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The YOLO Economy: A New Era of Risk and Reward

Planning Lifestyle Scott's Thoughts

By: Scott Van Den Berg, CFP®, ChFC®, CEPA®, AIF®, CRPS®, CMFC®, AWMA®

Have you ever felt like life is too short to stay in an unfulfilling job? Perhaps you've contemplated a leap into something new and exciting, even if it means leaving behind the security of a steady paycheck. Welcome to the YOLO economy, where 'You Only Live Once' isn't just a catchy phrase but a guiding principle for many, especially in these transformative times. This mindset has ignited a wave of people, empowering them to prioritize personal fulfillment and make bold career moves over traditional paths, inspiring a new era of risk and reward. 

But is this trend sustainable? How does it compare to previous generations' economic behaviors? In this article, we'll explore the fascinating rise of the YOLO economy, why it might be changing, and what it means for our financial future. Whether contemplating a major career shift or simply curious about this cultural phenomenon, you'll find insights that could reshape your perspective on work and life.

What is the YOLO Economy?

YOLO encapsulates a daring mindset focused on making the most of life by taking bold risks and embracing spontaneity. It's a modern twist on classic mottos like 'seize the day,' 'live life to the fullest,' 'make every moment count,' 'life is short, make it sweet,' 'life is what you make it,' and 'go big or go home.' 

In economics, the YOLO economy is not just an individual choice but a societal shift. It's a reflection of a powerful trend in which millennials and Gen Z are prioritizing personal fulfillment and unforgettable experiences over traditional career paths and financial stability. This societal shift is reshaping how we think about work, life, and what it means to truly live.

Origins of the YOLO Economy

The YOLO economy gained significant momentum during the COVID-19 pandemic when the world was forced to pause and reflect. The global crisis disrupted daily routines and forced many to reassess their life choices and priorities. The pandemic-induced lockdowns led to widespread job losses, remote work opportunities, and reevaluating what truly matters in life. 

In the face of these challenges, with courage and determination, many people chose to leave secure jobs, pursue passions, or start their own businesses, driven by the philosophy that life is too short to be spent on unfulfilling work. This is the essence of the YOLO economy, a movement born out of a global crisis and a testament to the resilience and adaptability of the human spirit.

Comparing the YOLO Economy to Older Generations

To better understand the YOLO economy, it is useful to compare its economic behaviors with those of older generations, notably the World War II generation, the Silent Generation, Baby Boomers, and Generation X.

World War II Generation (Born 1901-1927)

  • Economic Hardship: The World War II generation, also known as the Greatest Generation, experienced the Great Depression and World War II, leading to significant financial hardships.

  • Community and Sacrifice: This generation emphasized community, sacrifice, and hard work. They were known for their frugality and resilience, values forged by economic and global turmoil.

  • Conservative Financial Approach: Financial decisions were conservative, focusing on saving, avoiding debt, and making do with less. Homeownership was valued but approached cautiously, and investments were typically low risk.

Silent Generation (Born 1928-1945)

  • Post-War Recovery: The Silent Generation grew up during the Great Depression and World War II but came of age during the post-war recovery.

  • Conformity and Stability: This generation is known for valuing stability and conformity. It often followed traditional life paths such as early marriage, stable careers, and home ownership.

  • Savings and Security: They were diligent savers, often prioritizing job security and pensions. Investments were generally conservative, focusing on reliable and steady growth.

Baby Boomers (Born 1946-1964)

  • Economic Stability: Baby Boomers grew up during a period of post-war economic expansion, where job security, pensions, and long-term employment were common.

  • Traditional Values: This generation valued home ownership, stable careers, and financial security. Long-term employment with one company was not unusual.

  • Savings and Investments: Baby Boomers were diligent about saving for retirement, investing in real estate, and participating in employer-sponsored retirement plans.

Generation X (Born 1965-1980)

  • Technological Transition: Generation X witnessed the shift from analog to digital and adapted to rapid technological changes and the early stages of the internet economy.

  • Work-Life Balance: This generation began to seek a better work-life balance, although they still valued job security and financial stability.

  • Economic Challenges: Generation X faced economic recessions, such as the dot-com bubble and the 2008 financial crisis, influencing their views on financial security and risk management.

