Look Mom, I Graduated! Now What?

The Class of 2009 is graduating into one of the worst job markets in decades. Lot's of articles are being written on the subject. What are the job prospects for these new graduates? If they have the means, many will go straight to grad school. Others will look in fields they otherwise might not have considered, like education. That could be a good thing. The bottom line is, they'll have to get on with their lives and do something. It's a bitter pill to swallow after years of hard work, but sometimes life doesn't work out exactly the way you planned. My husband likes to say that life is like a wheel, sometimes you're on the top and sometimes you're on the bottom. It's tough coming out of school into this market, but maybe learning to overcome adversity and pull through isn't such bad training for the road ahead. Just keep your eyes on the road.

I graduated into the recession of the early 80’s. I had a ream of rejection letters from every bank and Wall Street firm out there (most of which no longer exist, like Manufacturers Hanover and Chemical Bank, as a result of 20 years of consolidation). I got by tending bar and waiting tables. Ultimately, I went on to get my first job in my field, and my career got rolling. In tough times like these, take whatever job you need to in order to get by, but here's my 20-20 hindsight advice about what to do while you're treading water:

• Plug into networking opportunities in your industry (these 3 are great for women in financial services The Women's Bond Club , 85 Broads and The Financial Women's Association).
• Go to industry events to learn about what’s going on in your desired field as well as make connections.
• Do volunteer work, it’s also a great way to network while doing something productive.
• Read, read, read. Newspapers, magazines, the latest business books, all of these keep you abreast of the latest trends, what's happening in the economy, what the "new new thing is". I highly recommend Outliers and The Tipping Point, both by Malcolm Gladwell. Also, Who Moved My Cheese by Spencer Johnson.
  
• Lastly, tap your school’s alumni network to the fullest extent. Those of us who’ve been there and done that, love to help young grads.

What do you think? Please post your comments.

Enough is as Good as a Feast

This is my favorite line from "Mary Poppins". Sometimes we glean wisdom from the strangest places, but good economic sense rings true wherever we find it. How much is enough? From a career perspective, it's always current compensation + n. At least in my industry, but that's not the focus of this post.

At the heart of our current economic woes is leverage. Using leverage to spend more than we earn, and losing sight of the difference between what we want and what we need.

So, how much is enough? This question can be applied to so many aspects of our day to day life. How big should a restaurant portion be (seriously, does anyone need a half pound burger?)? How many game systems does a kid need? How many pairs of jeans? How big a house? How fancy or big a car?

I made my children wait a very long time before I finally bought them a PS2 a few years ago. They have a few games. Maybe they get one at Christmas, but that's about it. Until they were teenagers, I refused to buy anything rated "mature". No one became a gaming addict. I was shocked to learn from my boys, that a lot of their friends had all the systems. Why? No wonder they spent all their time playing video games! How much is enough? How can a child learn about making choices or deferred gratification if they've been taught that they can have one of every flavor?

How many pairs of jeans, or handbags, or shoes are enough, and what kind? Does a kid really need 5 pairs of jeans, one for every day of the school week? Will they suffer permanent social outcast status if, heaven forbid, they wear the same pair twice in the same week to school? My family owned a clothing store, so I never wanted for nice clothes. Still, my parents impressed upon me that they still had to pay wholesale to the business for our clothes, so I got what I needed rather than anything I wanted. My father grew up during the depression, and while the family owned a business and was in good financial shape for the times, he wore the faded clothes from the store window. I cringe when I hear about people charging clothes on credit cards, and paying them off over time. Much too much focus on who has what kind of clothes! Don't get me wrong, I love fashion as much as the next person, but I couldn't sleep at night if I was in debt for it. Like my mother used to say: "if it's clean and paid for, it's no body's business".

