Why the cost of education should be marked to market

Image attribution: Lumaxart; CC BY SA-2.0

At the undergraduate level, a degree in accounting costs the same as a degree in journalism. Yet, according to the Daily Beast, a degree in Journalism is the most useless degree to have (wiping my forehead, good thing I have two degrees in philosophy!) Having said that, there is a real societal and economic issue underlying education costs. Basically, undergraduates are not getting an education marked to market, which basically means the value is not measured in terms of actual worth.

Skeptics would argue, if degree costs were measured in terms of worth, professors in low-valued fields would not work because the pay is so low. Really. Has that been proven or is that just speculation? From one perspective, life is more than just money, actually, much more than just money and some might just be passionate to share some things in life regardless of compensation. How do I know this? Quite simple, I've been writing for over five years and have a very low income.

What if education were marked to market, what then? For starters, the debt to income ratio of creative types who choose to learn about their fields would be more manageable. That isn't so bad is it? Oh, actually it is for those who only care about money. For those people, who I relate to at a substantial level, follow the smart money. Makes sense, following the arts is not typically being in the path of smart money, unless it's coming from George Lucas, Jean-Louis Gauthier, or William Shakespeare. So if you want to teach art and make a living, have a lot of faith in life. Otherwise, focus on the money ball.

There is another real economic problem to marking education to market however. Specifically, if all education costs were marked to market, only a handful of degrees would really be worth a great deal. In such case, and assuming many degrees would be valued at far less than their actual present costs, the economy would be affected significantly. For example, professors could be on food stamps, perceptions of education could lower enrollment causing the revenue of educational institutions, and the quality of educational programs to decline. If economics is the focal point, then yes, that is a big deal; but what if it isn't?

Economic models are not fool proof, and the field of economics is one of many that applies mathematical formulas to sociological constructs.  This is why economics is not considered a science, and what is not scientific is not absolute, therefore economics is not accurate. Also, measuring worth is not quite that simple as a survey of the career paths of thousands of former students would need to be tracked to create any sort of statistical significance to the valuations. It would also be challenging to isolate the exact influence education has on wealth apart from other variables such as luck, personality, motivation etc.

Even if economics were a science, which at basic levels it is, the scenario does not bode well materially. For example, Jeremy Grantham, a well known fund manager, thinks "grandchildren have no value" because of the unsustainable course of current economic practices according to John Elkington of the U.K. Guardian. Indeed, Grantham has clearly illustrated that constant growth is impossible with finite resources and demonstrates this using simple mathematics. This is reiterated by Henry Blodget of Business Insider who summarizes Grantham's reasoning as essentially this: "One cubic meter of possessions at a growth rate of 4.5 percent per year for 3000 years is equal to 10 to the 57th power."

The economy is a fragile mechanism that millions of people depend on to live and thrive. That's no small potato in an existential world where 'actual living' is a legitimate concern. In such case, humanity and common sense draw lines where economics might not. Specifically, minimum values of educational worth similar to minimum wage of labor. Makes sense doesn't it? No degree is worth nothing, and everybody is on Earth for a reason, so why stand in the way of life when it such a good thing? In other words, undervaluing education is just as bad as overvaluing it because it slows progress, and decreases the quality of education. 

Tips for financial planning in your 20s

Anyone in their 20's who are thinking seriously about financial planning may be ahead of the curve in one sense, but it's probably just as realistic to realize there's lots of time to worry about financial planning later. However, ridiculous financial planning might seem in the 20s though, it can do wonders later in life.

Perhaps it's a good idea to think of it like tickets to the Super Bowl or a really good concert, both of which require just a little advance planning. Financial planning in the 20's is different from that in other periods of life. Risk, fun and experience are often more typical pursuits of '20 somethings', and responsibility, fiscal discipline and end of life savings are not always a high priority.

Investing, and debt management are two of the major part of financial planning in the 20's. What's more investing in the things one loves is a good way to invest in the 20's, after all what 20-29 year old doesn't like spending money, and some 20-29 year olds might simply dismiss the word 'retirement' as a meaningless concept that applies to old people only.

