My Student Loan Story:

I was considered, by most measures, a stellar student in High School. Despite this I lacked the maturity and cognizance to plan ahead and mostly did what others told me.  As a first generation college student I did not really know what to expect when it came to how to choose a college. When I got my offer letters I chose the college that required the least out of pocket. At this age I didn’t know what I wanted. I had a few teachers tell me to go to Rice University or USC, but both of the schools were expensive and I had not yet learned about student loans. So I settled for University of Houston with the plan of completing an Engineering Degree (again because my teachers told me to). After the first semester I came to the realization that I was ill equipped to compete with my class mates who seemed to have a better foundation in understanding the curriculum. I saw the writing on the wall and spent the next semester “finding myself.”

I met with the Honors Program counselor and spoke with her on what I should do. As you can see this was my primary problem, relying on other people for direction. She looked at my SAT scores and suggested that I would be a good fit for liberal arts. It was at this point for the first time I questioned the advice of an authority figure. I asked her what I would be able to do with that degree. She suggested that I get my PHD and teach at a college. I mentioned to her that I was interested in looking into the Business school for some options. She discouraged that saying that it would be a waste of my talent to pursue such a degree. Me, being the dumb naïve kid that I was, took her advice, and audited a few liberal arts classes. While some of the conversations in those classes were interesting, I felt like the whole class consisted of massaging egos. I felt unproductive and honestly a little intimidated by the other classmates who seemed so sure of themselves. After this experience, I left the Honors program.

It was at that point, I had a moment of clarity. A better way to approach this was to ask people who actually have the job the degree is designed for. Lo and behold the school had events in place in which there are round tables to ask actual pharmacists, CPAs, doctors, college professors, architects, counselors, and etc. details about their jobs. After listening to all of these professionals I decided that a CPA fit my personality best. I also was excited by the salary that the field commanded. It was then that I signed up for my first accounting class at a community college, since a large chunk of my scholarship was lost due to my major switch from engineering. The counselor suggested that I take out a student loan and take the accounting class at the University level. However once I started reading the details of the loan I was confused and intimidated. I also needed a cosigner to get the loan, which my parents refused to do since they were scared of debt. Their fear startled me as the counselor seemed so nonchalant about it.  I was surprised by the cost, but I had just enough money saved up from high school to pay for the class at the community college. Once I did, I got a basic introduction to accounting and all things money related. I understood now why my parents were scared of debt, and vowed to finish college without relying on loans. I was eventually able to do this, as I applied for new scholarships specific to the Business school. My first semester as a business major ended in a 4.0 GPA. My confidence was restored.

Shortly after this debacle I met my future wife through my roommate. About 1 year into the relationship I started thinking there was a good chance I would marry her. She was just finishing up her basics and starting her degree in Photography. It was at this point I began to ask her how she was paying for school. Her reply was “Oh just student loans.” Alarm bells went off and I panicked a little. I asked her if they were federally subsidized or private. She had no idea what I was talking about. She said her counselor guided her through it. Based on my past experience with my Counselor I wanted to take a closer look. Upon looking into her online account I was shocked to see that it had a variable interest rate (at the time 10%) and was already accruing interest. I could not believe that the Counselor didn’t push her towards a federally subsidized loan, or at least one with a lower interest rate. It was at that point that I sat her down and explained to her how this loan works and that getting a degree in Photography would not guarantee a job that could service her loan. The loan stood at over $36k after only 2 years of college. They lent her the lump sum of what she would need for college at the beginning so that they could start charging interest on the full balance immediately, instead of giving it to her as she needed. I was outraged by how they tricked her, and once she had understood what had happened she was too. She repaid half of the money in order to slow the rate at which the interest accrued and borrowed from then on with federally subsidized loans.

It was at that point we made some sacrifices. We moved to my parents’ house which was about 45 minutes away from the school. We stopped going out with friends. We focused on finishing school as fast as possible instead of working our way through college. We maxed out our course load per semester as the classes were cheaper after 15 hours. We also took summer courses at the community college. Most days we got to school around 6:00am and left around 9:00pm. To me it seemed the situation was, “You have debt, and your future is on fire. Get a well paying job to pay it off immediately.” Our friends would make fun of us for our sense of urgency. We would constantly be bombarded with concerns that we were not having the college experience, and that we needed to chill out.

