanVest and others who have a hungering eye on the $7 trillion in liquid assets that Millennials will have in their generational clutches within the next five years.

What’s particularly revelatory about the success of Wealthfront – they reached one billion in two-and half years, while it took Chuck Schwab six years to get there – is its canny use of technology and whizzy algorithms, the deities of the Millennial, in the service of a rather boring, long-term, Ben Frankliny investment conservatism. This is more often associated with people who need hip replacements than hipsters.

Wealthfront works by first asking a few basic questions – age, income, liquid assets, risk tolerance. It’s the bromidic stuff of financial planning for decades. Then it provides a financial plan consisting of ETFs – most of them from Vanguard – that track underlying indices in a variety of asset classes, trades based on what the algorithm instructs. The boil down their practice to: personalize, diversify, re-balance.

It’s not surprising that Millennials are willing to put their financial faith in the crunch of algorithmic investing (or as its called, robo-investing from robo-advisors. After all, this is a generation of digital natives and semi-natives who trust code jockeys to find the cheapest plane ticket, recommended the best oxtail pizza, and soon, to provide driverless cars. They will also be the early adopters of Apple Pay and other new transaction modes.

Their faith in technology is understandable. Algorithms don’t act in their own self-interest. Algorithms weren’t responsible for dreaming up sub-prime loans and nearly bringing down the financial system. Millennials didn’t trust authority and conventional sources of wisdom before the melt-down. Imagine now. Wealthpoint argues that Millennials: “…have been nickel-and-dimed through a wide variety of services, and they value simple, transparent, low-cost services.

The Pew Study “Millennials in Adulthood” confirms the Wealthfront thesis finding that “… just 19% of Millennials say most people can be trusted, compared with 31% of Gen Xers, 37% of Silents and 40% of Boomers.” If you can’t trust people in general – which was the question – what hope is there for the conniving financial advisor?

The technology lure of Wealthfront is unsurprising, but what is remarkable is that Millennials are so drawn to the core Wealthfront investment thesis, which argues against individual stock picking, and balances a personalized mix of actively managed ETFs instead. As they put it, “…our service is premised on the consistent and overwhelming research that proves index funds significantly outperform an actively managed portfolio.”

I love that a generation who’s identified with the eroticism of immediacy is choosing slow and steady as an investment theme. It makes them, truly, the Ben Franklin generation, in even more ways than just how they relate to money; they value craft, authenticity, strong values. Ironically, they are far more prudent and sensible than their predecessors. After all, both Boomers and, yes, the Greatest Generation fell victim to get-rich-quick bubbles, blandishments, and stock-picking mania. Not many people reading this remember or know that the stock market euphoria of the sixties was monikerized as “the Go-Go Years.”

Millennial attitudes are understandable, to say the least; they are struggling under the crippling weight of student loans, they’ve seen their parents and often grandparents suffer the pain of the financial crisis, so to the extent they want to enter the stock market at all, they want to do it with commanding caution. As one commentator, noted, they “share experiences that color how they look at their finances and the financial industry”

Yet despite their personal debt and experiential context, Millennials are surprising long-term optimists, which explains their willingness to park their money in tracking ETFs. On this subject, Pew notes: ” Millennials are the nation’s most stubborn economic optimists. More than eight-in-ten say they either currently have enough money to lead the lives they want (32%) or expect to in the future (53%).”

Needless to say, skeptics are in full swarm mode, most from the traditional advisory world. They argue that nothing can replace a human being – supported by the right technology tools. And that Wealthfront’s business model – a monumentally minimal .25 percent (on assets over $10,000) – does not a business make. I’m confident, though, that the folks at Spark, who led the $65MM round, can do basic Common Core multiplication.

It will, in fact, be possible for Wealthfront to move up to more expensive, value-added services if it so chooses, because they are proceeding from a place of generational trust. It will be harder for traditional financial institutions to come down and meet them from the top of the mountain.