No discussion of today's economic troubles can skip the how big a house question. This question really has a few parts. How big? What needs to be in it? Is owning always better than renting? Again, how much is enough? A few decades ago, families were frequently larger than is typical today, but they often managed to live in much smaller houses. I've met people who were one of 8 or 9 kids who grew up in modest Cape Cod houses with one bathroom. They turned out fine, and I don't think anyone went dirty. They learned to share, and how to wait their turn. Both excellent attributes. Over the past decade, there has been an explosion of home decorating shows on TV. They've raised the bar to a whole new level in terms of what amenities a house should have. Granite countertops, stainless steel appliances, marble bathrooms, all "necessary" if you want to maintain your home's resale value. Do you need these things? Really? These things are nice, and you might enjoy living in your home with them, but if you can't afford to pay cash for them then you can't afford them. So then save up for them, right? Unfortunately, that's not what happened. Deferred gratification went out the window. Enter the Home Equity Line of Credit (HELOC), and the Mortgage Refinancing with Cash out. Take out a second mortgage on your house? Sounds scary, but that's essentially what a HELOC is, just sugar coated. Refinance your mortgage, and take out your equity to spend on home decorating? I refinanced my mortgage twice, once from 30 years to 20 at a lower rate, and then again from 20 to 15 years at an even lower rate (always fixed rates!). It never occurred to me to sign up to pay more for longer! This of course explains why there are now so many people who once upon a time bought houses they could afford, but now have much bigger (now underwater) mortgages and are in deep trouble. They do, however, in many cases, now have granite counter-tops, wall mounted flat panel TV's, and restaurant grade appliances. None of these will be much consolation if they lose their house. I'll save "should everyone own?" for a future post.

I'll return to my basic premise that you can't spend more than you earn. HELOC's and Refi/Cash-outs are just another example of invisible money. Money, whether visible or invisible, still has to be counted. Borrowing more than you can afford to pay back on a bet that the collateral you put up will keep rapidly increasing in value is just what it sounds like: gambling. This makes a lot of Main Street an awful lot like many on Wall Street. Think about it.

Bottom line, Mary Poppins had it right. Enough is as good as a feast.

Postscript: I had to come back to this article and post this link to an article in today's New York Times entitled "Losing Its Cool at the Mall" http://tinyurl.com/c7wblw, a very interesting piece on the changing spending habits of teens (reported to be down 14%). Although this is bad news for some retailers, particularly Abercrombie & Fitch which is featured in the article, it's good news in terms of growing economic common sense in the teenage population. Is it fleeting?

A World of Invisible Money

I was raised by a very fiscally responsible family. I was taught the value of hard work, saving, and most importantly, deferred gratification. When I started raising my own family, I somehow assumed that my children would glean, by osmosis, the same money sense I had gleaned from my parents. But as they grew up, I realized that this wasn't happening. And it wasn't just my kids that had no concept of financial reality, it was other kids and younger colleagues, too. What happened? I pondered this for some time. I had set a good example for my children. I worked hard, saved, lived within my means, shopped frugally, and had no credit card debt. Then one day it hit me when my very bright 16 year old daughter asked me if she could deposit cash in the bank. I was dumbfounded! At first I couldn't even grasp what she was asking me. What's the bank for, if not for depositing cash? How could my bright, beautiful daughter who'd come to the office with me since she was small, who'd travelled with me on business trips to Europe, who knew there's always a breakfast buffet at a hotel and that you can call the concierge if you forget your toothbrush, not know that you could deposit cash at the bank? Then she told me. "Mommy, I've never seen you deposit cash". She was right. Why would I? My paycheck is direct deposited, and aside from depositing an occasional birthday check, I never go to the bank. Money has become invisible. It goes electronically to the bank from your employer, and comes out magically when you put your ATM card in the machine. Even better, now we all just pay with our debit cards, so we barely touch cash.

Before I go any further, let me make it very clear that I love technology and the convenience of direct deposit and debit cards. To me, the best part about debit cards is that I don't need to carry cash or write checks, and they are not credit cards (which I knew from an early age are bad, but that's another post).

When I was a little girl, I had a passbook savings account. I learned to deposit the 50 cents a week allowance I got, so I could save up to buy things. When I was 8, I started working in my father's clothing store for 25 cents and hour. I deposited my earnings in my savings account, and learned that every month you got a bonus entry in the passbook called interest. My father used to send me down the street to the bank with a green pouch to deposit money from the store in the bank (unbelievable in this day and age, but that was small town America in the late 60's and early 70's). Okay, this is all very nostalgic, but why does it matter? It matters, because I saw money being earned, counted, deposited in the bank, and earning interest. Money was real, tangible, and visible. You earned a finite amount, and you could spend a finite amount. The money you had in the bank was the money you put in the bank. A simple equation.

How did our economy get into so much trouble? While it makes good populist TV to blame greedy Wall Street fat cats (and there were some), the bottom line is that too many people lost sight of that simple equation. You can't spend more than you have. Invisible money is fine, and very efficient, as long as you learn that behind the scenes is real money that has to be counted and kept track of. The challenge now, is to teach an entire generation how to keep track of their money and determine what they can actually afford. But that's the stuff of future posts.

If you have stories about how you learned (or didn't learn) about money while you were growing up, I'd love to hear them.