Following our graduations I got a decent paying job and my wife got one a year later. We had decent cash flow coming in and immediately tackled my wife’s student loan which stood at about $40k. My coworkers would celebrate their new cash flow with exotic trips overseas; I was still in crisis mode. After a year and a half of immense frugal living we brought the loan down to a little less than $5k. We would be fully repaid by August 2013.

The point of me sharing this is to acknowledge the fact that college students by nature are barely adults. The only reason I avoided student loans was my parents’ reaction towards them. I recognize that not everyone can get scholarships to pay for college. My wife had 1 small scholarship, but the rest was financed with debt. As an 18 year old right out of college I didn’t really understand money at all. I think few 18 year olds actually do. I think most companies/schools know this, and they exploit this. The only solution is for 18 year olds to be taught what debt is and how it can ruin your life if you are not careful, and that college is not the place to rest easy. Remember your future is literally on fire when you borrow money.

Understanding Money

Money is damn important it seems. In fact out all the tangible superficial things in the world, I would say money is the most important thing to understand out there. What do I mean by “out there?” I mean the real world after graduating high school or college. The real world begins at different times for different people, but that is another blog post. I deal with understanding the monetary value of organization on a daily basis in my profession. With that said I have come to a few conclusions. Putting it extremely simply, value comes from what you own, what you owe, and what you make. These attributes must all be taken into consideration when deriving a value from a company or an individual’s financial value. Let’s assign words to these attributes to further clarify their meaning.

Assets

Assets are economic resources that provide value. From an accounting standpoint assets represent ownership in something that provides a value that could be converted into cash. A lot of people solely value their “social class” on what they own. To them a 3,000 square foot house means they are rich. Or buying a new car every year means that you are rich. A lot of people confuse consumption with assets. Yes your CPA/Broker/Financial Planner will tell you those things are assets, but from a logical standpoint they are liabilities. There is one asset everyone is born with and that it their time.

Liabilities

Liabilities are obligations an individual or organization has made. They are obligations that must be met, but they usually have equal value to the asset. In a perfect world a mortgage balance will equal the value of a house purchased. The only way to reduce the net liability is to acquire more assets (ie. cash) to service the debt. Your asset may also grow in value as well due to inflation or speculative appreciation.

Income/Expenses

Income and expenses come from what you make. Income is a derivative of assets and expenses are derivatives of liabilities. In order to assess whether something is indeed an Asset or liability, one needs to determine if the net of the attributes attached whatever you purchase falls in the Asset class or Liability class. For example if you have a house that is worth 200K with a loan of (180k), for the current year your interest expense/property tax expense was (12k), your regular housing expenses were (15k) and you rent a room for an annual cash flow of 3.6k. The calculation would look something like this:

200,000-180,000-12,000-15,000+3,600=-3,400

As you can see the number is negative, therefore from a logical perspective, this house is a liability. This does not following Accounting regulations, but from an operational standpoint this is true. After viewing money from this perspective it has changed my wants and needs.

When I initially started my profession I felt the need to go out in the world and buy things based on how others would perceive me. This continued until I realized through a sort of morbid epiphany that buying all those things would not make me happy. In fact that lifestyle would enslave me to my career with the extra pressure to raise my income in a significant incremental manner each year in order to maintain the false lifestyle that others expected me to engage in. I think it is very hard to divert from this line of thinking due to the incredible influence advertisers and society exhibit on the average person. My moment of clarity came when I realized that most people save less than 10% of their income and therefore have to work until their sixties or later.

While I do enjoy my profession due to the learning opportunity it provides me, I do not want to work 40 years only to have the last decade or two of my life available for my true passions. I realized that I have control over this outcome. All I have to do is increase my rate of savings in order to experience true financial freedom. When the passive income of my investments covers my expenses I am free to pursue whatever interest despite its economic rewards. Also I can be aggressive and engage in actual business ventures that are risky, but I have always wanted to do. This can only happen in a capitalist society, which we happen to live in for the time being. I feel that the general inclination society feeds us is to be a cog in the wheel and never be the person who set the wheel in motion.

Alien Planet

A story broke this week regarding a new planet in the fabled “ Goldilocks zone” between the planet and a star. Interested, I clicked on the article eager to read the details. Full disclosure, I am grossly incompetent in most things science as far as the advanced analytic mathematics used to actually make discoveries. However I appreciate the benefits this work brings to us as a species.

