Grownups will own nothing with author Carol Roth

 

Episode Description: Carol Roth, shares how a seemingly simple premise from the World Economic Forum, that we will own nothing and be happy, could become a reality. We discuss the potential impact and  consequences of owning nothing on wealth and financial independence. 


Video Highlight: Roth Carol

 

Carol Roth’s Bio: Carol Roth is a “recovering” investment banker; entrepreneur; TV pundit and host; speaker; economic, business, and financial commentator; content developer; and New York Times bestselling author. Her books include The Entrepreneur Equation, The War on Small Business and now, You Will Own Nothing (out 7/18/23).

Carol has worked in a variety of capacities across industries, including currently as an outsourced chief customer officer (CCO), as a director on public and private company boards, and as a strategic advisor and C-level consigliere. Carol connects the dots on financial, business, and economic issues for novice and pro audiences alike. She is also the creator of the Future File legacy planning system and software (FutureFile.com). Carol advocates for small business, small government, and big hair. Coming from a blue-collar family, Carol has worked hard to seize the American Dream, and is fighting to preserve that opportunity for all Americans.

 
 

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Full Transcript:

Being a financial grownup is hard- That’s why we need to be focusing on financial wellness. According to PwC, the majority of employees said that financial worries had a negative impact on their overall health and well-being. Money stress is expensive for companies- workers are less productive and more likely to leave a job. They also have higher healthcare costs when they are worried about finances. As if health care costs weren’t already sky high. Financial Wellness Strategies is here to help by providing engaging and yes, delightful workshops and educational programs for employees to better control their finances. Anyone can lecture and run numbers. We talk about real-life money stuff.

Topics include 

-setting up the best grownup everyday money habits

-managing those social media temptations to splurge.

-strategies to shop for the best deals

-demystifying and really understanding financial lingo

-strategies to steer friends and family away from bad money decisions. 

-and how to know when you should ignore the math that says you “should’ do one thing with your money, and focus on your goals, even when it isn’t the best “financial decision”. 

 

Welcome to the Wellness for Financial Grownups podcast. I am your host Certified Financial Planner Bobbi Rebell- author of Launching Financial Grownups and founder of Financial Wellness Strategies. 

This may be the most controversial episode I have done on this podcast- and I keep politics out of it but I will warn you there is an undercurrent you might sense. I have some pretty strong views on this topic that may surprise some of you. 

But first- a little backstory. I used to do rent the runway, pre pandemic when I was not working from home and frankly got out a lot more. I loved being able to wear something and then return it and get more options. I was a heavy user. And yes there was some bad fashion in the mix of some great looks. But when the pandemic hit, and the bags stopped arriving at my home,  I looked at my closet, and it was kinda sad. I didn’t have much. I started thinking- did I save money by renting and returning all those clothes? And what did all that dry cleaning cost the environment? I’m guessing I spent about the same amount of money all in. Was the empty closet a sign I had wasted money? Or was it good that I got to enjoy all that renting and non-commitment? I mean most clothing does not hold its value as we all know if we try to sell it. 

 

But this week’s guest got me revisiting how I really felt about not owning things that I used to own. Like software. Remember buying disks or paying for a download. You owned it. Now you pay subscription fees that never end. And you are effectively trapped. If I just stop paying for say, Microsoft word, what would happen? The system I use to keep track of clients has a monthly fee. It will never end.  I’m not sure what will happen if I stop paying. Will my information no longer be accessible? And the same thing for countless things I used to own. The bills never end. These companies own me. And my data. 

 

Something to think about. 

This week’s guest is Carol Roth. And I asked her to come back on the podcast to talk about her new book “You Will Own Nothing,' she investigates what would happen if a new financial world order took hold, one in which global elites own everything and individuals own nothing. 

 

So this week’s quote is from Robert Kiyosaki "The rich have money to work for them. Buying or building assets that deliver cash flow is putting your money to work for you"

 

 Given how happy we all are with the flexibility and often lower costs of renting our homes, leasing cars, renting clothing, and taking our Ubers, this interview is going to get you talking and really thinking about how little you may actually own and how our priorities are shifting. Is it or is it, not a good thing.?

 

Here is Carol Roth, author of You Will Own Nothing. 

Carol Roth, welcome back to the podcast. You are a financial grownup, so great to see you.

 

Carol Roth:

So fantastic to be back with you, Bobby. I'm very excited about our discussion today.

