Tag Archives: debt

Why you go to school

With a headline like “why you go to school”, you’re just waiting for the common answer of “to get a good job!” to be exploded, aren’t you?

Well, if you’re a regular reader of Personal Due Diligence, you probably are by now.

In this morning’s Globe and Mail, Kevin Lynch, Vice-Chair of BMO Financial Group (and former Clerk of the Privy Council, Canada’s top civil servant), cited “literacy, numeracy, creativity, adaptability and entrepreneurship” as essential to success.

That’s why you go to school. A career that sustains you flows from that.

Now think for a moment what those five require of you.

Are you going to get that by rushing your way into some programme or other that promises “a good job” at the end of it? Probably not.

Robert A. Heinlein, in his book Time Enough for Love, took the view that “specialization is for insects” — in other words, that we need to bring many different skills to the table in order to deal with life. His quoted list is longer than Lynch’s, but unsurprisingly contains those five elements — but with the possible exception of “die gallantly” isn’t longer.

The problem with any educational programme that’s geared to “job gaining” is twofold. First, it will necessarily be more narrow than you’ll need in the long run. That’s because most of the jobs that exist today won’t exist forty years from now (just as a fair few number of those from forty years ago are on the rubbish tip of history now).

On 16 January 1974 — forty years ago — I started work as a computer operator in a data centre. Of the four manufacturers of computers in that data centre only one remains in business today. My first jobs there included mounting tapes (robots do it, to the extent tape exists now), running a burster/decollator (we no longer print on carbon-paper multi-part forms that have to be stripped apart and have the sprocket holes sliced off before using), running the “scanning” computer (which was started up by feeding in a program on paper-tape, no longer in use), sorting card decks pre-input (we neither keypunch card nor use machines programmed via plugboards) and running an all-batch workload environment (very little processing is done in an offline, batched way any longer).

Good thing I wasn’t “trained” to be “job ready”, eh?

Of course, forty years in and around IT work (my degrees are in philosophy, not computer science) have taught me one thing. Every technological evolution in the IT industry has actually led to its “professionals” dumping all their hard-earned experience of how to do things well in the dumpster in a mad dash to “the next new thing”. I’ve earned more than a few dollars over the years by having a memory for how we solved a problem the last time and being able to communicate that history in the language of the new paradigm.

Seems my literacy, studies in history, and reasoning classes have served me better than any amount of technical training might have.

Here on PDD, we’ve repeatedly said “pay cash to go to school”. If literacy (the humanities) and numeracy (maths and the sciences) are one part of the puzzle, the “pay cash” part turns to the “adaptability” and “entrepreneurship” part.

Here’s the nasty thing about coming out of school in debt: you have to pay it back. (Indeed, if you do that in the United States, you’ll find that the one debt you can’t, by law, discharge in bankruptcy is your student loan. You can dump your credit cards, kill your mortgage, even stiff the IRS — but you can’t wipe away the enslavement of your university years.)

Having to pay it back, in turn, forces you to take a job — any job — rather than explore your options.

You see, for every hour spent in a classroom, you need to spend at least another one in “the school of life”. There are those who are happy, for instance, being a barista (they like people and enjoy serving them; they have another career they’re working on and this is the extra money needed to close the gap; they’re studying how the shop works with an eye toward maybe starting their own one day — three different baristas at my favourite local independent coffee house fit these to a “T”). Then are those who are pouring coffee because they’ve got loan payments to make: the sort that, in the words of Daffy Duck in Beanstalk Bunny, say “it’s a living”.

Trying your hand at something new, or something entrepreneurial, when you’re a newly minted graduate is likely a little easier than having to gear up and do it for the first time in your late 40s having just been dumped out of the corporate career ladder with no easy way back in. Doing it with no prior obligations is, of course, even easier.

What’s more important is that the move to self-employment — with a business, or as a consultant — isn’t as much of a one-way trip at 25 as it is at 50. At 30, having your résumé read by someone with a job to offer showing you spent five years working in a not-for-profit, or trying your hand at business, merely translates as “lots of useful skills”. Doing the same thing twenty years later translates as “not our sort of person” and is binned long before the interviews start.