An America led by the Ben Franklin generation is likely to be a more stable, patient, values-driven and realistic place than the one led by the boomers. It’s a place where technology is expected to solve problems, simplify life, and strip inauthenticity out of the sales process. They don’t want to beat the system; the success of Wealthfront and others says that the Ben Franklins want a fair system they can be part of, and that can benefit everyone in it.

For traditional financial institutions – who for decades have sold themselves on outperforming the system – this is decidedly not good news. The regulatory language “Past performance is no guarantee of future results” was created because banks, mutual fund companies, and others would manipulatively scream “Up 75 percent” and investors would see that as a go-forward promise.

I’m not saying that Wealthfront or Betterment will become tomorrow’s JP Mogan Chase or Fidelity. The market is dynamic; already Schwab is getting into their space, and others will follow. But the impact of the Millennials on the fundamental sales structure, value equation and content (in its broadest form) delivery of financial services is yet to be written. There is no doubt of that.

While it is true that most financial behemoths make their big money from the corporate side, I think even that world – which is very much driven by advisory services and complex financial products – is vulnerable to the upside-down view of the Ben Franklin generation. Even so, the quirky but intellectually consistent confluence of Ben Franklin values and Larry Page technology will come to disrupt the embedded architecture of corporate finance. Not all of it can be dismantled, but I can see opportunities for disruption in areas like debt syndication.

So when the SEC finally gets its act together on the JOBS Act, and promulgates the details of equity crowd-funding for non-qualified investors, that will be just the beginning of what I think will be an inevitable cascade of change. Things happen slowly till they happen fast. It was back in 1998, believe it or not, when Spring Street Brewing was brought public by Wit Capital in the first Internet IPO. The giants of financial service haven’t seen the telluric shifts that travel, media, entertainment and home thermostats have. They will. Depending on who you are, the Ben Franklin generation is composed of 80 million Benedict Arnolds.

I have not, or do not, consulted for any of the companies referenced in this piece, and have no equity position in them.


How To Live a Rich Modern Life Without Debt

too much stuff
This is an excellent post about debt and how you can have an awesome life without it. I love this post and it makes some really great points about our purchases and how we can come to regret them. I for one can certainly relate to this. In fact I’m looking around my house now and I STILL see things I can get rid of that I never ever use. They sit there collecting dust and I just move them from one side of the table to the other. Like every day I do this! I have little by little getting rid of a lot of stuff so I am proud of myself for at least getting started. How about you, do you need to de-clutter?  You can find this awesome post here:

How To Live a Rich Modern Life Without Debt

“My single biggest regret in my adult life is that I used debt to finance my life choices after college.

That’s about as simple as I can make it.

Debt was a huge mistake. I used that debt to get a nice car… which I no longer own. I used that debt to buy a lot of electronics… which I no longer own. I used that debt to buy a lot of restaurant meals… which I mostly don’t remember at all. I used that debt to buy a lot of books… which I mostly don’t own. I used that debt to delve into expensive hobbies… which I mostly don’t participate in any more.

Almost all of that debt went to nothing. It simply went to finance a short-term lifestyle, one that has almost completely vanished in just a few years.

Why did I let that happen? It’s simple. I believed that to live a modern, comfortable life, I had to get into debt.

Essentially, I bought into the idea that there were a bunch of things that I needed to have in order to have a life that didn’t feel like “poverty,” and I needed those thingsnow.

The whole idea was ludicrous, of course. After a few years, I was left with very little other than an aging car, an apartment full of barely-used stuff, and a gigantic pile of debt.

What happened once I figured this out? I continued to have a pretty good day to day life, but I paid off every cent of that debt including a home mortgage within five years.

The truly sad part of this tale is that I now realize that I could have had virtually everything I actually valued from life back then without taking on a cent of extra debt. I didn’t need to have a car loan or a bunch of credit card debt to have a really good “modern” life.