YOLO Economy (Millennials Born 1981-1996 and Gen Z Born 1997-2012)

  • Embracing Risk: Millennials and Gen Z are more inclined to take bold risks, such as quitting stable jobs, investing in startups, or relocating for a better quality of life.

  • Gig and Freelance Work: The rise of platforms like Uber, Airbnb, and Fiverr has enabled greater flexibility and autonomy, allowing individuals to monetize their skills and assets more easily.

  • Experience Over Possessions: There is a strong focus on experiences such as travel, adventure, and personal growth, often leading to spending on these activities rather than on savings or traditional investments.

The Changing Landscape and Future of the YOLO Economy

While the YOLO economy represents a liberating shift for many, it is not without its challenges. Several factors indicate that this trend may be evolving and could shape its future trajectory:

  • Economic Uncertainty: The initial surge of the YOLO economy was fueled by a mix of government stimulus packages and a booming stock market. However, as economic conditions become more uncertain, with rising inflation and potential recessions, individuals may become more risk averse. The financial instability that accompanies economic downturns can prompt a reevaluation of the YOLO lifestyle.

  • Long-Term Sustainability: The sustainability of a YOLO lifestyle is questionable. Without traditional retirement plans or stable income, the long-term financial security of those who have embraced the YOLO mindset is at risk. Health issues, economic downturns, or unexpected expenses can significantly impact those without a financial safety net. As these risks become more apparent, there may be a shift towards more cautious financial planning.

  • Changing Work Dynamics: While remote work remains popular, companies are increasingly pushing for a return to the office. Hybrid work models are becoming the norm, potentially limiting the flexibility that fuels the YOLO economy. The reduced freedom to work from anywhere may influence individuals to seek more stable and traditional employment arrangements.

  • Economic Policies: Government policies on taxation, labor, and social security will significantly shape the economic behaviors of future generations. Policies that support gig and freelance workers, provide social safety nets, and encourage innovation will be crucial in determining the sustainability and growth of the YOLO economy.

  • Technological Advancements: Continued technological advancements will create new opportunities and challenges. Automation, artificial intelligence, and the evolving gig economy will impact job markets and economic stability. These technologies could either enhance the flexibility and opportunities of the YOLO economy or lead to increased job insecurity.

  • Cultural Shifts: As societal values shift, so will economic behaviors. Future generations may blend the YOLO mindset with more traditional financial planning strategies, seeking a balance between risk and security. This blend could lead to a new hybrid economic behavior that values both personal fulfillment and financial stability.

In summary, the YOLO economy is likely to evolve as economic conditions, work dynamics, technological advancements, and cultural values change. Understanding these influencing factors will be key to navigating and adapting to the future economic landscape.

In Summary

The YOLO economy represents a significant shift in how people approach work, risk, and personal fulfillment. While it offers unparalleled flexibility and opportunities for personal growth, it also poses financial security and long-term sustainability challenges. By understanding the differences and similarities between the YOLO economy and the economic behaviors of older generations, we can better appreciate the complexities of this trend and its potential future evolution. Whether the YOLO economy will continue to thrive or give way to a more balanced approach remains to be seen, but its impact on our economic landscape is undeniable.

Navigating this new economic landscape can be challenging, but working with Century Management Financial Advisors can make a difference. As a third-generation wealth management firm, we can help you create a comprehensive financial plan—a financial roadmap—that integrates the pursuit of personal experiences and work-life balance with financial prudence and security. This approach helps ensure you can enjoy the benefits of the YOLO mindset while maintaining long-term financial peace of mind. Contact us today to schedule a consultation.

Warm regards,

Scott S. Van Den Berg

Scott Van Den Berg, CFP®, ChFC®, CEPA®, AIF®, CRPS®, CMFC®, AWMA®

President

Century Management Financial Advisors - Since 1974 

Disclosures

Century Management ("CM") is an independently registered investment adviser with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Century Management is also registered as a Portfolio Manager in the Province of Ontario. This article is educational in nature and does not constitute investment advice. A full description of our Firm’s business practices, including our Firm’s investment management services, wealth plans and advisory fees, is supplied in our Form ADV Part 2A and/or Form CRS, which are available upon request and also on centman.com. CM-2024-06-20