When I was growing up, my father would constantly chastise me to “get a job, you need to pay for one-half of your college education.” Although his education policy was clear, I found this approach tended to emphasize making money over extracurricular involvement.
As a result, I had an egg route at age 14. A paper route at age 16 and worked at a Kroger in Indianapolis as a bag boy (or a Courtesy Clerk in today’s more politically correct world). I later worked every summer during college including stints as a house painter, a bakery oven construction worker and a pizza chef for Godfather’s Pizza. That is the same chain that the recently deceased Herman Cain was famous for turning around.
The emphasis in my case was purely on the money side. On the positive side, it did help me limit my student loan debt to a mere $2,500 upon graduation. Yes, I know the joke…what would that be in today’s dollars? Ha ha!
With my kids, I was a bit less stern. The idea was they would pay around half their education but with many jobs unavailable until 18 or after and the fact that my kids were not the entrepreneurs that I was, they were allowed to pay for their half with student loans and grants or scholarships.
What is your policy?
Whether it was my education or that of my kids, in both cases, we were provided, or we provided, a clear policy towards college and post graduate education.
With so many kids approaching college, getting ready to head to college or just logging in for college, do you have an Education Policy?
Let me give you four (4) reasons why you should:
What does a sample policy look like?
Here are a few examples, but I would encourage each couple or parent to develop their own policy for their own special circumstances.
Policy Example #1
When you finish high school, you are on your own. Your parents do not have the resources to help you so you should focus your energies on getting the best grades you can so you can get as many grants and scholarships as possible or consider other alternatives, like community college or trade school, where you can work while in school to pay for those costs.
Policy Example #2
We will pay for 100% of your educational costs for a four-year degree from an in-state college or university, including tuition, fees, room, board and a monthly stipend. We will only pay up to the cost of attending a four-year, in-state college or university, including the above items, should you choose to attend an out of state institution. Essentially you will be responsible for the difference in the total cost over and above the total four-year cost of a similar in-state college or university.
We will not pay for any post graduate costs but will credit and pay for some of those costs up to the amount of scholarships or grants you earn during your undergraduate program at an in-state school.
Policy Example #3
We will pay for 50% of your educational costs for a four-year degree from any college or university, including tuition, fees, room, board. We will also provide you a monthly stipend to cover any other costs.
We will not pay for any post graduate costs, that will be your sole responsibility.
I can go on and on as there are lots of possibilities. However, the key point is that it is important to develop such a policy that is uniquely yours and to make your children aware of such a policy as early as possible.
I know there are going to be those out there that say this puts too much pressure on a child, but I would argue it also provides clarity. It allows the parents and the child to start discussing what might be the child’s responsibility and how they can prepare, such as work in high school or college. Finally, it may incentivize the child to work harder in school to take advantage of all possible grants or scholarships if college is part of their plans.
Obviously, every child is different, and it is tough for most teens to know exactly what they want to do with their lives, but a well-crafted education policy will provide for a dialogue if nothing else.
Let me know your thoughts in the comment boxes below.
Let Them Eat Cake!
In the late 1700s famine spread across the land in France. The monarchy of the time seemed to have little tolerance or sympathy for the starving poor. The story goes that the people of France were starving following a poor harvest and a rodent crisis that led to a shortage of the staple of the time, flour, and consequently bread.
Allegedly upon hearing the news, Marie Antoinette, the wife of King Louis XVI, uttered this now famous phrase “let them each cake.” As cake (really brioche when properly translated) was more expensive than bread, the anecdote was clear evidence of just how out of touch she was with the lives of her subjects.
Although we are lucky enough today to not be in the middle of a famine in the U.S., we have the same kind of unrest today that must have been present in France at the time. One would guess a desperate peasant class was up in arms with the royal aristocracy and starvation was a powerful catalyst for their unrest.
Today, we have the Black Lives Matter movement front and center. The catalyst for this movement was the viral video of police brutality against George Floyd in Minneapolis. This group, and others that have infiltrated their ranks, are today locked in what seems like a never-ending struggle with the ruling class of our time, the government at all levels and their enforcers, the police.
I am not going to take a side in this ongoing dispute but to say that the 2016 Netflix film, 13th, was an eye opener for me. One I would not have seen if not for the insistence of my 20 years old daughter. I would highly recommend it. Not as absolute truth, but as a film that broadens the thinking and at least allows one to look at the protests with greater objectivity.