To my chagrin, the subculture that lies in the comment reply system was utterly pissed off. I started noticing a pattern in the comments and wondered how our society became divided in something as objective as scientific discovery. Well the common themes were: Environmentalism is good, Obama anger, Bush Anger, Global Warming is fake, Global Warming is going to kill us all, Politics, Liberals are bad, NeoCons are bad, Religious is dumb, Science is blasphemous, Scientists are dumb,etc. I swear these are the same topics that come up when any news article is posted. Why is it that comments typically devolve into this?

Comments are an entertaining unfiltered view into the minds of my fellow human beings. Sometimes while sifting through the crap, I find a comment extremely insightful and full of intellectual substance. Why do these individuals bother posting when the majority of the commenters just spew out talking points they heard from whatever “group” they attribute themselves to? Once in a while I’m pessimistic and believe that these individuals are either venting or trying to feel self important by correcting the logical fallacies present in ongoing dialogue. However, I honestly think some people want try to help others see the correct view whether by opinion or by fact. I will sometimes seeing a calm Christian debating with a pissed off atheist or vice versa, without ever disrespecting the other individual. Eventually the conversation becomes more structured and intellectual substance forms from the primordial goo that it is the comment reply system.

I wonder if great ideas will one day come from this phenomenon, but in the meantime I wonder if anyone who happens to read this can describe any interesting conversations they have had while commenting on an article, video, or other internet real estate.

Goals


I remember the constant nagging of my teachers all throughout my journey through the draconian halls of public education. Once a year, (although this stopped once I entered high school) we were assigned the task of writing a list of long-term and short-term goals. At the time, I was so short-sighted that I never took the exercise seriously. I would write things like: purchase X video game or purchase X action figure. This utter childlike naivety stayed with almost through my first year of college! I realized at that point that I had no direction in life. Instead I surrendered my responsibility for my future to my parents or school counselors. I was completely passive, until I finally took control of life. The feeling was scary. For the first time I realized that my life was in my hands and that if I failed I had no one to blame but myself.

So how does this relate to goals? Personally, none of my goals were really goals until I took responsibility for myself. Until I surrendered myself to the reality, that someday my parents would not be there to catch me if I fell, that society is too unreliable to trust with my future, and that the world in general is INSANE, my goals would remain empty, substance free ego masturbations.

Here is what is working for me with regard to writing goals and following through on them:

1. Define the Goal

The hardest thing about goals is actually having the balls to write them down. It’s much easier to avoid accountability when you keep the goal in your head and adjust it as perceived circumstances prevent the goal from being reached. When doing this you lose information on what is keeping you from attaining your goal. By writing it down somewhere, you are accountable to yourself. While you can still cheat and erase it and edit it without leaving notes to why you are changing it, it becomes a physical activity and increases the chances of you noticing that you are just procrastinating. Writing it down also allows you to be extremely detailed on what you want to achieve. For example you can break down a complex, daunting goal into more bite sized chunks. For me the more detailed I am in my goal writing the more achievable it seems because it becomes a tangible, solvable problem.

2. Set a Time limit

Time limits make the goal a reality in that they bring an abstract idea in your brain into space-time. Once the goal can be assessed in real time with quantifiable attributes you can begin to determine how prone to procrastination you are. I realized early that if I did not set a time limit I would never accomplish their goals. I think there are some people out there with the discipline to set goals and follow through without tethering a false sense of urgency, but I learned real quickly that I was not one of them. Another prize from setting goals is actually become more self aware of your individual strengths and weaknesses.

3. Assess the goal

It is important to develop a means to assessing the status of your goals. I am definitely a numbers guy. When coming up with financial goals I attach monetary values to the goals to give myself more of an incentive to follow through. For example one of my financial goals was to decrease my monthly expenses by $50 dollars a month. When I multiply that by 12 I realize that I no longer have $600 of expenses for the year. Taking it further, assuming an annual return of 5% adjusted for inflation, I would need to save $12,000 saved for retirement to maintain those expenses. Since I no longer have those expenses that amount can be reinvested or spent in another way.  This thus potentially reduces the amount of time and money I need in order to retire. That is definitely motivating for me.

4. Revise your goal

It is important to constantly revise your goal as you become closer to achieving it. It is a well known fact that humans are terrible at predicting the future. This is especially true with regard to human behavior. As accrue more and more relevant information, it is important to condition and further develop your goal. It is also important to realize that your goals do not exist in separate vacuums. They are interrelated. When revising your goals you may come to the realization that achieving one of your goals is undermining the achievement of a more important goal.

