When it comes to saving money, you need a sense of urgency about the NEED to save – driven by your many future financial needs, longer life expectancy, and the fact that it is increasingly your responsibility to fund your own future. You also should be motivated to WANT to save – because of the exciting power of compounding and the fact that your money can grow (your money can earn more money, even when you are sleeping…so start saving young!). But, sadly, many people, especially young people, are in no POSITION to save, because they are saddled with debt or underemployed. I devoted two of the three sections of my recent book to these topics – “You Can’t Begin to Save if You Have Too Much College Debt” and “You Can’t Save if You Can’t Get and Hold a Good Job”.
What surprises many people, or what they learn with hindsight, is just how early in life they can make bad decisions that have huge financial implications – like taking on too much college debt or pursuing a job they are not passionate about or that cannot generate the earning power needed to pay off college debt. We need to get ahead of problems. Thus, my strategy is to ‘team up with’ parents to deliver critical messages to their kids (especially high school-aged kids).
“You Can’t Begin to Save if You Have Too Much College Debt” – Step 1 is for high school students to realize that the top priority is to get a job and career and not just a degree. Their future rests with them, the passion they have and the drive and determination they display, and not what is printed on a diploma. They also have to be shown how the current system is broken, acting more as a self-perpetuating cycle that results in and supports ever-higher costs of college and the exploding amount of student debt to fund attendance. In fact, college is not right for everyone, despite the national narrative that everyone should go. And many of those who decide to go, choose a school they can’t afford based on a purely emotional decision. Both students and parents suffer from too much college debt. Student debt means graduates start out in a financial hole and are not in a position to save when they are young. College debt held by parents, easy to occur with the uncapped nature of Parent PLUS loans, can derail retirement plans and endanger financial security. The key is to have a personal process to assess your passions and choose a career, and to evaluate the potential earning power of that career to determine schools you can afford.
“You Can’t Save if You Can’t Get and Hold a Good Job” – I provide guidance on how to save money. Techniques for saving often emphasize controlling spending. But ensuring that you get and hold a good job, particularly one with which you can grow your income, can be an even more powerful determinant of your ability to save. Step 1 is understanding the drivers of career uncertainty and what is constantly changing the employment landscape. Secondly, we need to accept that it is our own responsibility to adapt, cope, and succeed in this changing environment. The key is to adopt a mindset that embraces change and to continuously invest in yourself to stay employable. This entails, among many items on my ‘checklist’, a continuous desire to learn and improve yourself, throughout your life, especially beyond formal schooling.
For more information see www.yourfinancialsherpa.com