So, when it comes to your education, take the long view. Arm yourself with a diverse, useful background — something that can fill a good part of Heinlein’s long list of “a human being should be able to…”. A good understanding of history, your culture, maths, at least one science, will serve you well in many different endeavours. Do that without risking a penny of your future earnings. None of that education will be replaced by the march of progress — and it frees you to then give yourself the “school of life” lessons needed to succeed in the long run.

In the meanwhile, learn to think long term, as Lynch suggests. Periodically that may mean investing in a year or two of “professional grooming” (what else can you call a professional Master’s degree or certificate program?) because where you need to be next needs what that offers. But by then you’re earning, and again, can pay for it, cash on the barrelhead.

Maximal flexibility to seize opportunities — minimal ties holding you back from doing so — it all adds up to a life with you in charge, not the whims of some “boss” whom you have to put up in a desperate quest to keep the money flowing to pay the bills.

Getting there involves more than good luck, though — it involves planning. That’s where the advisors at PDD come in.

At what point should you consider going it alone?

Making the jump from the career world to the world of earning your own way in the world is a traumatic choice for many.

Far too many (and I count myself amongst this group) first ended up there not by choice, but by circumstance. A “mid-life course correction”, so to speak, brought about by the decisions of others.

But suppose, for a moment, you’ve decided this will be a part of your future. Are there reasons to delay jumping in with both feet?

If you’re just starting out

Coming out of school and going straight into entrepreneurial life can be very rewarding. (Indeed, an increasing number of people I meet at technology industry conferences that are doing startups are still in school even while they’re building out their companies.)

The big thing I see, from years of mentoring and advising entrepreneurs, is that the fewer obligations you have personally the better off starting out will be.

Doing a start up while trying to repay six figures’ worth of student debt, for instance, might be the breaking factor for the success of the venture. Doing it without any, on the other hand, would make it possible for you to reduce your draw on the venture, ploughing time and earnings back into it.

There are transitions in new ventures — that moment when you absolutely have to bring another person in to cope with the work, for instance — where being able to do so without letting your own pocketbook needs get in the way really helps.

If you’re in school, and thinking about an independent life after it, come out with as few outstanding “ties to your past” as you can.

At the same time, you’ve just removed the biggest worry about school from your back: the “will this course selection, will this degree, get me a job?!?” So take what helps you, broadens you, makes you better suited to turn ideas into reality.

If you do need to seek employment a few years from now, you’ll have that venture on your résumé — and that will come ahead of your degrees.

End of working life

For those of us past fifty years old and perhaps facing (or recently put through) one of those lovely “let’s shed cost early retirement programs”, it can be difficult to find a new position. The idea of self-directed working starts to take hold as a good idea — you’re not ready to retire, after all.

Oddly enough, for many of us, this is almost as good a time to chart a new course as coming out of school is. But there are a few things to think about.

First, if you do, you’re probably on that road until you decide to hang it up altogether. It’s a nasty (but true) fact of life that “trying your hand at being an entrepreneur” is less damaging to your résumé at 25 than it is at 55. At 55, what it says is “couldn’t find work” — whether that’s the case, or not.

And, alas, whereas a young person at 29-30 looking for a job can be slotting into an entry-level position without too much worry, an ex-senior manager coming back to corporate life at 59-60 is seen as having lost their “corporate edge” — not because of age, but because the challenge of running your own show has probably raised your independence levels to heights that would challenge too many around you.

So, if you’re taking this path at this age, it’s important to clear the decks, since although you may have more than one venture before you hang it up for good, you will be in venture mode from here on in. If you’re fortunate enough that your children are grown and actually moved out, now’s the time to downsize, free up cash (save it, you don’t have years left to put money away for retirement) and, in essence, make it possible to live on far less cash flow so that your business can grow.

If you are the sole earner in your family — or your spouse is already on the self-employed track — this is even more important. The reason? Lack of corporate benefits, chief amongst them extended health coverage. So the other part of self-employment at the end of a career is that you must take your health into your own hands, and work hard to minimize your costs in this area.

Mid-career entrepreneurial zone

For those somewhere in between these two poles (let’s say 35-45 as a talking point) the mid-career change is the toughest problem of all to crack.

You’re at the height of your financial responsibilities, your family’s still growing, and yet you’re now old enough that, just like your 55-year-old cousin, going off now can easily become a one-way trip to “permanent unemployability”, where working for yourself is your main future to the end of your working days.