 

Bobbi Rebell:

I am excited to talk about your newest book, You Will Own Nothing. And if people see the video of this, you can see that you've got a lot of words crossed out like a house, a car, a business, stocks, and then of course your life. This is a very provocative book, and I will tell you, one of the reasons I had to have you on was that we talk here about financial wellness, and one thing that I think gives people a real sense of financial wellness is a sense of ownership, a sense of financial security. And you've raised a lot of questions about the future of this. So tell us about the premise of the book.

 

Carol Roth:

So probably a few years ago on social media, I was browsing around and I came across some people talking about this video from the World Economic Forum. If you're not familiar with the World Economic Forum, it's littered with the business and political elite. They go to Davos, they hobnob, they talk about ideas. And they had these eight predictions for 2030. And their number one prediction was, supposedly you'll own nothing, and you'll be happy. And I'm like... Okay, there's no way there's no way that the business and political leaders saying, you know, in a matter of years The private property is going to end Twitter must have gotten it wrong. Facebook must have gotten it wrong and it did not take very much research to find that yes, that was their number one prediction And it was really staggering to me. You know, just as you said as somebody who has been advocating for wealth creation opportunities for individuals for over a quarter of a century now, I know that wealth comes from ownership, right? You own assets, hopefully, that at least retain their value, even better, they appreciate in value, and that's what drives wealth for people. So, the idea that you would have people who are very well connected, all of a sudden pushing that there isn't going to be this opportunity and that somehow you would be happy, is very, stands very starkly in opposition to what I know to be true. And also, throughout history, the people who did not have ownership and didn't have property, they were all very unfree and unhappy, so to speak.

 

Bobbi Rebell:

It's interesting because the way that we approach what we spend our money on is really evolving these days and you have a lot of younger people, and I'm going to stereotype a little bit, that focus on experiences over owning stuff, which actually has a lot of merit. Absolutely. We think that can be great and we don't support just buying a bunch of junk and being hoarders. However, there's also a new perspective that maybe we don't need to, let's say, own a car. And so for example, I have a neighbor. that doesn't own a car because he did the math. He's in his 20s but very financially successful and he goes up to play golf in the suburbs probably every weekend and he just takes an Uber. And because he did the math, again, very responsibly and figured out that it doesn't make financial sense to own a car. And yet, multiplied by many different things like he also rents his apartment. I'm sure if he has software systems that he uses for his daily life, he's now on software as a service. We used to own. a program, we'd buy it, it would get outdated. So there's a lot of good things about constantly updating. We want to be clear about that. But here you have someone who's Gen Z probably, and he probably doesn't own a lot, and he's happy. So what's going on and what's wrong with that?

 

Carol Roth:

So there has been this sort of training of the younger generation to get away from the concept of ownership. And I think that people need to understand the difference, which I know you educate people on, between spending and investing. You know, a car is an asset, but it's a depreciating asset, you know, other than perhaps some collector's cars or during that weird period during COVID when everything was going through the roof. But normally that depreciates over time. We're talking about the kinds of assets that have the opportunity to appreciate. And we're also talking about free choice, right? He has the choice to make whether or not he owns that car. It's not being made for him quite yet, but certainly there is movement in that direction. So, you know, from that standpoint, we can go, okay, you know, that makes sense. But in terms of renting his house, you know, that's a different story because we know a home is the symbol of the American dream and there's a reason for it. Houses... are the largest assets on household balance sheets on a dollar basis across all households and across almost every demographic group. So when you think about the American dream being symbolized by a house, it's because that's how most people earn their wealth. So if he's taking the money and he's giving it to somebody else, instead of putting equity into something that he actually has the opportunity to own, that may feel really good and easy today. but what happens in 10 years when the rents go up and all of a sudden he's spending more and more money and the equation doesn't make sense in his head and he realizes that he's now taken that money and created wealth for somebody else and that he has none. What does that end up looking like?

 

Bobbi Rebell:

This book is very well-researched. And one thing that you talk about is that millennials actually on an inflation-adjusted basis do earn more than the older generations, but yet housing is unaffordable. And that is being framed as something different to kind of ease the pain because of a whole big societal shift in who's actually owning all these houses. To some degree, yes, it's the Gen Xers and the Boomers, but there's other stuff going on.

