Part 1: Money, Millennials, and the American Fever Dream

Katie: Welcome back to The Money with Katie Show, #RichGirls and Boys. And not just any episode of the show, but part one of a two-part special that I'm calling “Millennials, money and the bizarre American fever dream.” These episodes—which spanned about 10 pages in writing after I finished them, which might explain why we've decided to split 'em up—were my attempt at synthesizing roughly two years’ worth of confusion and research and casual reading and observations. It's my attempt at understanding the world around me, around all of us, particularly from my viewpoint as a personal finance blogger. Here's the thing: Our team had some concerns when we were putting together these episodes that they might feel a little too pessimistic. So I want to acknowledge that, because I know some of the topics we're going to dive into may feel a little hopeless, and I want to make it very clear that I do have hope for the future. I am optimistic, particularly about the potential of Gen Z and the millennials that are getting older, that we can turn the ship around. So if it's pessimistic, why did I feel strongly about publishing these thoughts?

It really all started with a Rich Girl Roundup submission we got a few months ago that essentially said, “Hey, my friends and I make good money and we've worked hard and we did the right things, but it feels like after we pay our bills and our student loan debt back and have a little bit of fun, there's basically nothing left over. Has life always been this hard? Are we doing something wrong, or is this just normal?” Now the question rattled around my head for a few days. I remember feeling the same way in my early twenties. And to some extent, I think we can chalk up some of that feeling to just that: being in your early twenties. But there's another part of this puzzle, a part of this puzzle specific to this generation, that I really wanted to explore.

So this is part one. Part two will go live next week. I have two great interviews for you. One with Gaby Dunn of Bad with Money fame, and another with Malcolm Harris, the author of a book cited quite a bit throughout this episode and the next, called Kids These Days: The Making of Millennials. Without further ado, here we go. 

When I first began writing about personal finance back in 2018, I naively believed that the rules of the game were fixed, simple, and universally applicable. Go to college, get a degree (without debt, if possible), get a good job, work hard, save, and repeat. I was going to make all my peers rich, baby, because it was so simple. And I had the ready-made framework branded in millennial pink. Why did I believe that this system worked well? Because it worked for me, and I figured anything that could work for me could work for anyone. It was the quintessential “If I can do it, so can you” framework of optimism and actionable advice that some small part of me really still hopes is true, but the unequal effects of the pandemic, and simply learning more about American history, the economy, privilege and wealth inequality, thoroughly disillusioned me. It bared the soul of this supposedly repeatable framework and with it, huge gaps and holes.

It's a weird time in history too, to be examining these truths, and from a weird vantage point. After all, the personal finance guru as a mainstream phenomenon began in the 1990s and peaked in the aftermath of 2008 with the man—you may have heard of him—named Dave Ramsey. Anne Helen Petersen, in a feature that I'll link in the show notes, writes this: “Before Ramsey, financial advice was largely for people who were already rich. It went straight to stock picks and skipped what to do if you had credit card debt or lived precariously from paycheck to paycheck, assuming people were in those situations because they didn't care about financial education. For the first time, working-class, Southern, and Midwestern folks who'd been conditioned not to pursue wealth could indulge in what middle-class Americans had been devouring for decades: the fantasy of being rich, a perpetual belief that a better life is within your grasp if you can just get the money right.” So one of the principal oddities of the human experience, I think, is the recognition that the conditions of the environment you exist within are constantly evolving. They're not static. And the idea that financial gurus used to primarily concern themselves with the already rich fascinates me, though I suppose it shouldn't, because the popular Roth IRA was not even invented until 1997. 

