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The following is a guest post from AJC of 7million7years.com. He only recently started blogging but he’s already one of my favorite daily reads. If you’re the type who likes RSS, you can subscribe to his blog here.

People often ask me what it takes to be an entrepreneur.

Probably the best book that I can refer you to is the E-Myth Revisited by Michael Gerber … it has changed many business owners’ lives (including my own).

In it, he shakes the myth of the entrepreneur being some sort of ‘knight on a white charger’ - you know the type, like Jack Taylor, the founder of Enterprise Rent-a-Car who was a navy pilot in WWII then went on to launch Enterprise in 1957, taking it to $78 million revenue (it’s now a $7 billion company!) before handing the reins to his son, Andy in 1980.

Here’s how Andy describes his father:

“My father was the true entrepreneurial risk taker. He was the guy flying airplanes off carriers. He did not see taking a $25,000 second mortgage to invest in a business as a huge risk, because he saw real risks being taken during World War II.“

There’s no doubt that adversity makes for better entrepreneurs … adversity gives you a ‘nothing to lose’ attitude.

Contrast that with the educated middle-to-upper-middle class …

… once you finish college and put in a few years learning the corporate ‘ropes’ it’s very hard to let go of the comfortable $50k - $150k that you are earning (and that your lifestyle has magically jumped up to meet … you know: cars, toys, vacations, etc.) to jump into a business that all the odds point to going broke.

You see, that education that we strive for, to lift us out of the middle-class, actually serves to keep us there.

After 6 years in the corporate world, I was bitten with the ‘entrepreneurial bug’ so badly, I was miserable every day that I was still at work after that little epiphany (I used to LOVE my job until then).

Yet, it still took me 4 years to leave …

If I was still working, no doubt I would be well on my way to saving $1 million or maybe even more by the time I retire at 65.

But, from where I now sit that seems WAY too little WAY too late …

photo credit: Môsieur J.,  …selected by Steve

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Oh, young mind, how we envy you! The world is your oyster, and who doesn’t like oysters? Here you are, venturing out into the world. Freedom, independence, adventure are all just around the corner! Mom’s not there to do the laundry anymore, but who cares! Nobody will yell at you when you sleep til 2pm on a Tuesday. Nobody will be waiting to make sure you do your homework instead of watching Sucker Free Countdown. Bliss.

Unfortunately, the boogeyman is out there too. You have to generate some income to pay for the things you took for granted in your home. Yes, of course, the luxuries of shoes, Wiis, ironically detached rock band t-shirts and overpriced notebook computers used primarily for Facebook, but also items you didn’t realize were so horribly expensive while Pops was paying for them - milk, cell phone bills, iTune downloads.

So here are 10 things to remember for the new graduate, about to head off to college.