 

Carol Roth:

This was probably the piece of research that blew me away the most when I was researching for the book. The fact that, you know, I thought it was just inflation that was making the millennials and the younger generation's salaries bigger. But the research showed Kevin Drumm, who did the original analysis, showed on an inflation-adjusted basis, like you said, that millennials were earning more than Gen X or boomers at the midpoint of age 40, but at the same time had fewer assets. And so if you think about something like housing, there are two sides to the story. One of them is that Fed and government policy has completely upended the housing market and made housing much more expensive. They gave, after 15 years of easy money policy, they gave lots of cheap capital to investors. And they also underbuilt coming out of the Great Recession financial crisis when they forced a bunch of people to have their homes foreclosed on or short sale them. And so there's a huge demand and supply-demand imbalance in the market. So with all this cheap capital, Wall Street, who was looking for places to invest, ran out of places. And in 2010, for the very first time ever, institutional capital came into the single family home market. So now Wall Street is competing with you to buy a home. And as of the end of last year, the statistics said about one in every five homes is now being bought by a corporate investor. And what they're doing is not flipping them and trying to make them better and getting them to you. They're trying to wrench you the American dream. They're trying to get you to buy into this convenience and this being happy so that they can make the money at your expense. So we have that. We also have a lot of regulations that preclude the building of houses, make it harder to build. It's the state and local level. There's a ton of regulations that add almost $100,000 to the median price of the sort of average home in America. So there are all these things that are forces that are making housing more expensive, but we said millennials were earning more. So why is it that they can't bridge that gap? Well, their personal balance sheets have also been crushed by the cost of college. And ever since the government nationalized the student lending, that has really created a wealth transfer from young people to colleges and their administrators. And college costs have gone up five to eight, depending on the statistic, times the GDP and wages. So you're getting these colleges that have no skin in the game. You have very young people who are taking out huge loans for colleges that they can't afford or that aren't producing the right return on investment for them. There's no underwriting, there's no bankruptcy. And so you basically have these ruined balance sheets. So it's one thing to say that income is higher, but we're not talking about the other side of that, which is the balance sheet costs, the heavy debt loads that some of these young people never get out in front of. So between the two of them, these crushed balance sheets that delay being able to make the investment and the houses going up, you have sort of this institutional drive to make sure that you own nothing. And I don't think that's gonna make very many people happy long-term.

 

Bobbi Rebell:

No, and it's interesting because this is sort of happening under the radar where, yes, it's absolutely a factor that because people have locked in lower mortgage rates, they aren't necessarily selling their homes. And that's part of the inventory issue. But we're not talking that much about what you just talked about, which is the fact that we have this corporate ownership of housing. And we're not talking that much about the student loan crisis as a way to really keep younger generations from building. the economic power that they really are going to need as they move through their lives. And that's really hard. So what is your advice to all of us, but especially to young people who want to be financial grownups, who want to have a healthy financial future, who want to bring financial wellness into their lives?

 

Carol Roth:

So if you haven't gone to college and you are considering it, you have to do an ROI, return on investment calculation and make sure that you can pay the debt down in three to five years after you graduate. The rule of thumb I like to use for people who are as savvy at building financial models is that take the salary that you expect to earn three to five years out of school and you can have no more debt than that. So let's say you're going to make $80,000 a year. three to five years out, then that is your absolute cap. And if you can get under that, that's great. And if you cannot find like the school that you want to go to, you can't get the right scholarships or financial, you know, assistance from the school to knock down so that you're taking that debt, go somewhere else, because from a return-on-investment basis, you're not gonna get that payoff from your education. Now, if you already have that level of debt, you know, then the thing that you do is you do what I did. I graduated. Way back in the mid-90s, I'm a little bit of a dinosaur here. And I had $40,000 of college debt back then, which is the equivalent of the average right now for people. So what I did is I did for five years, I lived in a tiny little box. I lived in like a 400-square-foot studio. I had a cardboard box next to me as my bedside table with a sheet over it. and I did just this crazy personal austerity. I paid down that debt in a year and a half, and then I spent the rest of that time building up that nest egg, so I could then go ahead and make investments. And I think that you have, as a financial grownup, a choice around your financial wellness. Do you want to have that austerity and that pain for a short period of time? delay the gratification and then not have to worry about it for the rest of your life and really have that opportunity to build up wealth and a legacy and really have that kind of freedom that's around you instead of the burden on your shoulders. Or do you say, well, I want to make sure that I have some fun too and I need to have this great bag and whatever. And then that chases you for the rest of your life. And I'm not here to make that decision for you, but I don't think that people often think about it in that terms. If you go through that short duration of pain, it really provides so many benefits in the long term. And I think in terms of the ability to retain and seize that American dream, that's something that I would offer up to any young person.