If we go back in time even further, the children of Israel in the book of Samuel in the bible, were complaining that they wanted a King just like all the other peoples on the earth at the time. In Samuel 8:11-20, Samuel warns the people about what a King would do to his subjects.
He said, “This is what the king who will reign over you will claim as his rights: He will take your sons and make them serve with his chariots and horses, and they will run in front of his chariots. 12 Some he will assign to be commanders of thousands and commanders of fifties, and others to plow his ground and reap his harvest, and still others to make weapons of war and equipment for his chariots. 13 He will take your daughters to be perfumers and cooks and bakers. 14 He will take the best of your fields and vineyards and olive groves and give them to his attendants. 15 He will take a tenth of your grain and of your vintage and give it to his officials and attendants. 16 Your male and female servants and the best of your cattle and donkeys he will take for his own use. 17 He will take a tenth of your flocks, and you yourselves will become his slaves. 18 When that day comes, you will cry out for relief from the king you have chosen, but the LORD will not answer you in that day.” 19 But the people refused to listen to Samuel. “No!” they said. “We want a king over us. 20 Then we will be like all the other nations, with a king to lead us and to go out before us and fight our battles.”
Today we are under the thumb of a government and its monetary system. Like the kings of the times past, our system does many the same things as in Samuel’s time and a couple things that they did not have to deal with including a Central Bank over its money supply.
I mention the Central Bank because I believe much of the class war, we have today is due to this one non-government organization. The Central Bank is a relatively new concept that was brought to the U.S. from Europe in the early 1900s.
Our founding fathers were against the idea of such an institution. They reasoned that there was no reason for an organization to issue and control the money supply on behalf of the U.S. government and its depository institutions. However, enough palms were greased that the U.S. Federal Reserve was finally born of out of the Federal Reserve Act of 1913.
Why were our founding fathers against a Central Bank? I think Mayer Amschel Rothchild said it best, “permit me to issue and control the money of a nation, an I care not who makes the laws!
The Central Bank and our government have been integrally aligned ever since. The problem with a Central Bank, as we have seen in recent years, is that they don’t work for us. It may appear that they do, but they don’t. Their programs and intervention in markets many times serve a purpose that does not align with the 99% but the 1%.
How do these programs lead to inequality?
Central banks pull several levers in their management of the economy including interest rates, bank reserve requirements and money supply. In recent years, to spur growth and allow its member banks to repair their balance sheets post the Great Recession, they have kept rates very low and been highly accommodative with their stimulus programs. This has benefited the wealthy, while hurting the saver, who has received very little interest on their excess savings while “stealth inflation” has squeezed the 99% amid an extended period of wage stagnation.
I say stealth inflation because the government changed the methodology in 1980 by which inflation is measured in the Consumer Price Index (CPA). Thereby understating the effects of inflation on the economy. Since CPI is used to determine annual adjustments to social security to the increase in employer wages, this has resulted in stagnation of wages while the real level of inflation has been much greater thereby squeezing our cost of living.
You can see this spread in the chart below courtesy of Shadowstats.com.
Likewise, the Central Bank has promoted lending programs that make colleges and universities affordable to the masses. The problem is that their buddies at those same colleges and universities have used the plentiful loan programs to boost tuition and fees, enrich their tenured professors and embark on massive expansion programs. We are already seeing a backlash here as students are taking legal action against those same universities for fees paid them during the pandemic without the receipt of proper classroom learning.
In other words, they have stacked the deck against us. Is it any wonder that the masses are rioting?
If you look at the pictures of those rioting, it is not just black Americans. It is Millennials and Generation Z who lost their jobs during the pandemic.
Why are they there? My theory is that it is not just black Americans that feel their government have abused their responsibilities towards them, but it is much of our younger generations that feel the squeeze of rising inequality, while being saddled with student debts they will have a hard time ever repaying in this low growth economy. This economic squeeze inevitably leads to a cycle of unrest just like in Marie Antoinette’s day until the tide is turned and the inequality is addressed.
What do think? Leave me your comments below.
Five Ways to Prepare for the New Normal
I am sorry I have not put up a new blog post in the last 45 days or so, obviously the world changed with the Coronavirus shutdown and it has affected everyone.
