Last week former Fox News host and longtime subscriber Bill O’Reilly had me on his podcast to talk about the American Dream… whether it still exists… and how more Americans can achieve it.
Some believe the American Dream is alive and well. Others insist it isn’t.
Before we consider the question, let’s define our terms.
I define the American Dream as the belief that we live in a free country with the world’s most dynamic economy, where everyone has the opportunity to rise as far as their abilities, hard work and persistence will take them.
Others feel that this is just a pipe dream, that the rich get richer while everyone else stagnates or gets poorer.
You might think this is simply a matter of opinion, but it’s not.
The middle class has been shrinking, for not only years but decades. Just not the way most Americans imagine.
More people than ever have moved up over the past several decades. (Even though the pandemic put a temporary dent in this trend.)
According to IBISWorld, the percentage of U.S. households earning more than $100,000 increased, in inflation-adjusted terms, from 15.2% in 1980 to an estimated 30.7% in 2020.
The vast majority of Americans have moved up, not down.
Household income and net worth, in all quintiles, have steadily increased for over a decade.
Of course, not everyone is benefiting equally from the nation’s increasing prosperity.
Most white-collar employees found during the pandemic that they could keep their jobs, work from home, and even earn raises and bonuses.
Many blue-collar workers lost their jobs, their incomes and their sense of security.
These people deserved government relief and received it.
But now the pandemic is receding. Jobs, incomes and asset values are rising again.
Yet the same folks who insisted the American Dream was dead before the pandemic are now repeating that claim.
They view the American Dream not as a goal to strive for but a government entitlement to be delivered.
The idea is fanciful.
Economic success in this country is overwhelmingly due to education (or the attainment of specialized skills), work, saving and risk-taking.
Yet millions of able-bodied Americans today are choosing to stay home and collect state and federal unemployment benefits.
That helps explain why the U.S. currently has 7.4 million job openings and 9.8 million unemployed.
This doesn’t just hurt businesses trying to come back from the pandemic. It prevents men and women from achieving the American Dream.
Work is essential. So is saving and investing.
We hear a lot these days about “equity” but not enough about how to realize it with equities.
With even a modest amount of money – most investment firms now have no investment minimum – an individual can accumulate a stake in any of thousands of the world’s greatest businesses.
And it’s easy. A click of the mouse – and zero commission – and you’re in. Another click – still no commission – and you’re out. (Compare that with your typical real estate closing.)
And owning a piece of a company is a whole lot simpler than running one.
You don’t have to sign personal guarantees, hire or fire employees, grapple with an avalanche of federal mandates and regulations, pay lawyers and accountants, or even show up for work.
How great is that?
Financial freedom requires personal responsibility, however.
Here’s the basic action plan used successfully by millions:
- Maximize your annual income.
- Reduce your monthly expenses.
- Save a greater proportion of your income.
- Invest in a smart and disciplined way to achieve higher returns.
This is the nuts and bolts of achieving the American Dream – or at least the financial part of it.
And it helps explain why investing is such a serious business.
Getting it right is the difference between a retirement spent in comfort (or luxury) and spending your golden years counting nickels, worrying about whether you’ll have enough.
The difference could hardly be starker. But there’s an even bigger issue at stake.
Studies show that what people who achieve the American Dream value most is not the stuff they can buy, the experiences they can enjoy or even the people they can help.
It’s the feeling of “earned success.”
It’s gratifying to work hard, live within your means, take prudent risks and enjoy the rewards.
And that’s a feeling that government is powerless to bestow.