In practice when I first started writing my goals down I felt silly and did not take it too seriously, but when I became more successful at seeing my goals through I became a believer.

College pitfalls episode1:

I’ve decided to start a series of entries that go into detail on some mistakes I have made or have seen made in the name of pursuing higher education. While I am by no means an expert in this subject area, this is one of the few things I have accrued experience in simply by “fucking up” over and over again.

Is a college degree the right fit for me?

College is an interesting institution. The overall attitude of society towards college is one of respect. However it has become quite bloated in some regards and has led some people into a lifetime of debt servitude. Circumstance often asks the impossible of the inexperienced high schooler. How do you know what you want to do with your life when you have had limited to no exposure to the possibilities that life has to offer? A short solution to this is to expose yourself to these possibilities before you start college. Do not take someone else’s word as a guide to what your future holds. Just because you are good at math does not mean you should be an engineer. Just because you are a good writer does not mean you should major in journalism. Just because you are first chair in band does not mean you should major in music.

Before choosing a major, find out if the end-point of that road (a job or lack thereof) is where you want to end up. There are many avenues for this as professionals or enthusiasts are eager to share the details of their careers with aspiring students. At many Universities there are panels held for each various degrees with professionals that will explain how their jobs really are. Frankly I found them quite enlightening when I was going through my identity crisis as an undergrad. They will be brutally honest about misconceptions about the careers they have chosen. An example of this was when one student said he wanted to get into accounting because he was creative and wanted to use that creativity in setting up businesses. Obviously accounting is not a creative endeavor unless you are doing something illegal. However, this brings to point how little most people actually know about a field unless they ask someone who is in it.

The majority of people in the United States have been indoctrinated into the belief that to become rich or middle class a college degree is necessary. I was indoctrinated into that belief! The United State government has made it increasingly easier to get a college degree which has in turn made it extremely expensive. After graduating high school I had very little knowledge on how debt worked. I thought it was simply buy something now and then you can pay it later once you got paid. Once I learned that virtually everyone was in debt in one way or another and that the compounding interest is an extremely powerful force, I decided that maybe I should focus on understanding on money in general. Crudely simplifying the situation, debt can strongly restrict and/or increase your standard of living in amazing ways. The majority of electricians, plumbers, and mechanics, are in a better financial position than lawyers, doctors, and psychologists. Tuition at major universities is growing at a staggering rate at which point the earning potential of high-end degrees will be overshadowed by the debt obligations they will have to encumber in order to earn their first professional dollar.

There are memes everywhere in our society of people reaching insane levels of wealth without taking the predetermined path: make good grades in school, get into a good college, make good grades in college, get a high paying job, tolerate the job, retire, and then hope you die before you run out of money. You do not have to follow this path to make a living. Lo and behold you can actually twist and turn this formula as you see fit. I am working on that myself.

On modern video games

So I’ve finally gotten into current gen gaming after a 9 month hiatus from gaming altogether with my new job. Needless to say I suddenly feel antiquated. I was impressed by the immersive and giant worlds that some of the new games offered. From the unparalleled nooks and crannies exhibited in Batman Arkham Asylum, to the vast stretches of wilderness in Red Dead Revolver, I knew that that I was getting my money’s worth for each game.

However I suddenly realized that I simply did not have the free-time to complete these games to my heart’s content. Some games are so immense (Mass Effect 2) that I cannot even scratch the surface in the free time that I have available for a particular weak.  I find myself gravitating towards Super Street Fighter 4, Super Street Fighter 2 turbo HD Remix, and Street Fighter 3 3rd strike due to the thousands of hours I had invested in each respective title in my younger days. While I hardly consider these games “new” since they are remakes or regurgitations of familiar gameplay, they do have stellar arcade play. I wonder how long I will keep up with gaming.

It takes a long time to officially exist

So after a grueling 15 months of crazy career grinding, I have come to a point where I finally have some time to think. I’m rethinking everything I’ve been taught. I’m reshaping my perception of the world based on my experiences. I’m not sure if the blog will become anything beyond a miscellaneous smudge on the Internets. Regardless I want to continue to practice writing and practice creativity, less I devolve into something simple, like a careerist.