1. You need to hit the ground running. If you have scholarships and grants, great. You’re already ahead of 90% of the US student population who finance their education with loans. Don’t blow it - make keeping those scholarships and grants your #1 priority, even if it means giving up the Alpha Beta Delta Wednesday mid-afternoon Beer Bash.
2. Please don’t think life is going to be easy majoring in Spanish (for example) and graduating with $50,000 in student loans. Go ahead and do it if you want to - there is something to be said for following your dreams - but I’d think strongly about making some good connections and giving some hard thought to how you’re going to use that Spanish degree, considering about 30% of the US speaks it better than you even after 4 years of study.
3. Party, but not too hard. There is a fine line between making friends, enjoying life and gaining experiences, and lying in the toilet stall with your shirt covered in puke at 3 am in the morning.
4. Spend a lot of time on the Internet learning useful skills - make a blog, set up an online store, learn website design, etc. Do not spend a lot of time playing vampire tag or sending movie messages on Facebook.
5. Don’t play video games. I’m serious. I see this as an immediate and massive threat to your development rivaled only by television. Get out and interact with people - you will never have such free time and so many people ready and willing to sit around and just talk about anything you want! Trust me, you’ll have plenty of time to play video games when you are older.
6. Join organizations. Hanging out with your friends in college is great. But join organizations that will force you to meet people you otherwise might not meet. Join intramural sports. Join interest clubs. Get out and participate. Don’t just hang with your friends in the dorm. And don’t stop joining even after you finish college. There are a lot of interesting ways to meet people that don’t involve a keyboard and an IM account.
7. If a class looks interesting, take it. I was a mathematics major and most of my “extra” courses were Russian, German and linguistics courses. But at the same time I threw in courses on “leisure and pop culture” (about the groupies who follow the Dead, George Jones, Jimmy Buffet, etc.) and economics (because I find economics fascinating). Mix it up. You will find out what you love and hate, and that’s useful to know.
8. Get a credit card now. I know that’s odd advice considering how much trouble people have, but get a credit card and start building a credit history. AND PAY THE WHOLE BALANCE EACH MONTH! I know many people who are in debt today will say “easier said than done,” but learn to pay the whole balance each month. I did. Friends of mine did. It can be done, just like quitting eating junk food. Now is the time to set your habits in regards to money. If you can’t pay off the full balance one month, freeze the card in a block of ice or cut it up. When you pay it off, lesson learned (right?), you can start using it again.
9. Don’t buy any furniture or appliances that you can live without. You will have plenty of time to buy a blender when you have a home. As a college student, you need a bed, a chair, a desk, a microwave or a hot plate, and a fridge. Stop. Don’t buy anything else. Scavenge. Spend your money on decent food for your health, or to have extra money saved up. I scavenged bits and pieces of stereo equipment people put away for my stereo. I had an old black and white TV. I knew that all of the furniture was going to be abused beyond belief (I lived in a fraternity). Nothing I owned in college stayed with me past my first year as a working man, so I’m glad I didn’t spend anything on anything, practically.
10. Live life to the fullest! Think about this: you are at the apex of human development. You are living in an age when change has become exponential rather than incremental. You have won the “birth lottery” by being born in the West in the late 20th century - by attending college you are amongst the best educated, most privileged and luckiest people to live on this planet in human history. DO NOT WASTE THIS TIME! Have fun, play hard, study hard, meet people, spend hours talking about life or love or hopes or politics or whatever you want. But most importantly, be aware that you are in a position that 6 billion people around the globe would die to be in. Seize that opportunity and squeeze it ’til you shake out every last drop.

Yay, graduates!

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Patrick, of Cash Money Life fame, has tagged me to give my best financial move in college. This “organically growing” meme was started by plonkee. The first part was posted yesterday.

Best Financial Move In College #2: Learning an “exotic” foreign language.

If you read this blog, you probably know that I’m a Russophile. I lived in Moscow for several years, I can read/write/speak Russian fairly comfortably and my wife is Russian. Key the computer geek theme music: I mentioned that I was a finalist in the International Science Fair: I wrote, in Basic on a Tandy Color Computer with a cassette-tape drive, a very primitive artificial intelligence program that reliably translated English into Russian, grammatically correct. I even had to develop the Cyrillic font. I did all of this after buying a Russian grammar book at a public library for $.10 and using it to set it up - I didn’t know Russian at all.

Anyway, after the ISF my interest in Russian waned. I always joke that my ancestry is German with a little German mixed in. Even though the Original Blap Ancestor ventured to the new world in the 16th century, my paternal ancestors clung to German ways and traditions and language. And I mean they clung. To the best of my knowledge, my dad was probably part of the first generation of Blaps to speak English at home rather than German. So in high school and college I had a strong motivation to take German, and I did.

But I always liked foreign languages. I took French and Latin as well and decided in my sophomore year that Japanese would be a good challenge. Keep in mind that this was the mid-80s: Japan appeared to be well on its way to becoming the dominant economic power of the 21st century. We know now, in retrospect, that Japan’s economy tripped and stumbled and has never really recovered, and China and India are now careening past it, but at the time it seemed that Japan might become an economic superpower at a minimum and THE economic superpower if everything fell right.

I decided to take Japanese. It was a new course at Hometown State - only one class was offered. So on registration day I woke up and strolled over to the registrar only to find that it had filled up in minutes and no slots were available. I was disappointed, but I still wanted to take a language. I thought Spanish might be useful, but boring (I didn’t care for French when I learned it - romance languages don’t appeal to me). I skipped through the catalog until I saw Russian and remembered my little project at the ISF four years earlier. And best of all, it was at 10 am so I could sleep late - back in college I had yet to discover the benefits of waking up early.