Here are several key things that I figured out about life that I dearly wish I could drop in my lap in, say, mid-2002 or so. If I had understood those things then and applied them, I would probably be retired right now.

Stop Buying Stuff You Won’t Remember in a Week

This is perhaps the biggest lesson I’ve ever learned about personal finance. If it’s an item or an experience you won’t remember in a few days, you shouldn’t be spending any money on it. If it’s completely forgettable, then any money you spent on it is basically just lost.

The only completely forgettable things you should be spending money on are your most basic life needs – basic food, basic clothing, and shelter.

The thing is, people often have a memorable event where they do something they enjoy – like enjoying a delicious morning coffee with a friend – and then start repeating it and repeating it until it’s completely not memorable any more. It becomes normal and completely forgettable, and when you have an extra expense that has become normal and completely forgettable, you’re literally throwing money away.

Even “special” purchases can become completely forgettable. The first book you buy this year might be memorable, but the 30th? It just gets tossed on your shelf.

Use Credit Card Statements, Bank Statements, and Receipts to Track These Down

The trick with forgettable purchases like these is that, well, you forget about them. That’s the whole problem – they just fade away.

The solution to that problem is to simply dig through your credit card statements and bank statements and receipts every once in a while and look for these kinds of purchases. What purchases did you make that you can’t even remember – or barely remember? Look for the places where you spent that money and recognize that those are pretty wasteful places for you to go. You don’t get anything lasting out of your money spent there.

Avoid Convenience Foods

Don’t get me wrong – there’s nothing wrong with going out to a restaurant as long as it’s a memorable experience. If you’re going out with friends that you haven’t seen in a while or you’re taking your sweetheart to a very special place, by all means, youshould go out to eat.

The problem comes when you go to a restaurant as a pure “time saver” and the food and experience are completely forgotten in a few days.

Fast food almost always falls into this category, as do many chain restaurants. The meals are completely forgettable, relatively expensive, unhealthy, and actually don’t save much time, either. If you know you’re going to need to eat in a pinch, put a couple of sandwiches in a small cooler before you leave home.

The same thing is true for convenience stores and gas stations. In fact, it’s basically always true there. Sure, you may be really hungry or really thirsty on a road trip. That’s why it always makes sense to have a few snacks and an empty water bottle in the car – you can fill the water bottle at the gas station and eat the snacks you already have instead of the expensive ones they have for sale.

Rent, Don’t Buy, Your Living Quarters

Yes, for many, the “American dream” involves buying a home of your own. The problem is that many people mortgage their lives to do it. They lash themselves to a very steep mortgage payment, one that gives them little leeway to make other life choices down the road, and then they’re hit with all of the additional expenses of home ownership – insurance, property taxes, association fees, higher utilities, and so on.

The end result is that many homeowners find themselves pushed into a corner. They have a home that they love, but they have little money left over to live or to save for the future. Often, they “solve” this by going into further debt for automobiles and for things they want at home.

It’s a bad recipe, one that forces people into a tightrope walk where they have to keep their current employment or else they fall and lose everything. It’s not a fun way to live.

A much better approach is to simply rent rather than buy, and rent small. Look at the place where you live solely in terms of what you’ll actually do there most of the time – prepare food, eat, do basic hygiene, relax, and sleep – and ignore the “corner cases” like having big parties and such things. Don’t pay a bunch extra every single month because you might someday want to host a lavish party there.

Choose a Small Place with Essential Kitchen Items

If you’re focused on just your basic needs for housing – space to prepare food, eat, do basic hygiene, relax, and sleep – you really don’t need much space for that, so don’t pay for it. Extra space means that you’ll just be filling it with stuff that you don’t really need.

The solution is to go small. Go efficient. When you do that, you cut back seriously on your housing bill without spending extra money on extra space to store extra stuff you don’t need.