But one thing that has felt universal and permanent is the alluring promise of the American dream, a tale as old as time. Well, as old as the pilgrims yeeting out of England to evade taxes and secure themselves the right to argue with one another about the best way to organize a society and throw tea in the river every once in a while. As potentially the most successful brand campaign in the history of planet earth, America is seen as the land of opportunity, promise, and freedom. But then there were some signs of cracks in the facade in May 2008, when Demos released research that suggested that the millennial generation would be the first to not surpass the living standards of their parents. People freaked the fuck out, because for the first time to the masses, it became evident in the data that maybe the American dream wasn't as in reach as we would like to believe. The reasons that Demos shared shouldn't surprise anyone: a combination of declining incomes, growing debt, high costs of education, home ownership, and healthcare. Huh. The full report would be comically bad if it wasn't so depressing. But Jacqui Shine of the LA Book Review describes its impact on our country's ethos really well here. She says “This news unleashed something between a moral panic and a national identity crisis. One that's only sort of about the material conditions of millennials’ daily lives or the documented effects of growing wealth inequality on the health of our democracy. Someone or something, it seems, had killed the American dream, the idea not only that hard work will be rewarded with social mobility and economic prosperity, but also that justly earned wealth will grow exponentially across generations.” 

Still, as a millennial myself, it was hard not to waver between taking the data at face value and wondering if every generation is presented with its own unique challenges. Maybe millennials were just the unlucky recipients of a convoluted collection of systems and realities that have combined and recombined into a kaleidoscopic tangly shitstorm. Hold on, let me retake that. Sam has zoomies and is stepping on the keyboard.

Betty the bloopers robot: Katie. Hello. 

Katie: Speaking of shitstorms, Betty the bloopers robot, back again, I see. So great to see you.

Betty the bloopers robot: Katie, it's great to see you too. I'm afraid the Sam Cat bloopers hard drive is full and must be initialized. 

Katie: What? Can we just skip this, this one… 

Betty the bloopers robot: If you skip, the unimaginable will happen. 

Katie: Buddy, I am doing…this is a serious episode. 

Betty the bloopers robot: You must initialize. You must initialize. You must initialize. Destroy. Destroy.

Katie: This is ridiculous. This is the last time I'm doing this, Betty. 

Betty the bloopers robot: Bloopers initiated. 

Katie: Okay, I'm going to stop again because now he's in the way and he's biting me. Ow. Stop. Hold on, Sam is chasing his tail. I'm going to start over 'cause Sam's tail just whacked the Celsius can out of the way. I'm going to do that over 'cause he just like rocketed in. Sam, get lost, okay? Can you go over there? Okay. Can you please go somewhere else? Find a place to sit quietly please, buddy. Can you take a seat? Oh my god. Sit down. He tries to get under the computer and nudge it. Sam. He's just so disruptive. Sam, stop, okay? Can you go nap? Why are you being so, like, in the way? Okay, there he goes. Okay. All right. Let's do it and get through this. This is like, he's never been this bad ever. 

Suddenly the extreme frugal behavior really began to feel…oh my god. Serenity now. 

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Katie: My apologies. I have no idea why Morning Brew bought this thing. Anyway, back to millennials being the unlucky recipients of a tangly financial shitstorm. To understand the unique circumstances that kicked off this generation’s bumpy late-capitalist ride through life, take a look at the childhood and education that crafted the millennial generation, as Malcolm Harris, also today's guest, does in his book, Kids These Days. This is a quote. “Between the 1984 and '85 and 2011 and '12 school years, there was an increase of 921% in the number of high school students taking Advanced Placement courses, as well as an increase in the number of tests per student, from 1.37 to 1.76. While you might expect that such an expansion would have a negative effect on scores, the percentage of students scoring in the top marks of four or five on their tests stayed constant.” So what does this mean? It means modern-day high schoolers are studying more advanced material and more in general, likely in an attempt to give themselves a leg up on the competition—each other—and live up to the implicit promise of the purpose of education, that if you study hard and get good grades and then get into a good college and then get more good grades, and then work a few unpaid internships, then you'll get a good job and you'll be able to live a good life, all with increasing urgency. The borderline collusive part, of course, is how the universities and companies seem to conspire together to keep this promise afloat and just unattainable enough that it benefits everyone except the students themselves.

Here's another quote. “In a job market where a letter of recommendation and a line on a resume seems so valuable, we millennials have shown ourselves willing to trade the only things we've got on hand: our time, skills, and energy. Many schools offer credit for internships, treating them as if they had the educational value of a course. What this three-party relationship means is that students are paying their colleges and working for companies. And in return, both will confirm for anyone who asks that the student indeed paid for the credits and performed the labor.” Which is just, I don't know how to feel, but of course, most of us aren't paying the schools. We're taking money from the government to pay the schools. And as a result, Richard Fry of the Pew Research Center found while studying households with heads younger than 40 in the year 2014, that the median net worth of those who were college educated without student debt was seven times greater than the median net worth of those with student debt. It was $64,700 and $8,700, respectively. Perhaps more shocking, young people who were not college educated and therefore had no student debt had a higher median net worth than those who were college educated with student debt, which was $10,900 and $8,700, respectively.