Russian was fantastic. The teacher was a guy straight out of PhD school, passionate about the subject and the culture. He invited his students to his home, showed us Russian movies, introduced us to actual Russians (quite the novelty in the Deep South in the 80s, let me tell you) and managed to get Russian food. I loved the intellectual challenge of the language - a different alphabet but more importantly a language completely removed from the European languages’ interrelationships.

So why was this a good financial move? I’ve already mentioned it in 8 steps to a six figure career, but here it is in a nutshell: it gives you instant credibility as a smart person (deserved or not). Employers and contacts and almost everyone I meet expresses shock that I can speak Russian, read it and write it. I don’t think it demonstrates much intelligence, personally. Language acquisition is more of an inborn skill, I think. But I do think that learning Russian demonstrated some intellectual curiosity and the fact that I stuck with it indicates some intellectual discipline. I have benefited hugely in my career from knowing Russian. It meant that I was plucked out of obscurity as a junior staff member of a Big 6 (now 4) accounting firm and hurled into the middle of the mid-90s Russian economic explosion. It opened up opportunities I would never have had as just another staff person.

But that’s not the biggest part of it. Without developing my Russian skills I wouldn’t have met, pursued and married my wife. Maybe if I had taken Japanese I would have lived in Japan, developed a fondness for all things Japanese. Hard to say. But I do know that the decision to learn Russian set in motion the life process that brought me to where I am today: with a wife who is focused on the same things I am, personally and financially. So that’s actually the single biggest reason why that was a great financial move.

So what was your best move?

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Patrick, of Cash Money Life fame, has tagged me to give my best financial move in college. This “organically growing” meme was started by plonkee. This will be a two-parter because I didn’t want a post that looked like a short novel…

I have what might be an “unallowed” answer, so I’ll give both of them. One of them had a huge impact, one of them had less of an impact, but both were important long-term decisions.

Best Financial Move in College #1: I attend a public university.

I will be as clear as possible about this: my choice of college has made more of an impact on my financial life than any other decision I have made. A little background: I was a good student in high school. I was class valedictorian, I had high scores on my SAT and ACT exams, I was a varsity athlete. I had received a full scholarship to attend school in Germany as an exchange student; I was an International Science Fair finalist; I had clubs and academic honors and extracurriculars out the yin-yang. I applied to a fairly wide spread of colleges, ranging from my hometown state university to small private liberal arts schools (one I really liked I’ll call Tiny Private) to well-known-very-good-but-not-Ivy schools (one of which I will call Regional Private) to the big grandaddy of them all, Harvard.

I got accepted to every one. I got scholarships to every one. I got tennis scholarships, academic scholarships, etc. etc. However, many people are surprised that anyone who was accepted to Harvard would turn it down. I did. I applied to Harvard on a whim, with no serious intention of attending even if I was accepted. I sent in the application on the deadline date. I started the application, handwritten, in black ink and when that pen died I finished in blue ink. I did it because one of my friends told me there was no way I could get in, and I took the bet. I had no intention of going there. I actually had my mind set on Regional Private - and received a full scholarship there, too.

But one school was ferocious in their recruitment - my hometown state university, which I’ll call Hometown State (for obvious reasons). They were relentless - they gave me not only a full scholarship but they swamped me with calls, meetings with academic deans, calls from alumni, even additional scholarships to cover the costs of books, fees, housing, and on and on. Part of this was due to my dad’s relationship with the university, but a lot of it was simply because I was well-known there already - friends of mine had parents who were professors or administrators or otherwise associated with the school.

I visited Regional Private School and detested the people I met, who were condescending and intellectually dead rocks. Harsh, I know, and maybe it was bad luck, but as a multi-generational legacy (I would have been a third-generation student there) but I couldn’t stand it on multiple visits, including a “new prospects weekend.” I toyed with attending a few other schools, including Tiny Private, but I decided the cool atmosphere didn’t make up for the fact that nobody had ever heard of them or that the academic and social programs were limited.

I decided to go to Hometown State. It was the best decision I ever made financially, for one reason: I actually made a profit attending school. After tuition, fees, books, fraternity dues, food, everything I made a profit. I got a bachelor’s degree and started day one of my postgraduate life with money in the bank and no debt. I think (although I don’t know) that even with full scholarships at Tiny Private or Regional Private or Harvard I would have had enormous expenses not covered by tuition scholarships. My parents would have covered many of those expenses, I’m sure, but I would still have struggled.