Here is the zone, in other words, where managing your personal security so that you don’t find yourself having to make a forced decision is really your first priority. (Obviously, if you’re making a conscious choice and doing so with your eyes open, that’s a different situation.)

What all of these examples show is that thinking of your life as a portfolio of things done rather than a career ladder, or trying to seek security via being the boss rather than working for something large enough to be “safe”, comes at a price.

While there may be “no free lunch”, there are ways to manage risk and move with surety no matter where you are. That’s where PDD can help. Give us a call or write an email and we’ll discuss what a personalized advisory program would look like for you.

The notion of learn once, milk for years is over

A good friend of mine was quite critical of my daughter’s approach to her education.

She did not jump from high school to university. She spent time working, piling money in her bank account.

Then she went to do her Bachelor’s degree, and worked throughout. She graduated without a penny in debt (flat broke, but debt free).

Instead of heading off to graduate school right away, she again went to work. She’s restocking her funds for her assault on her Master’s degree (this time she hopes she can avoid working while studying, but it’s a coin toss whether that’ll work out for her).

My friend thinks she’s a fool. “Interest rates have never been lower: borrow, go straight through school, get into your profession — it’ll be easy to pay off and you’ll not be too old to enter against the others”.

He’s right that interest rates are low. He’s wrong about the strategy, though.

Here’s why: except for a very few people, education never ends any more.

One of the little known secrets of the robotics revolution in manufacturing, offshoring of all sorts of work, and the like is that the rate of job creation slowed. As a result, the number of applications for each open position jumped.

Differentiation of those candidates became necessary. Requiring ever more education became the answer — it made it easy for a computer program to scan and reject résumés. (That upping the educational requirements for a job may have gotten it classified up into the next pay band, possibly bumping the manager’s band as well, was just a lovely optional extra that made rewriting the position requirements all worthwhile.)

That’s how the same job went from Grade 12 to Grade 13 to any Bachelor’s degree, to a specific one, to any Master’s degree to a specific one, to add two or three industry credentials and certificates on top. (In Europe, where job stagnation has been a fact of life for two generations, an increasing number of roles now require Doctorates. Same job. Same responsibilities.)

Well, it’s all good if you’re in academic administration, which may explain why those jobs are paid like bank presidents these days. After all, there’s not many industries that can command price increases at four times the rate of inflation year after year due to demand.

(At the same time, most universities now have upward of 40-45 per cent of their teaching staff on sessional contracts rather than as tenure-track or tenured professors. This includes most Masters programs. Wow — higher tuition than as an undergraduate, and taught by people paid $7,000/term who won’t be there in the future. That’s what you get when there’s too many academics turned out of the Ph.D. mill for the available funded positions.)

What this means is that, only a few years after graduating — you, your six figure debt, and all — your credentials may be insufficient to get your résumé read. This is all before taking into account having to shift careers because the work you prepared for is now down at one tenth the cost in some other part of the planet that now has a fibre-optic cable connecting it to cost-sensitive buyers.

Oh, and if you’re in the United States, your student debt is non-dischargable in bankruptcy. You can walk from your mortgage and tell your credit card and line of credit bankers to take a hike; you can even tell the tax man he’s not getting as much as he thinks. But your student debt is a millstone for life.

You have to be debt-free in order to afford to pay cash for the next certificate, the next diploma, the next add-on degree. (You also need to be debt-free to afford to deal with the inevitable downtime that comes as your career is shattered by yet another job being pulled out of the market, a rung on the ladder that breaks while you’re the one on it.)

That’s why I back what my daughter’s done against my friend. When you’re in your mid-50s, it’s hard to see that the world is very much different than it was when you were in your mid-20s. Thirty years ago, borrowing to get yourself educated made perfect sense — and it did so with interest rates in the 17-22 per cent range. Today, at 3 per cent, it’s a trap.

Nimbleness is essential, here in the 2010s. It’s why you see so many younger people today not buying a car (not even a beater), renting rather than owning, paying cash for everything. They’re mobile, and ready to seize any opportunity, because they’re not tied down by past decisions.

Once you realize that being nimble outweighs “job readiness”, the world changes. Have you?