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I Forge Iron

My kids assignment taught me something


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My daughter wasn't motivated to do her best on the PSAT (Preliminary Scholastic Aptitude Test).  So I decided to give her an assignment which I hoped would put her choices today into a meaningful context for her future.

I asked her to roughly define her dream life with everything she cared about laid out over time in the future.  Now working deductively from the assumption that her dreams are achievable, I asked her to roughly define how she might overcome the obstacles that separate her from her dreams.

In practical terms, that meant estimating the cost of her dream life, then figuring out what careers currently offer sufficient compensation in the place she wanted to live.  

This is where I learned something a bit unexpected.  Working off commonly available information on median incomes, home prices, and mortgage calculators, it's pretty easy to rough-out some understanding of what's going on in a given area.  Back in the dark ages when I was in school, we were taught a maxim attributed to Ben Franklin, that one shouldn't spend more than a quarter of their income on lodging.  So I took the median home price for a local city and chunked it into an online mortgage calculator set to "standard" defaults, and got a monthly payment.  I multiplied that by 3 (12 months times one quarter) and arrived at the post-tax annual income for the household.  I multiplied that by 1.2 figuring about 20% income tax, then compared the result to what census data says on the median household income for the city.  I repeated the exercise for a half dozen cities in my area.  In every case, the calculated income necessary to heed  "traditional advice" was about 70% higher than the actual median household income.  

Now I realize that older folks might read that and conclude "well duh, everybody knows that home prices went up".  Sure, but just for fun, consider taking Franklin's advice and applying it to yourself in today's housing market.  Based on the census numbers, most people couldn't purchase their current home without exceeding a quarter of their household income.  It's a humbling exercise.

While investigating the most appealing of the available options, I asked her to look into what sort of experience, education, and social connections, she would you need to arrive at such a job.

This naturally led to an investigation into the time and expense of higher education relative to it's reward.

As my daughter was roughing out the necessary years of education and experience to hit the wage range to facilitate her dreams, I noticed something.  High risk pregnancy due to maternal age starts at 30.  If her dreams include having kids, she's gotta consider how much time she'll have to make that happen.

Even assuming that a person graduates with an in-demand Bachelors (4 year) degree, their starting wage won't be sufficient to break even on the combined effect of supporting themselves, and the payments on their education loan.  Super-rough calculations lead me to think that most of the "successful" graduates from higher ed, will still be accruing debt for at least five years after graduation.  By the averages, that means a diligent, student who landed a job right away, will be 27 years old before they can expect to make progress on education debts they took on as a teenager.  

From personal experience, I can tell you that having kids is an expensive undertaking.  A young couple waiting until they can afford to have kids, is likely to run out the biological clock.  Couples that take on the debt to have kids while they can, may well struggle to save enough to purchase a home by the time they're 50 years old.

This exercise taught me how much the world has changed in the past 20 years.  Growing up, I heard plenty of career stories that started with a job sweeping the floors and ended with a corner office.  As a teenager, college was presented as a near-magical pathway to prosperity.  There are still opportunities for people to work their way up, and college can be vital to advancement.  However, the stakes are higher than they've ever been.  The truth for most of us is that there's never enough money or time to follow the "traditional" route.

My daughter came up with a "plan A" which involves a staged approach to her career.  "On paper" it'll take about five years longer to get from here to her dream, as compared to the uninterrupted college to work path.  However, her plan would reduce her debt, while also providing a viable vocation to provide the means for her to get from stage to stage.  All without sacrificing her dreams to accumulated debt.

Oh, and for what it's worth, she came to see the PSAT a bit differently.  

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My Parents were one of the 1950's success stories; he worked as a printer's devil while in High School. Married when he graduated  and suddenly got a college scholarship.  They managed to scrape though college, (no living stipend!),  and he ended up as a high executive for AT&T.

My second degree was paid for by my employer; of course I had to do it out of hours and books and fees were my responsibility; but they were all things I could cover by my then current income.  The main thing I paid was *time*. It took me 10 years to get that degree working full time, with a 100+ year old house and a young family.  Luckily my wife was able to stay home and provide a living environment for our children and her insane husband. (I could have trimmed several years off the 10 but I decided I needed to take summers off from school.)

My eldest Daughter, born when my wife was 38, graduated from college with no debt. She then went on to Vet School and graduated with horrendous debt.  She recently told us that she loves her house mortgage as she can see it going down steadily while her student loans do not. (She pays at least an extra payment on the mortgage principle each year to shorten the loan.)

Life has changed since I was young.  Many of our young friends and associates are putting off "living" as they are under crushing student debt loads; no house, no kids, etc.  (I read an article recently that showed that the cost of college went up to match the maximum you could get in loans for it. Must be nice...)

Something has to give.

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Thank you for your post.  I agree with you that something has to give. 

In the mean time, I think it's imperative for every parent to be honest about how things have changed with their kids.  Right now, debt will likely play a bigger role in defining a kids future, than their education, or work experience will.  

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One thing I don't understand about young folks is the reluctance to join one of the military services. My youngest son joined the Navy when he turned 18. His tour of duty allowed him to see a lot of the world and learn a lot of life's lessons. When his tour was over he went to the University of Arkansas on the GI bill and earned a masters in engineering, without accruing any debt. He now has a very good career and family of his own. Seems to me that is a very good deal.

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Also, the GI Bill doesn’t cover nearly as much as it used to. After WWII, thousands of veterans were able to afford everything from state universities to private liberal arts colleges to Ivy League universities on their GI Bill benefits. No more. 

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I just read an article that 41%+ of people in CA are spending more that 30% of their income on housing.  Rockstar, in CO it is, IIRC, in the 25-30% range.  This is why so much of the current housing construction is for rental units rather than single family homes.  I suspect something will go bust but I'm not sure what will break first.

"By hammer and hand all arts do stand."

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3% inflation coupled with 1.5% average wage increases since the 80’s. Government funding for public universities has steadily dropped. Cities and counties running on sales tax (9.5%) here. 

A study here in Oklahoma showed you need $19 an hour live here for a single person not including medical expenses. Folks consider $16 an hour good money and $20 is great. 

The blue color economy isn’t what it was when  I entered the workforce. 

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I applaud you for encouraging your daughter the think through her future and develop a "plan". Our oldest gets out of the service next summer, I may challenge him to complete the same project

I think that too often now parents just tell their kids that they have to go to college, and to just pick something they like for a major. Most people just don't make the connection for education cost and potential income.

I have an office job in the construction field, and I firmly believe that skilled trade wages will outpace degree professions in the next 10-20 years. It is a huge problem in this area to find people that want to work in the trades. Between the baby boomers retiring and the associated strain on the heath care system, and the lack of skilled trade working, it will be interesting what changes I will see before I retire.

On the GI bill, from my understanding after you get out it is a max yearly reimbursement. They do cover when you are active duty, but with deployments and regular training op's its hard to take advantage when active

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