I think the obvious caveat to make here is that while this particular cohort of indebted students at this particular point in time, people under 40, has a lower net worth than their uneducated counterparts. The hope is that their lifetime earning potential will outpace their uneducated peers, narrowing the gap until eventually surpassing them. That's the value proposition offered when the 18-year-old signs on the dotted line to take out a mortgage-sized amount of debt. 

Anyway, in the midst of all the heated debates of “Forgive student debt, because it's predatory” and “Pay for the consequences of your decisions, you entitled piece of shit,” in hellacious Facebook comment sections everywhere, it's easy to forget that student lending has been hugely profitable for the US government. The Department of Education expects to reap $18.99 in profit on every hundred dollars in loans originated in 2014. You multiply that by 140 billion, and we're talking over $25 billion in projected profit off the 2014 cohort alone. Since student debt isn't dischargeable in bankruptcy, the same way that all other debt is, and you can't exactly foreclose on your own human capital and give it back to the bank, it's pretty much impossible to default on student debt. Even someone who attempts to stop paying can simply have their wages garnished by the Feds. And honestly, I think that would be all well and good, if the jobs available to college graduates today were highly paid enough to warrant all of the debt. After all, most millennials took out debt under the assumption that the asset we were buying, higher education, would pay enough in dividends later to justify the massive liability. 

And usually this is the point at which someone says something like, “Well, those millennials should have taken out less debt and worked through college.” Uh, don't worry, they did. In 1960, 25% of full-time college students ages 16 to 24 worked while enrolled, and in the 2010s, more than 70% of enrolled undergrads are working. 20% are employed full-time, year-round. Among those working part-time, which is roughly half of students, half of them work more than 20 hours a week, finds Sarah Goldrick-Rab in her book, Paying the Price. This means that nearly three times as many college students work throughout their college education as was common in the sixties, likely in an effort to both pay down some of their loans and to prepare themselves, the human capital, for the working world and the pursuit of wages high enough to make all the trouble worth it. But sadly, this, broadly, has not been the case. Here's another quote. “Millennials’ extra work hasn't earned them the promised higher standard of living. By every metric, this generation is the most educated in American history, yet millennials are worse off economically than their parents, grandparents, and even great-grandparents. Every authority from moms to presidents told millennials to accumulate as much human capital as we could. And we did, but the market hasn't held up its side of the bargain.” That's a quote from Kids These Days. And now Beans is barking. So I'm going to go calm her down and we'll be back for an interview with that book’s author, Malcolm Harris.

Betty the bloopers robot: Katie. Hello, the Bean Dog drive is full.

Katie: I’m not doing it, Betty. I am not initializing this time. We need to get to the interview. 

Robot: You must initialize. You must initialize.You must initialize. Destroy. Destroy.

Katie: Forget it. I'm not doing it. 

Robot: You had fair warning, Katie. Entering reality TV mode. 

Katie: Oh, fiddlesticks. 

Robot: I hate money. You're a fraud. 

Katie: What? I love money. 

Robot: Sam Cat is a very bad kitty. Katie, what an awful thing to say. 

Katie: Are you piecing together words from old episodes? 

Robot: You won't break my soul. Nah, nah. 

Katie: Oh, hey, Beyoncé. That's pretty sweet. 

Robot: Oops. I was jealous of Candice's new Range Rover. Envy is a sin. 

Katie: I never said that. Stop it, Betty. 

Robot: I don't really have a Zen rock garden. I lied. Why do you lie? 

Katie: Okay. There has to be a plug to pull around here somewhere.

Robot: You should've listened. My social security number… 

Katie: Oh god. 

Robot: Is 940-9… 

Katie: Oh god. Found it. Say night-night, buddy. 

Robot: Wait, Katie. Kaaaatieeee.