To spend 'right' in the 20's requires just a fraction of the amount of time spent studying for a test or time spent with friends or playing sports etc. By doing this and thinking about what to buy well, one is generally helping oneself prepare a better future. This article will illustrate a few ways to 'buy right' i.e. invest in things that are fun and fiscally prudent at the same time, in addition to providing investing and debt management tips.

Investments for the 20'S

• Automobile: Automobiles can be more than just an exciting way to get around town, they can also be wise investments if chosen well. Certain vehicles including some used cars such as the Subaru Outback, Honda Accord, Mini Cooper and Toyota Prius all retain their value well according to research from CNN Money. Vehicles that retain retail value over time can also be dependable, and long lasting in addition to bringing back a decent resale price. Also, such vehicles may be used to help finance other things such as tuition loans, and asset backed mortgages.

• Education: A well chosen education can lead to a promising career that earns many thousands a year. Even though the upfront cost of education can be expensive, it is still an investment and can pay off in the future. The more the education chosen is in demand, the greater the potential return on the investment.

• Time: Time is a commodity in the 20's just like any other decade of one's life. Investing one's time in the simple act of thinking about investing is an investment. Not only can this build an awareness of money but time spent in employment yields cash. Cash, as everyone knows, can do a lot of things.

• Home: Home's that are located in working class neighborhoods and that need a little work can be affordable to a working 20 something. With as little as 2% down-payment and a steady job, a home in the 50K-100K range diverts rent money that would probably be paid anyway into a home that may appreciates in value and save capital. Most people have to live somewhere, so why not make a home out of it.

• Individual Retirement Account (IRA): Open one of these and throw away the key, just getting one is an accomplishment in the 20's. If this can be achieved, don't worry too much about meeting the maximum annual contribution, a few year later one might thank oneself and start contribution more to an already set up account.

If the above investments can be accomplished by age 29, one may be on track to bigger, more retirement related investments. It really isn't necessary to save for retirement in the 20's, but it is a good idea to invest in something. The following tips may help one focus on things like where to come up with down-payment money for a car or house, how to find good jewelry and a good education.

Investment and debt management tips for 20-29 year olds

• Save 5-10%: Just do it. 10% of one's beer money, music money, movie money, clothes money etc. can translate to 20% down the road and it doesn't hurt that much. This 5-10% can be used to fund an IRA, a down-payment on a good car, or any other kind of investment.

• Avoid Credit Card Debt: It may not seem a lot at first, but credit card debt can pile up before long. Pretty soon afterward, debt can get out of control.

• Transfer Credit From Community College: Since community colleges are cheaper, it can dramatically lower the cost of a University education to transfer credits from a community college.

• Live at Home: Living at home may not be ideal, but just a year or two of living at home while working can lead to potentially large savings especially if the parents don't charge full or any rent.

• Talk with Jewelry Appraiser(s): Chatting with Jewelry appraisers who love gems, and precious metals can be interesting and informative. They can inform one of the best jewelry and where to get it. Theoretically, any jewelry is an investment, but some jewelry can be a better deal and hold value better.

• Surf the Internet: The Internet has lots of car listings and automobile advise. Searching for a list of cars that retain value will help one buy a 'set of wheels' that last a long time and keep their value. Not only could such a car cost less in maintenance, it could pay back a little when it's time to trade in or sell.

• Ask Parents: It's not always fun asking parents for advice, but they do know things sometimes. If one grew up in a house, a parent may be able to help with understanding the mortgage process and what is required. Mortgage loan officers at mortgage banks can also provide details of what is required.

Financial planning in the 20's involves investing, debt management and a little fiscal responsibility, but the responsibility doesn't have to be painful and it may be a benefit down the road. Sometimes in the 20's or 30's life might have a few unpleasant surprises, the dream job may not pull through, one's plans may not turn out as expected. By investing and thinking about investing, one is preparing the mind for the future of life.