If I were to rewind to my twenties, making myself single or married without children, I would live in a tiny apartment. I’d probably find the smallest place I could in a reasonably safe part of town, a place that basically had space for a bed, a bathroom, and some kitchen essentials (access to a stovetop and an oven, a few cupboards, and some counter space) so that I could easily prepare meals at home. (After all, having at least a little space to prepare meals at home becomes a big encouragement to do so, and home food preparation is a gigantic money saver.)

Those things are way cheaper than rent on a larger space or a mortgage payment. You’ll literally be saving hundreds – or even thousands – per month by going this route. That money can go straight into savings to actually buy a larger place someday – or for fulfilling whatever dreams you may have.

Focus More on Location

The thing is, most of the extra stuff you might consider doing at home is stuff you’d probably do outside of the home if you had easy access to other places to do that. For example, there’s a lot less need for a bunch of space to hold friends if you’re already near places where you can meet up together.

My recommendation for most people is to find a place to live that’s near where they work and near places where they can facilitate their social lives and friendships – or near access to public transportation so they can get to those places really easily.

That way, most of the stuff you would consider doing at home, you’ll do outside the home, which minimizes the expenses needed for a home.

Rely on Other Means of Transportation

This doesn’t mean that you shouldn’t own a car, necessarily. Everyone has a different situation and, for some, a car is vital. If you live in a rural situation, for example, it’s pretty hard to make things work without a car.

However, if at all possible, your primary mode of transportation should be something less expensive than a car. Your car should be a backup at best.

What other modes? Public transportation. A bicycle. Your own feet. In many cities, that’s more than enough.

Why? Cars are expensive, even if they’re paid off. You have to pay for insurance, registration, maintenance, gas, and parking. Those things add up big time, and if you can do without them, you’ll be glad you did.

If you are in a situation where you do need a car, don’t buy a new one. Buy a late-model used car and drive that thing until it’s about to fall apart, then swap it for another late-model used car. Keep the cycle going. Save about $100 a month for your next replacement car and you’ll always have enough to pay cash for a good late-model used car when it’s time.

Use the Library for Entertainment

Many people envision a library as being a dry place with an angry librarian telling everyone to shush around the endless rows of dusty shelves full of arcane books. Those people haven’t been in a library in a very long time.

Modern libraries have books for all different types of readers, from children to adults, from page-turners to educational books, in almost every genre of fiction and nonfiction you can imagine.

They also have racks full of DVDs (and even some Blurays) of movies of all different kinds, from obscure documentaries to the latest blockbuster films, as well as piles of audiobooks. Many libraries also have equipment of various kinds that you can borrow.

The best part? These things are free to borrow. You don’t have to pay a dime for them.

The next time you’re tempted to rent a DVD from a kiosk, buy a book, buy a DVD, buy an audiobook, or anything like that, consider the library instead. If they have that very thing you want for free – or something similar – why would you spend the money for it? You can get the same exact entertainment experience by checking something out from the library that you can get from buying that item – and spending your hard earned money – elsewhere.

Find Outdoor Hobbies

An outdoor hobby serves several purposes at once.

For one, it gets you outside and moving around, which is good for your health. You’ll feel better, have more energy, and keep serious medical problems at bay.

For another, most outdoor hobbies (note: not all) aren’t very expensive. They often just require shoes and time (like hiking on trails), or perhaps one or two pieces of equipment (like soccer).

For yet another, most outdoor activities are inherently social. It’s really easy to participate in outdoor activities in a group. A team sport at a playground or a park is purely social. Even something like a hike can be a social endeavor if you invite other people to go along.

For yet another, many outdoor activities feed our natural human need to collect. I enjoy collecting a number of things that I find in the outdoors, many of them in photograph form. Our front garden has a bunch of rocks we’ve discovered, too. Total cost for all of it? Nothing.