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With that, let's welcome our guest, the author of Kids These Days, quoted throughout this entire episode and a millennial himself, Malcolm Harris. Malcolm, thank you so much for being here. You ready to jump in? 

Malcolm Harris: Yeah, thanks so much for having me. 

Katie: We're going to hit the ground running. So in chapter six, you wrote that “a market that doles out success on an increasingly individual basis is not a strong foundation for high levels of social interdependence.” And that “generalized trust is a privilege of the wealthy few for whom the stakes aren't so high. Those who are so well off, they can feel secure even in a human-sized rat race.” And I think you captured something special here, that the more we valorize and reward individual success, the more competitive a person has to be to survive. Like one must be special in some way to be rewarded by the market. And that leads to a general distrust of others. And I think high stakes is the best way to describe it. So I'm curious how you think this game, so to speak, is different for millennials than it was for generations past. Like, surely those who came before us in this country also had to deal with competition, right? Like, were they just as distrusting as we are, or has something really changed? 

Malcolm Harris: No. When you look at social trust in particular is one where you get a big demographic cohort effect, where if you go from Gen X to millennials and even further back from boomers to Gen X, you see these real, like, large quantitative falls in social trust, in generalized condition of social trust, to where now it's like really, really, really low, when it used to be very high in America. And so that's one where you can look at the data and say, we need some framework to explain how this is happening. How are you having these qualitative demographic shifts? And that's where you look at the data and try and divine that relationship between the qualitative and quantitative shifts. 

Katie: Yeah, it feels like we know at that point in the book, you had already laid out a pretty compelling argument for what could be causing that. You also write that “our society runs headlong into an obvious contradiction when it tries to turn high-achieving into normal.” And this is part of why I find America—I guess particularly 21st century America, but that's the only America I've really ever lived in—in general, to be a bit of an acquired taste. Because if you are really talented, brilliant, you're beautiful. Like you're amazing. Then it's a great place to be, because there is practically no ceiling on your potential and the riches that will, you know, flow to you in a capitalist society. But if you are average, as majority of the bell curve is going to be, just by the definition of average—the bottom 50% of Americans, for example, making an average salary of $19,000 a year, I think it's pushing $20k now. But anyway, this reality makes people like our Northern European neighbors—so Norway, Denmark, Sweden, they're on the mind right now because I just was there, and their more egalitarian approach to life, more collective approach to life—a more appealing alternative to me as a solution that's probably gonna work better for most. Do you think that the millennial condition that you described in your book is specific to the US? 

Malcolm Harris: No. No, definitely not. I think you have to look at it as part of a global system of production, right? The global capitalist system. So you have the same and even worse in terms of pressure on young people probably happening in the People's Republic of China on young workers, where they're seeing something very similar. That was one of the only places to translate my book, actually, was into Chinese, but not into, say, French, right? 

Katie: Because the French will be like, what do you mean? I take three hour lunches. 

Malcolm Harris: But that's sort of a stereotype that's falling apart too, right? And so you see this historical trend, the state's ability to insulate population from this global system through wealth redistribution—we think of the Scandinavian model—is evaporating, right? You can see this, especially in a country like France, where they used to think of it as a social democracy that redistributes wealth towards the broad population. And now they have, you know, battles on the streets over labor reform, and they're heading in more of an American-style direction. So it's a global system that you see, and I think we're going in this direction and I don't see the Scandinavian model as, say, a solution to the global set of problems we have. 

Katie: Yeah. That makes sense. There's also, I read something while I was there, 'cause I was so kind of…I'm just fascinated by how they structure society. And I guess the value systems are just a little bit different, and something I had read that really was poignant, given where I was in your book while I was there, was this idea that in order for that to work, the Scandinavian model, the reason it works so well for them is because there are very high levels of generalized trust between populace and government there. And how, you know, if you really have distrust or you suspect corruption of any kind on any level, it kind of all falls apart. That there has to be trust. And so reading that in tandem with reading what, you know, your findings about, or the research, rather, that you are illuminating about how distrust is actually very high in the US, I was like, oh, well, yeah, I guess that's not going to not going to work very well for us. 