In our case, market volatility rose, client needs ramped up, and investor nervousness was heightened. This led to a very busy quarter for us and our distributed workforce.
Additionally, some of the work we usually do during the summer was pushed forward. Things are finally stabilizing. Just like Punxustawney Phil, we are finally sticking our heads out of our burrows and wondering what happened to the world!
I was reading a article sent to me by one of my support staff recently called Leading Beyond the Blizzard: Why Every Organization Is Now a Startup where they used the terms Blizzard to describe the virus shutdown and Winter to describe the period we are now entering over the short to intermediate term. They used the term Ice Age as the place we may be heading. It was a somber piece with some great ideas for businesses of all sizes in the “New Normal.”
As a financial guy, I must point out that we were headed towards Winter with or without the virus. Sequential quarter over quarter earnings and GDP were starting to slow and we were already in unprecedented territory with regards to the length of the economic expansion. The pandemic just expedited the process and accelerated the pain for many unsuspecting individuals and businesses.
What was a key take away from the article is that everyone is now a start-up! The point being that every business must now adapt, reinvent itself or die, even the large multi-national firms. As I look out of our burrows, I see a new environment with new challenges in term and new opportunities. In other words, a New Normal.
Here is a recent example, I went to the eye doctor recently and had to phone to get let in, wear a mask my entire visit and then have my hands sanitized on multiple occasions by the staff just to keep germs at bay. This is not the world I used to know!
Something else we see are disruptions in supply chains. We see tremendous government spending and interest rates that are now approaching zero (and being forecast to be negative by November). This is not the old normal!
Internally, we are already a distributed workforce utilizing technology to stay lean. However, we will be looking for ways to serve our clients with lower even costs and man hours while still delivering world class service. In my mind, technology is again the answer!
Enough of me rambling. Where am I going with this?
I think simply that the world has changed, and we all need to be prepared to think outside the box and be proactive, not reactive, to this New Normal. Those businesses/families that see the new environment as a positive and adapt, will thrive. Those businesses/families that attempt to stay the same will likely struggle.
The Leading Beyond the Blizzard article does a pretty good job of providing some basics for leaders as we move forward in “Winter.” I want to give you five specific ideas or take aways that you can use in either your business or in managing your family wealth.
1. Nothing is free in life – right now the global governments are passing out funds and bailing out businesses like there is no tomorrow. Unfortunately, those funds have a cost and ultimately, these same governments will be forced to raise taxes to pay the carry on those funds. Now is the time to look for ways to reduce your taxable footprint. Some ideas that come to mind quickly are utilizing private placement insurance or annuity products to reduce taxes on messy, tax inefficient investments. Maybe looking at places like Puerto Rico, where there is a 4% tax on foreign business income, for back office operations to lower overall tax rates.
2. Digital currency is a place to be – My belief is that when global governments are debasing their currencies in unison (as they are now), a new financial pact and currency agreement is on the horizon. Don’t be surprised if that next currency is digital. Now is the time to take advantage of that possible change by being an earlier adaptor/investor in digital currencies. The digital currency that the global governments will likely issue will be different, but it is coming as the world becomes more interconnected.
3. Debt is not your friend – some of you are discovering this right now. Debt is not your friend; it is your enemy unless used prudently and judiciously. A great deleveraging could be part of the future Ice Age. Now is the time to seek to restructure your liabilities so they are more easily manageable in a world where revenues may be harder to grow or return to pre-crisis levels.
4. Deflation and inflation – In a recent post, A Possible Next Move for the Markets, I spoke about the possibility of deflation and then inflation thereafter. I now believe there is a chance we will see both inflation and deflation at the same time until a future date where inflation likely overwhelms deflation. Just look around, prices of many things like energy are falling but prices for things that you really need like paper products and food are continuing to increase. In the past gold has served as an effect hedge against both deflation and inflation. Given the wave of government money printing, it could increase in value dramatically as one of the only forms of sound money.
5. Reexamine/Question Everything – now is the time to turn everything from your business to your personal life upside down and sideways. Look at it from every angle. Is what you are currently doing working? Will it work in the New Normal environment? Does it meet your personal goals and objectives? Be prepared to try new things as Leading Beyond the Blizzard suggests and to possibly fail. However, whatever you do, do not rest on your laurels!
So, what are your thoughts or comments? I would love to hear them in the comments below.