I have never regretted attending Hometown State for a minute. To this day I point to that as one of the best decisions I ever made. I loved college. I did well academically. I was again active in all sorts of things: club sports, varsity lacrosse, a fraternity where I was pledge trainer, social chairman and rush chairman at various times, and interest groups from a Russian-language club to political organizations. I did all of this without having one minute’s strain or stress or worry about how I could afford this, or how I was accumulating debt. And I have still done well in my career.

That is my “unfair” answer, since it wasn’t IN college. I’ll give my “fair” answer in my next post.

photo credit: me! an original photo!

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American kids are stupid about financial matters. That’s what a Federal Reserve study says. From the Washington Post:

High school seniors, on average, answered correctly only 48.3 percent of questions about personal finance and economics, according to a nationwide survey released Wednesday by the Federal Reserve. That was even lower than the 52.4 percent in the previous survey in 2006 and marked the worst score out of the six surveys conducted so far.

You might read this article and think that high school seniors are idiots. The survey was sponsored by Jump$tart Coalition for Personal Financial Literacy and paid for by the Merrill Lynch Foundation (ironically, since it’s obvious that the related Merrill Lynch corporation has a little bit of trouble understanding finance themselves). But look at a few of the questions and the responses - some of the questions seemed a little bit politically loaded, if you ask me:

21. Matt has a good job on the production line of a factory in his home town. During the past year or two, the state in which Matt lives has been raising taxes on its businesses to the point where they are much higher than in neighboring states. What effect is this likely to have on Matt’s job?
14.4 a.) Higher business taxes will cause more businesses to move into Matt’s state, raising wages.
18.7 b.) Higher business taxes can’t have any effect on Matt’s job.
57.3 c.) Matt’s company may consider moving to a lower-tax state, threatening Matt’s job.*
9.7 d.) He is likely to get a large raise to offset the effect of higher taxes.

(My response? The company is going to relocate the factory to Mexico and thanks to NAFTA and the Federal tax code will rob the US treasury of the wage income taxes of its workers, corporate taxes that would be paid if they remained in the States, and deprive the US economy of wages that could be spent to stimulate the economy).

And some of the responses were actually encouraging:

28. Which of the following credit card users is likely to pay the GREATEST dollar amount in finance charges per year, if they all charge the same amount per year on their cards?
16.8 a.) Jessica, who pays at least the minimum amount each month and more, when she has the money.
17.1 b.) Vera, who generally pays off her credit card in full but, occasionally, will pay the minimum when she is short of cash
18.2 c.) Megan, who always pays off her credit card bill in full shortly after she receives it
48.0 d.) Erin, who only pays the minimum amount each month.*

I was surprised that 48% of high school seniors really get it - paying the minimum is begging for trouble.

And this one was also good news:

16. Rob and Mary are the same age. At age 25 Mary began saving $2,000 a year while Rob saved nothing. At age 50, Rob realized that he needed money for retirement and started saving $4,000 per year while Mary kept saving her $2,000. Now they are both 75 years old. Who has the most money in his or her retirement account?
24.8 a.) They would each have the same amount because they put away exactly the same
11.7 b.) Rob, because he saved more each year
12.5 c.) Mary, because she has put away more money
51.1 d.) Mary, because her money has grown for a longer time at compound interest.*

51% of high school students understand the value of compound interest? I think that’s quite encouraging. I am willing to bet that a similar proportion of the adult population understands it - meaning that some people get it early on, and some people never will. I am not sure that represents a failure of education. A significant proportion of Americans believe all sorts of things (that witches exist today, that (at least in 2003) Saddam Hussein was behind 9/11 or that evolution cannot be accepted). It doesn’t mean our education system is failing, it just means that some people can’t wrap their minds around simple facts. So rather than looking at this as a glass half-empty, I look at it as a snapshot of how things are when parents and governments don’t set a good example by living within their means. If almost 50% of kids understand that they need to pay more than the minimum on a credit card to get out of debt and will have more money if they start saving sooner, I think there’s still hope. For the other 50%, I’m not sure that a personal finance class in school is the answer - the answer may be getting their parents educated. And as far as teaching personal finance in school goes, I’m not sure I want a federal government that spends well beyond its means each and every single year teaching anybody about how to manage their money.

photo credit: Cold Cut

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My family lives in an urban environment with failing schools. The schools in our city were so bad that the state seized control of them a generation ago and has never let go. The state, amazingly enough, did nothing to improve the poor test scores and today the schools in our area struggle to meet No Child Left Behind requirements and are, frankly, awful.