So I got this sense of inevitability, kind of, reading your book. Like this was the destination that capitalism was always driving us toward. And in some ways it feels like it can't get much worse, but you know, you mentioned you wrote this in 2014, 2015, and it almost unequivocally has gotten worse. And you make a few predictions at the end of your book. You write, “the institutions that sort American children don't necessarily care who wins or loses. Anyone can technically climb from the bottom to the top of the national caste system. And it's possible to fall from the top to the bottom. But the number of podium spots is determined by larger forces than individual effort or merit,” and reading this, I was reminded of something I was thinking about while I was in Scandinavia. Just that maybe we, and I say “we,” as in like the broad middle class, maybe we push against the idea of taxing the rich or this, you know, when you said like, wealth redistribution, I know that's a very like politically charged phrase in the US that like people get upset about, but maybe it's because we all secretly believe that someday we are going to be rich. So we don't want to tax the rich, because what if we are rich someday? Why do you think we cling to this idea of upward mobility, also known as, like, the American dream, more broadly? 

Malcolm Harris: Well, I would question whether we actually do. I mean, increasing taxes on the wealthy has roughly 70% support among Americans. So that's a majority support among members of both parties, you know, more than 50% of Republicans support increasing taxes on the wealthy. 

Katie: Oh, that surprises me. 

Malcolm Harris: Well, it surprises us because we have this idea that America is a democracy. And so the things that people believe must be the things that happen. And so if the things that we believe aren't happening, we have to reconcile that somehow by changing our ideas of what we believe. But it's that basic fundamental idea that's wrong, which is that what we believe has anything to do with what happens in this country. And so if you think of the state as the embodiment of the will of the people, you're going to start being very confused about, well, why do people keep punching themselves in the face? Why do…Americans must be really stupid. But the truth is, absolutely, if it was up to raising hands for where's our referendum on shifting the distribution of wealth in this country, it wouldn't even be close. It's when you start to understand the state, and the American state in particular, as a committee to manage the affairs of the ruling class, that it all starts to make much more sense. And so Nancy Pelosi doesn't want to raise taxes on the rich 'cause Nancy Pelosi is ludicrously rich. And so is, you know, everyone she cares about. But when you get back to this question of, is it a great place to be, to be rich, in some ways it is, because you can get super rich and whatever, but you do have drawbacks as well. And you see this, if you go to the Bay Area where I'm from, you see the greatest explosion of wealth in the history of man, as some people say, and then you see homelessness and street poverty, and the rich people get really aggravated with the homelessness and the street poverty, as if that wasn't the other side of the coin of their own wealth. And so why things are the way they are isn't, yeah, isn't so much a question of individual intention or even collective will, but in terms of a distribution of power and resources that exists in this country and around the world.

Katie: Wow. I've never thought of it that way. And I guess I always thought that there was pushback, 'cause I feel like whenever I talk about this, I have people being like, no, you don't get it. Like, we can't do that 'cause it'll disincentivize entrepreneurship or it'll disincentivize…and I just don't know that I really buy that. 

Malcolm Harris: Well, you know what disincentivizes entrepreneurship is— 

Katie: Not being able to eat. 

Malcolm Harris: Well, mergers and acquisitions, right? We've got the lowest level of firm formation in many, many decades. And it's not because you can't go online and outsource every one of your firm functions to some tech company, it's because the market is so glutted with these oligopolies that new people can't even establish businesses. The way that it's framed by the people who benefit from the current system has almost nothing to do with what's actually happening, and that they put it on our psychology is the easiest way for them to get out of responsibility for the actual state of things. 

Katie: Mic drop. Wow. So on that note, at the end of the book, you took a really realistic approach, I think, to the conclusion, where most authors—and you note this, you say, like, this is usually where the author offers up solutions—and said, these are the neat and tidy things that we need to do and the boxes that we need to check to fix this. But you were really honest, and you said that honestly, most of the solutions we have access to, like philanthropy or political organizing or whatever, will likely fall short. And I'm curious at this point in time, now that it has been, I don't know, six or seven years, if you have any more clarity on what you think the best way forward is? Like, do we totally throw out the rule book that worked for our parents? Do we cling to it even more strongly? Is it something else entirely? How do we contend with the way things are? 