 

Bobbi Rebell:

yeah, and just to reinforce, it's not about owning stuff. It's not about having that extra handbag. It's about working towards owning, you know, things like not having debt and owning real assets, whether it be a home or something else, you know, investments, stock, whatever it is, but owning your financial future so that you can have that financial health that we all really want to have.

 

Carol Roth:

the funny thing is, it just depends on the handbag though. I will have to say things like Birkin bags have proved to be good investments. It doesn't mean they will be in the long term, but there are some like weird alternative categories that do well. So again, just a rule, but we want you to have those assets.

 

Bobbi Rebell:

So important to point that out. We all know that there are actually some material things that will increase in value. Somehow, I never seem to buy those things. every luxury good I've ever bought seems to go down in value, but that's okay. I'm learning as I go along and as I go through my own journey as a financial grownup.

 

Carol Roth:

Hahaha.

 

Bobbi Rebell:

Carol Roth, thank you so much. Where can people find out more about you? I know the book is everywhere and the book is probably sky high on the bestseller list by the time this interview comes out.

 

Carol Roth:

Thank you. Well, what I would offer to people is behavioral, you want to start the benefits of owning things, buy a hard copy of the book. Start with that, you know, hey, I really want to own something tangible and something that I can make notes on. And then I spend most of my time on Twitter at CarolJSRoth. And then you can find me floating around other platforms usually under that name as well.

 

Bobbi Rebell:

Thank you so much. And I definitely support buying hardcovers of books because also they're great because you can show people what you're reading and talk about it, which is a great IRL conversation starter. And also, they're better for your eyes as we all get older, right?

 

Carol Roth:

Amen to that

 

Bobbi Rebell:

Thanks, Carol!

 

Carol Roth:

Thank you.

 

Bobbi Rebell:

We all want to live our best financial grownup lives and one way to do that is to know that the people we care about are also in a good place when it comes to their money. That might mean our kids, our grandkids and yes- even our friends. But how. Its’ awkward. You see them struggling- pretending to know more than they do- or making bad money decisions but don’t know what to say- and even if you say something supportive- then what? That’s why I wrote Launching Financial Grownups. In Launching Financial Grownups I share the tools and strategies so you know what to say to take the pressure off and give those you love the confidence they need. It's about giving those we care about the right amount of help, at the right time- so they can not only learn what they need to know about being financial grownups- but also be confident they can do it- and that you will be there to cheer them on. Pick up a copy of Launching Financial Grownups - I promise you will be so happy you did. I learned so much from Carol in that interview- I really had no idea how much of an impact Wall Street was having on the housing market- not to mention the generational impact on spending power that the student loan debacle has had. We know its bad but this really put the spotlight on it. 

 

This week’s extra credit is to make a list of what you now rent that you used to own- subscriptions count too!. Remember you used to be able to buy a DVD of a movie- now you probably subscribe to a streaming service.  And consider how you feel about it. Its ok to be ok with not owning things. But Carol’s perspective is compelling. 

 

So also consider talking to a friend about it and sharing this podcast. Please take a  minute and share on social media - a quick screenshot on instagram is super easy- tag me at bobbirebell1 so I can thank you and share as well.

 

Pick up a copy of You Will Own Nothing from Carol Roth

And big thanks to her for helping us all be financial grownups and invest in peace of mind

Wellness for Financial Grownups is a production of BRK Media. Editing and production by Steve Stewart, guest coordination, social media support, and show notes by Alliee Borbon. Artwork by Chelsea Perez. You can find the podcast show notes, which include links to resources mentioned in the show, as well as show transcripts by going to my website, bobbirebell.com. 

To get even more out of this podcast, make sure you are also on our newsletter list to get more free content to live your best financial lives. There is a link in the show notes but you can also sign up at bobbirebell.com or at financialwellnessstrategies.com. And be a friend- share the podcast with your friends by taking a screenshot and sharing it on social media. Make sure to tag me on instagram at bobbirebell1. And while your there- follow me- and if you DM me that you listen to the podcast I will follow you back. You can also leave a review on Apple Podcasts. Reading each one means the world to me. You can also support our merch shop, grownupgear.com by picking up fun gifts for your grownup friends and treating yourself as well. And finally my grownup friends, don’t forget to invest in peace of mind. Thanks everyone. 

 
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