Hello folks! I have a special guest for you today, Stefan from The Millennial Budget is here to share a few thoughts. If you haven’t checked out his blog before, I recommend stopping by. He’s a sharp kid, demonstrated by having recently completed his MBA and now employed at one of the Big 4 accounting firms here in the US. He started his blog to help the millennial generation improve their financial aptitude. Having come from a third world country, I invited him over today to share his perspective on America. Take it away, Stefan…
A Third World Perspective on America
Having grown up my entire life on the Caribbean island of Trinidad & Tobago, I knew I wanted a change. I represented my country on the National Swim Team for several years and I knew this would be my ticket to securing an athletic scholarship to study abroad. I attended a Canadian High School and when applying to universities I realized that Canadian schools do not offer academic scholarships. Luckily, American schools do. This led to me accepting an academic and athletic scholarship at a small private university where I studied accounting and business management. I later went on to get my MBA. During these five years I learned a lot about the American culture and the opportunity to develop a substantial net worth.
Unfortunately, while I see an opportunity to build wealth I also see a lot of people wasting this opportunity. Some of the factors I believe are a cause for this are lack of knowledge, consumerism, complacency and minimal ambition.
Let’s delve into some of these topics where I will share my third world perspective and a little about my country.
Comparing wages between a developing and developed country is almost like comparing apples to oranges. While I can certainly argue that the federal minimum wage in America is $5 higher than that of Trinidad or the average salary is almost double, those assumptions simply would not be fair.
The easiest way to give you an idea of the difference in earning power is to use a personal example. During college I worked every single summer. I worked at the same company three out of the four summers as an intern, twice in Trinidad and once in America. In Trinidad, I earned roughly $2.50 per hour at this company. When I worked in the US I earned $27.50. Now I must admit, the experience was more valuable than salary for me when I worked in Trinidad as that is what ultimately got me a job in the US. Despite this fact, the reality that I earned $25 more an hour in the US is absolutely mind-blowing. However, these are just internship rates so let’s compare actual starting salaries.
Working the same job at home I would have a starting salary of roughly $1,400. I think I am being generous here to be honest. Compare this to America and I will earn more than three time as much. This is the reason I want to work and live in the US. I honestly love Trinidad but the earnings potential is mediocre compared to the US.
Access to Equity and Debt
As many people know, over 50% of Americans do not invest. This drives me crazy! Americans have access to liquid markets on a daily basis. They have access to thousands of equities and debt vehicles which can exponentially increase their wealth. Trinidad on the other hand has a very small equity market that has very low trading volume.
I think this is best illustrated with another example. I began investing during my sophomore year of college. My dad informed me about an upcoming IPO and told me to save as much of my salary as possible to invest into the IPO. I really had no idea what I was doing but of course I listened to my dad. Luckily, I invested in the IPO and doubled my money. Not bad for my first investment!
Here is the good part. Trinidad is so small, only 1.3 million people, that you pretty much know how most people are thinking and behaving. When everybody is going to purchase a stock (I was working in a bank so I knew what people were doing with their money) it was easy to realize that demand would be greater than supply. Thus the price of the stock would be expected to rise. However, when I wanted to sell my stock I had to go through a broker. We do not have apps or instant access to the markets like here in America. It took multiple days to sell my stock.
Compare this to how investing is in America. I can buy and sell stocks almost instantaneously. The markets are far more liquid as there is more buying and selling activity by major players. Prices fluctuate on a daily basis and have historically returned 8% over the long run. If I compare this to the stock I doubled my money on, it has traded sideways for almost a year after the initial jump in value after the IPO.
While we have access to purchasing international stocks in Trinidad, the trading cost are substantial. The only way to make this viable would be a large lump sum payment.
This is where the comparison and difference in culture is interesting. We have established that America has higher wages and access to capital and debt markets to increase wealth quicker. Where things are substantially different, and beneficial from a third world perspective, is our spending habits. On an island there really is not much diversity in things to do. All we do is fete (French for party), hang out with friends, explore nature and pretty much live a beach life. We do not have fancy shopping malls, amusement parks or any other entertainment sources that are the norm in America.
Consumerism is the downfall of people’s net worth. At least in my opinion. When I first came for university I realized that people enjoyed shopping, a lot! Going to the mall seemed to be a weekly excursion because there was nothing else to do. Eating out was almost a daily thing during college and my internship this past summer. This is where Americans destroy their net worth. Of course there are other factors but it is ultimately up to one’s spending habits to determine their wealth…not their income. Now don’t get me wrong. I am not saying developing nations have better spending habits, because we certainly do not. What I am trying to say is that with the insane wealth and access to ways to build wealth, Americans are nowhere near as prosperous as they can be.
Cost of Living
To briefly touch on this topic I think the cost of living in Trinidad is comparable if not higher than that of the US, in general. Many products are far cheaper in the US because of competitive markets as opposed to our small nation. One reason somebody can argue cost of living is cheaper in Trinidad is that our gas is subsidized heavily and almost everybody lives with their parents until marriage and get their education right through tertiary level paid for by their parents. For the average person though I would argue that cost of living would have minimal impact on this comparison.
I hope I was able to give you a different perspective on how I view wealth in America. While I did not touch on topics such as 401(k)’s, IRA, credit card rewards and a plethora of other topics, I think this post has already gone far too long!
I came to the US from a developing country because I believe this is still the land of opportunity. The resources are there for everybody to become wealthy. However, it is one’s actions that will ultimately determine their wealth. I understand that not everybody cares about money the way I do but it is disheartening when people complain about money in such a wealthy country, especially when so many people spend all their money on pleasing the status quo, as I like to refer to it. For those that read Green Swan’s blog you are most certainly on the right path. Knowledge is the first step towards improving your financial situation.
If you enjoyed this topic please let me know so I can write more articles about it.
What information surprised you? What are your thoughts on the comparison?