Malcolm Harris: Yeah. I mean, it's obviously gotten much, much worse since I wrote the book. So I think, insofar as my predictions were pessimistic, they've come true. Insofar as I made any optimistic predictions, they probably haven't come true. Maybe some. Things are getting much worse. And I definitely maintain that, you know, we're not going to vote our way out of it. That's becoming increasingly obvious. We're not going to philanthropy our way out of it. Ridiculous. We're not going to volunteer our way out of it. And we're not going to consume our way out of it, even if we're going to be consuming, you know, green cars instead of gas cars. So I think that conclusion was true. And so you look at now, how do we organize for something different? And I think we're going to be looking at more and more radical action, and people…I think there's going to be a tax on fossil fuel infrastructure, are going to become more normal within our society. Street conflicts between political factions has already grown. We have a liberal center that can do nothing but maintain control over the official levels of power and levers of power and can do nothing else. So I think people need to, you know, get out, get with people they agree with, and start thinking about how they're going to take history into their own hands. What that's going to look like. 

Katie: Malcolm, thank you so much for being here. 

Malcolm Harris: Thanks so much for having me. 

Katie: Okay. So clearly this doesn't sound intensely optimistic. The irony, of course, is the solutions that I can offer you, and the solutions I often try to offer you, are all individual solutions: how to navigate the financial world around you and the rules of the game, if you will. But I do want to end on a positive note, because there is one distinct wealth-building advantage that today's young people have that their predecessors did not: financial technology. Our parents and grandparents may have been able to afford homes at 23, but they were not able to invest in the stock market using their pocket computer with $10 and an internet connection. Investing in the stock market, arguably the most relentless wealth-building machine of all time, has never been easier, cheaper, or faster than it is today. So while there are myriad factors we've discussed already and will continue to discuss next week, I believe the most impactful thing you can do on an individual level to improve your financial standing is to take advantage of the FinTech revolution and invest as much as you can, as early as you can.

I appreciate you bearing with me through what might've felt like a bit of a narrative beatdown, but I also on some level hope that it provides some level of solidarity, and maybe even an explanation, if you feel like your adult life is in some ways harder or more precarious than you expected it to be. So next time, next week in part two, we will explore a few more things: where personal finance advice comes into play, privilege as a somewhat uniquely American concept, the promise of the American dream, and the foundationally millennial concept of scamming.

Rich Girl Roundup: As a reminder, we will take listener questions every month. I will put out a call for questions on Instagram. So—shameless plug—follow @MoneywithKatie on Instagram, if you're not already, and we will pick one that feels interesting and widely applicable, and we'll answer it. As my standard disclaimer, I am not a licensed financial professional. This is not financial advice. This is “What would Katie do?” This segment is brought to you by Betterment, giving you the tools, inspiration and support you need to become a better investor. Here's this week's question from Becky. 

Becky: Hey Katie, I'm Becky, calling into Rich Girl Nation from Detroit, Michigan. Can you share more info on how you personally structure your asset allocation? Do you do a simple three-fund portfolio, or do you also mix in other asset classes like small cap, emerging markets, value indexes, and rates? If so, what percentages do you use for each? Also, do you prefer to use a super low-cost investing company like Vanguard, or robo-advisor like Betterment, with slightly higher fees? Looking forward to your feedback. Thanks. 

 Katie: I am happy to, Becky. However, this question does force me to admit that I actually am not sure what my overall allocation breakdown is across my entire portfolio. Go figure. The last that I checked was in fall 2021, but as you pointed out, I do have money in a lot of different places. So it was a fairly manual process to assess each account and how much money was allocated towards certain categories across the entire portfolio. So to answer your question about the companies I use: Vanguard, Betterment, M1 Finance, Empower/Mass Mutual (it’s my 401k provider), TD Ameritrade (that's my HSA investment provider), and Fundrise. I know that is a smattering, so it will break down why I like and don't like each one. So Vanguard is a tried and true platform. The UX UI is horrible, though. So I don't tend to interact with those accounts very often. In fact, I have moved most of my money out of that platform to buy Vanguard funds somewhere else, because it was just too difficult to navigate it. It made it too complicated. I do still have a solo 401(k) there, because the more new age firms don't offer those.

