Tag: Self-Improvement

Sleepwalking Into Financial Slavery

As the father of children approaching what could be termed “university age” and having naturally come into contact with the parents of their friends over the years, I am struck by how the “system” is geared up to emasculating them in a significant form of financial bondage that will influence them for most of their lives.

Their years at school are naturally geared towards learning core skills and values to equip them through their lives, eg developing their reading, writing, speaking and numeracy skills and hopefully passing examinations which will be universally recognised when they apply for employment etc.

Beyond that however, I can’t help but think that the education system is no more than a conveyor belt towards a cycle of financial slavery that few have the imagination to breakout from. This is because the whole emphasis in their final years at school or college is based on going to university. Little debate takes place on why they should go to university or what it will achieve for them. They get caught up in an atmosphere that they must go to university because that’s what their friends are doing and also all their teachers would have gone to university so they must do the same. Either that, or they don’t yet know what they want to do in the long-term so the easy way to put off that decision is to go to university.

This has also been accelerated by a shift towards university based training for many vocations such as nursing, business and public administration and journalism. These callings may have had a university level entry option in the past but the majority of entrants would have entered at “shop floor” level either as school-leavers or after a career change. In many areas this option is no longer available due to the qualification levels required or a mentality where an employer doesn’t look at an applicant unless they have a degree.

At no time do young people seem to be encouraged to stand back from this before it’s too late and to ask important questions such as “Do I need to go to university?” and “What do I aim to achieve by going to University?” There is no consideration of alternative options such as starting a small business at a time when individuals have little to lose, before they’ve also been drawn into long-term commitments like mortgages and bringing up a family.

The opportunity to start a business instantly has never been easier. The tools for starting one are right at your fingertips in the form of a laptop and an internet connection. Never has it been easier for an individual to make a good living from their passion. If your passion is “Bodybuilding” why not start a blog, write some articles and monetise it with some Adsense and relevant affiliate links. Better still, build a list of contacts and subscribers and develop or rebrand a product about it. You would then be on your way to an alternative and far more enjoyable and rewarding lifestyle. It can all be largely automated without the need for buying and storing expensive stock funded by business loans, franchise fees or paying for ridiculously expensive and unproductive forms of conventional advertising.

Despite the economic troubles affecting the world there has been little sign of it stifling the phenomenal growth of the internet. If anything, studies suggest these problems are actually contributing to accelerating that growth!

Without wishing to be critical of many well meaning and dedicated individuals, aspiring students need to be aware that the education system is an industry. It depends on large numbers going to university or further education colleges (the target in the UK is 50 per cent of all school leavers), so that these institutions can get the funding they need and the work for their lecturers to remain on the payroll.

This may not have been particularly harmful in the past era of student grants, but the financial consequences in this new era of student loans are profound. Student fees in the UK are scheduled to rise from £3,000 per year to £9,000 per year from 2012. Additionally, the typical cost of university accommodation is £900 per year (based on 3 terms of £300 per term). A typical student will therefore walk away from university with a debt of £29,700 after a three year undergraduate degree course and that is before any consideration of living costs and subsistence over those three years.

This is just the start of this cycle of a lifetime of being locked into debt. The first temptation of anyone with a low level of cashflow is to boost it by using easily available credit cards. In 2008  the UK average credit card and other personal debt (such as car loans) per household was over £8,700. (In the USA the average credit card debt per household with credit card debt was $14,750).

The next norm in the UK after finding some form of long-term employment is to buy a house. This is typically financed by means of a mortgage, usually lasting 25 years. “Google” the details and it will show average household UK mortgage debt standing at around £140,000. If that £140,000 has been borrowed at an average rate of 6% over those 25 years on a repayment mortgage, it will cost £902 a month, £270,500 in total and £130,500 in interest.

So there you have it. Two major planks of society, the education system and the financial institutions depend on this mentality of debt. It will lock individuals into clinging onto jobs they think they cannot afford to lose for fear of failing to support their families, losing their homes and having County Court Judgements against them for failing to keep up their debt repayments. With much consumer spending financed on debt, the whole system hinges on borrowing. As individuals will typically spend all of their available income regardless of its level, never has it been more appropriate to describe a job as standing for “Just Over Broke”.