The result of the poor public schools has been a massive flight of children to private schools - at least, those children whose parents can afford them. Most of the schools break down into two types: secular schools (Montessori or similar) or Catholic. No other private organizations has the community presence to set up any substantial schools (i.e. there are no Baptist or French or Jewish schools). Starting in high school the options become a little better - some of the public city high schools are good enough to compete with the private high schools.

But the problem remains that the schools at the pre-K to 8th grade level fall into one of these three categories: failing, unsafe public schools, dramatically expensive specialty schools and moderately expensive Catholic schools. When I say dramatic, I mean dramatic (feel like paying $1000+ per month for half-day kindergarten?) and moderate is only moderate by Northeastern standards ($600-$700 per month for a full day of day care).

I have posted a number of times on my opinions of the benefits of stay-at-home parents. But a few months ago Bubelah and I decided to send Little Buddy to a day care program for about 3 hours per day. We saw our neighbors’ kids who were a little older bored and lacking social stimulation with nannies and stay-at-home moms, and we decided he would benefit from the socialization that he could get from a short day at a day care facility. With Bubelah pregnant, it also gave her time to rest. After about three days of unhappiness and adjustment, he quickly adapted and now seems to love his teachers and the activities that are possible with other children, although he would still probably be happier at home.

We sent him to Catholic day care. Neither of us is Catholic, but this day care program met our requirements; other parents loved it, it was clean, safe, relatively nearby, and affordable for us. The secular schools generally wouldn’t even accept children who were less than three, so that wasn’t an option; even if they had been they were so expensive and so hard to get into they wouldn’t have been an option for us. The day care Little Buddy goes to is run by an order of nuns and although most of the teachers are not themselves nuns, they are Catholic and the school makes NO pretense at the religion-free environment I knew from public schools (which is ironic, since I went to schools in the Deep South - times have changed).

I am not particularly religious. I have been at both extremes; I was very religious in my evangelical Christian church in my 20s but a series of events drove me to militant atheism over the years. I have since returned to a fairly gentle agnosticism which I suspect is similiar to Unitarian/Universalism and I restrict my “exercise of religion” to an internal debate and discussion. I think anyone who wants to exercise their religious beliefs - or education - is more than free to do so in these United States. The free expression of religion has saved us from so many of the horrible conflicts that have wracked so many other countries throughout the years. Imagine Catholic Maryland fighting Protestant Virginia. I am happy to see everyone do their own thing and leave me the hell out of it.

Yet it has become very clear to me that my son - at the very early age of 2 - is picking up words and phrases and associations that are not in line with what I believe and most certainly not in line with what my wife believes. My son can already clearly identify, unprompted, aspects of the Catholic faith - which led him to proclaim to me once “Papa, look - baby Jesus!” And do not misunderstand me - I would be equally uneasy if he was identifying with Jewish or evangelical Christian or even atheistic thought. I don’t like the thought of any indoctrination at this age.

But what I really wonder is “will it matter?” My mother was raised in an solidly, uncompromisingly evangelical home, and she’s a “big holidays” churchgoer now, if that. I was intensely religious for many years in my 20s and now I am not; no one person or event changed my mind. Should I worry about the exposure to religion? Is it the overreaction of an overactive, liberal-slash-libertarian mind? I don’t believe anyone in the school is pushing religion at this age, but the symbols and the presence of the religious artifacts and songs and so on are certainly exercising some effect on my son’s mind.

Perhaps I should just let it go. The teachers are very kind, the school is pleasant, my son loves the arts and crafts and playtime with other kids. Bubelah has benefited from a rest in the mornings during her pregnancy. I don’t remember anything from age 2 myself; perhaps it’s pointless to worry. But in an era where television and computers and information are crushing our brains into perfect data-gathering machines from a young age, every small bit of data begins to appear relevant. He’ll keep going, but I’ll keep worrying.

(photo by peasap)

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