The American Dream is endangered, doomed or already dead, depending on which economic pessimist you listen to. But prosperity remains very much in reach for people willing to revamp their expectations and adapt to the changing demands of an unruly but still-rewarding economy.
My new book, Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom, examines the unsettling ways millions of Americans are sacrificing prosperity, while calling for greater self-reliance as an antidote. The book also suggests many practical things ordinary people can do to improve their own fortunes at a time when many of the old rules about success no longer apply, as Yahoo Finance Editor-in-Chief Aaron Task and I discuss in the video above. Here are 4 new rules for achieving financial freedom:
Stay mobile. There are still many pockets of economic opportunity in America—but they’re not everywhere and they can shift quickly. If you don’t live near opportunity, you’ve got to go find it. Americans have always moved around in search of a better life, whether it was homesteaders moving west in the 1800s, rural citizens moving to cities in the 1900s or immigrants coming to America from all over the world, beginning with the country’s founding. But we’re a lot less mobile than we used to be. The rate of “labor mobility’’—people moving around for a better job—has dropped to the lowest levels since the 1940s. At the same time, many companies say they can’t find all the workers they need, which means some people who might be gainfully employed but aren’t are simply in the wrong place.
Home ownership—the supposed core of the American Dream—remains a goal society imposes upon many young families. Yet it can actually preempt prosperity if it anchors you to a place where opportunity is scarce. Many people these days are better renting, because that preserves the freedom to move on short notice if your career hits a speed bump or a better opportunity pops up someplace else. With home prices rising only modestly and buyers scarce in some areas, it’s easy to lose money on a purchase if you have to sell unexpectedly. And companies don’t offer the generous relocation expenses they once did. Staying mobile is the best way to assure you’ll have the freedom to go where opportunity is, and escape where it’s not.
Know your vulnerabilities. Globalization and the digital revolution have vaporized entire industries, and now robots threaten to displace human workers, too. Nobody can turn back these powerful economic forces, but a lot of people can take steps to put themselves on the winning side of change rather than the losing side—and it starts with anticipating what could go wrong.
The first thing to ask is whether your skills can be replaced by machines, software or foreigners working for less. If so, can you master new technology tools, climb the knowledge ladder and offer employers a richer set of skills they can’t easily replace? Would more education or another technical certification help? What if you blend two disparate skill sets—data analysis and sociology, say, or sales and social media—in a way none of your colleagues do? If nothing seems likely to help, then close the shutters and prepare to be swamped by the tidal wave of change. For tips on what’s about to happen, consult former travel agents, print journalists or Blockbuster clerks who were hurried into obsolescence.
Under-consume and overproduce. For nearly 50 years, the mushrooming availability of consumer credit has allowed ordinary people to borrow to buy just about anything—including a lot of stuff they don’t need. Excessive borrowing was a big contributor to the 2008 financial meltdown, and many Americans pared back their debt profiles (some involuntarily, as they defaulted on loans or banks reeled in their borrowing limits). But the use of credit is expanding once again, and it could be even more dangerous during the next crisis, since there’s simply less margin for error in an economy where the bar for success is getting higher. Politicians and economists confuse the situation by repeatedly pointing out that the U.S. economy is dependent on consumer spending, as if it's unpatriotic to save your money instead of spending it. Ignore them. National leaders will never declare the era of manic consumer spending over, but for their own good, consumers should.
Start winning the Information War. Americans are making a lot of erroneous decisions about what’s causing increased economic stress in the first place, which is evident from the blue-red hostility that grips public discourse these days. The news media promotes political warfare for its entertainment value, but an unhappy consequence of that ongoing spectacle is the widespread impression that one political party or the other is responsible for our economic problems. That leads to the logical—but usually mistaken--conclusion that simply adopting the other party’s policies will fix everything. Most economic problems are far more complicated than this, and fixing them requires thoughtful compromise, plus trial and error. Many economic problems have little to do with politics.
Silly sound-bite “solutions” don’t harm the politicians who usually utter them, but if you’re a laid-off assembly-line or construction worker waiting for some new policy to bring your job back, you’d be a lot better giving up on government help and going back to school or getting retrained. Politicians win when they can convince the public that economic misfortune is their political opponents’ fault. But you and I only win when we can accurately identify what’s holding us back, and fix it. A tough economy gives politicians more bait to use to hook voters on a preferred storyline about what’s causing the distress. That makes it more important than ever for ordinary people to educate themselves--and figure out the real answers.