If you don’t know where to start with this, start by thinking of things that seem pleasant to do outside and simply doing them. Invite some friends along, too. Doing this got me started playing disc golf and participating in geocaching (which has since become on of my favorite hobbies.).

If you need more ideas or want to find others, start by checking out the parks and recreation website for your community, as well as by checking,

Try Out Community Groups

While we’re on the subject of it’s a great tool for finding organizations and groups of all kinds in your community.

It’s very likely that your community has a number of clubs and groups and organizations that you’ve never heard of that would be of interest to you. The trick is finding those groups, and Meetup is basically perfect for that. It’s free and points out groups of all kinds that meet within a radius of where you live.

I personally have found several groups due to Meetup and have become a lasting member of two of them. Neither group has cost me a dime and they’ve been invaluable at extending my social circle and providing an outlet for my hobbies and personal interests.

Simply finding out about a group and attending an event or two doesn’t commit you to anything involving that group. It means that you’re finding out more about them and, if they click with you, then you’ve already got your foot in the door.

Have Some Sense About Your Wardrobe

Another challenging area for many people is clothes. Many young professionals are expected to dress well and doing so can end up creating a pretty serious expense.

Thankfully, there’s a smart solution to that, too.

Have a “Smart” Wardrobe

The one thing you really need to focus on in your closet is the number of possible outfits that will work. For example, if you simply say “these pants go only with this shirt,” then that shirt and those pants will represent only one outfit you can wear to work. If you add another shirt, your number is still only one.

On the other hand, if you say “these pants go well with these five shirts,” then you have five potential outfits you can wear to work. If you add another shirt, this number goes up to six.

Let’s go even further – if you say “each of these five pairs of pants go well with each of these five shirts,” then you have 25 potential outfits that you can wear to work. Even better, if you add another shirt, this number goes up to 30.

A smart wardrobe is one where almost everything goes well with almost everything else. If you have that, then the total number of clothes items you need to buy is actually relatively small. In fact, it can be quite small – six pairs of pants, six shirts, six ties, and two jackets can create a huge number of options for clothing while only taking up a sliver of closet space.

There are a couple of “catches” here. One, this does require regular laundry duty. You can’t skip “laundry day” very easily, though “laundry day” will probably only ever involve one or two loads of clothes. Two, this works best with quality clothes, so your individual items might a bit more expensive, though your overall wardrobe will be a lot cheaper and easier to maintain.

Look at Used Options First

It’s such a simple rule. I can’t believe everyone doesn’t do this by default, but they don’t.

Whenever you’re about to buy something, spend a bit of time to see if it’s available as a used item before you pay the new price.

Are you about to buy a slow cooker? Don’t go to Amazon and click “buy it now.” Instead, stop by your local secondhand store – or even give them a call – and see if they have a slow cooker available. If the answer is yes, you probably just saved $40.

This same exact story repeats for almost anything you might want to buy, from dishes to kitchen appliances, from towels to bedroom furnishings. There’s likely something used that will work perfectly for you available at a stiff discount in your community.

The thing is, you’ll never find it if you don’t look. So look. Whenever you’re about to buy something, put in a bit of effort to find it used. Check Craigslist. Check Freecycle. Call the local secondhand stores – or stop by.

Yeah, you’ll probably whiff on that at least some of the time, but you’ll get enough hits – and save enough money – that you’ll be glad you did it.

Final Thoughts

Here’s the big story: All of these changes are things you can do without disrupting the quality of your life one little bit. You still do the meaningful things you want to do. You still live the life you want to live.

You just choose to do it in a smart way so that you’re not saddled by the endless cycle of debt payments that keep you locked into your job.  You choose to live your life in a way that maximizes your freedom, not in a way that maximizes your stuff. You choose to live for memorable experiences, not forgettable ones that just drain your wallet.

And you do it all without the stress of debt.

That’s what I call a pretty great life. It’s one that I missed out on during my early professional years and I am incredibly glad that I discovered it now.”


Remember you can find the article here: