Dear 20-Somethings, You Are Mortgaging Your Future. It’s Time To Face The Music.

You might think you had good parents. They might have raised you in a loving household. They might have paid your way through college. They might have given you a great love of music, art and philosophy. But your parents failed if they didn’t teach personal finance to you.

Americans have a very strange love/hate relationship with money. We constantly reassure ourselves with platitudes like “money isn’t everything” and “happiness is more important than money”, but we then work ourselves into a frenzy when the Wall Street Journal talks about the impact of tax hikes for high income earners or when somebody highlights the wealth inequality/distribution in the US.

It’s time to face the music. Money is fucking important. And yet, for such an important thing, most of us don’t have a clue. Every year, FINRA asks Americans to take a simple, 5 question multiple choice quiz on basic financial principles (risk, inflation, compound interest, and yield). Last year, only 14% got all 5 questions correct. That’s absolutely pathetic.

The end result is that we have an entire country full of financially illiterate people. Entire industries and companies are built solely on the premise that Americans are too stupid to manage their own money properly. Unfortunately, many of those companies are unscrupulous and routinely take advantage of their customers and clientele.

The biggest problem people have when it comes to personal finances is saving and investing their money. Most people start way too late and save way too little. The end result? 64% of all retirees rely on Social Security for at least 50% their income. 35% of all retirees rely on Social Security for at least 90% of their income. And the average Social Security payout per retiree? 15,404 dollars per year.

The worst part is that financial literacy has never been more important. Defined benefit pensions don’t exist for Generation Y workers. Corporate America and the Federal government have pushed all new workers into defined contribution plans. That means if you don’t save, you won’t accumulate any wealth. And most of you aren’t saving at all. The personal savings rate is currently 4.3%. It’s negative if you’re in your 20s.

And if you had parents who pushed you into college but didn’t push you to succeed (high demand major, high GPA) when you were in college, they did you a huge disservice. Especially if you matriculated with a substantial amount of student loans. There are stories out there with college graduates saddled with over six figures of student loans. The vast majority of them won’t be able to pay them off in less than 20 years. Many of them will die with student loans still on the books.

I wouldn’t be doing my part if I didn’t point you in the right direction. The most important thing you can do right now is set a budget and stick to it. I use Mint.com and it is excellent for keeping track of all your expenses, assets, and debts. I guarantee you will be surprised to see where all your money goes.

Also, here’s a list of terms and concepts that you need to understand in order to become financially literate. In no particular order: S&P 500, risk free rate, 10 year Treasury, compound interest, bond yields, dividend yields, price/earnings ratio, inflation, 401(k), Roth IRA, traditional IRA, discount brokerage, exchange traded funds, expense ratio, efficient market hypothesis, modern portfolio theory.

Our generation needs a wakeup call. We can’t continue like everything will work out in the end without significant changes to our lifestyles and mindset. Don’t mortgage your future in exchange for partying/fooling around or living la vie bohème in your 20s. You will regret it for the rest of your life.