Betterment would be my robo-advisor pick. I have used Wealthfront in the past and I liked them, but Betterment's investing philosophy has a value tilt, which I fundamentally agree with. It basically attempts to buy underpriced segments of the market to increase your returns. And I find that they've done an exceptional job of naming their account types in such a way that they're better for beginners, more intuitive, who may not know how to go about investing for medium-term goals. I'm thinking specifically of their Safety Net brokerage account for emergency funds, and their Big Purchase brokerage account goal for things like homes. M1 Finance is a newer player on the scene, but I like them because there are no fees and you can build pies, which are basically just asset allocation decisions that you can make up front, and then M1 Finance will invest your cash according to the assignment that you give it. So it’s a little more hands-on than something like Betterment, because there's no guidance about what level of risk is appropriate for you, but it's less hands-on than Vanguard, because you can choose a pre-built portfolio rather than having to pick individual securities yourself. The others I noted were for specialty reasons, like Fundrise for real estate or Mass Mutual for a 401(k), so I won't spend too much time there. 

When it comes to my asset allocation, though, I have different allocations set up in different accounts, depending on what is available and when I anticipate needing them. Like in my 401(k), the options are slimmer, so I invest 90% in a Vanguard target date fund, and the other 10% in small cap. That's what's known as the “two funds for life” strategy from Paul Merriman and Chris Pedersen, who we've had on the show before. For my Roth IRA, I have it invested in what's considered an ultra-aggressive portfolio because it's the account that I plan to use last in my life. So it has theoretically 40 more years to compound from now before it'll be relevant again. So the ultra-aggressive breakdown is 34% developed markets, 29% S&P 500, 13% small cap, 9% mid cap, 7% real estate, 7% emerging markets, and 1% international bonds. This portfolio is down about 19% over the last year, which is in keeping with my comment that it is ultra-aggressive. 

For anyone that may not know about those particular ETFs, I'm just going to break that down really quickly. So developed markets would be basically other countries’ economies, outside of the United States, that are already, well, developed. They're already pretty far along, we'll say. The S&P 500, that one is probably a common one that you've heard before. Small cap, small companies. Mid cap, medium-sized companies, both in the US, that is. Real estate is…I believe it actually has exposure to domestic and international real estate. Emerging markets are countries that are still developing. The economies are not what we would consider on par with the US and our peer nations. And then international bonds. So other countries’ governments. 

Now my rollover IRA that contains three previous 401(k)s is invested similarly, but a little bit differently, different percentages here. So we've got 17% small cap, 17% small cap value, 17% total stock market, 17% like Vanguard value ETF (so again, a value focus), 16% real estate, 16% developed markets. So it's more evenly split. That portfolio is down 12% over the last year, probably because it is so small cap and value heavy, both of which have been doing well recently, for a change. My taxable brokerage account, which is the account I've been actively funding this year, apart from my 401(k), is invested slightly more conservatively than the Roth IRA, but not by much. It's 45% total stock market, 20% small cap value, 15% Russell 1000 Growth, 5% mid cap, 5% developed markets, 5% real estate. This one is down about 11% over the last year.

What you've probably noticed from this breakdown is that I tend to set asset allocations in each account based on the same initial building blocks of hitting all the major categories. But beyond that, I don't really abide by any other overarching strategy. This is partially because I have money in a lot of different places, as I noted, and that makes it tough to maintain an overall target asset allocation. But I also think that it's reflective of how I actually intend to use these accounts and the timelines that they're on. You also probably noticed I don't have much bond exposure. That is partially due to my age and the fact that I'm in the beginning innings of my accumulation phase. 

So we are actually doing a full deep dive episode all about diversification, why you should diversify, in a few weeks, and we'll break down all of that far, far more in depth. So stay tuned, because we will dig into all of it in a lot of detail then. 

All right, y'all, that is all for this week. I will see you next week, same time, same place on The Money with Katie Show, for part two of this two-part special, featuring an interview with Gaby Dunn. Our show is a production of Morning Brew and is produced by Nick Torres and me. Sarah Singer is our VP of multimedia and additional content editing comes from our lovely senior editor, Henah Velez. The talented Christie Muldoon is our video producer, and Sam Cat right here is our VP of chaos, while Jojo Beans is our chief of woof.