What is “SMART” debt
“Smart” debt is defined by lendingtree.com as debt that helps you financially. Student loans and mortgages have always been thought of as being smart debt. For our discussion this week we will stick with student loans as the topic of mortgages deserves its own article next week. If you want a great lead into living debt free as much and as often as possible check out last week’s discussion.
The cost of education
Post secondary education is expensive to say the least. According the Government of Canada a four year program costs on average $66,000.
There is tuition, textbooks, living costs such a rent and food and costs of entertainment. It’s difficult to fund education when many students are unemployed and their parents are either unemployed or employed but overburdened with their own debt.
Let’s not get started with the cost of post secondary education in the United States; it is a far worse off situation. If you’re interested check out the fast facts from the National Center for Education Statistics.
Are there any guarantees anymore? Used to be you could go to university or college and walk out with a job. Parents pushed children for decades to get a post secondary education. It was the holy grail for youth, the promise of a great investment and good careers awaiting them in their fields.
Unfortunately this does not hold true in all cases. Students are forced to work multiple part-time jobs until something more permanent opens up. Furthermore many graduates head back to school because they could not find employment in their first field. Others head out of the city, out of the province and out of the country to find employment. Take teachers for example, many have traveled to the south of Asia to find work teaching English.
Not so “SMART” debt
If the idea is to head off to university or college, get a degree and find a job in that field and the plan fails was that a smart decision?
Not all failures in the plans can be predicted however youth are lead into believing post-secondary education is the end all strategy to having the North American dream. Youth need to get smart and take a look ahead. Take a look around in your circle of friends and family and you will see what we are talking about. Pouring money into an education hoping for a great future is not smart.
Solution One: Look ahead
Look ahead to when you will be graduating and make a determination what the employment landscape will look like. Yes you do not have a crystal ball and you are not an economist but you have a brain that functions and you can speak to people in those fields.
Talk with employers who have decision making authority in the industries of your interest, see what they say about where they will be at in four years and where the industry will be. The good ones will have a decent understanding of this and in my experience enjoy sharing their knowledge with a new comer as they were once there themselves.
Starting early is also important; it gets you in front of employers and gives you an opportunity to build a relationship. When the hiring time comes you’ll be recognized more quickly than the competition!
Also you may come to find out the area of your interest though a passion of yours has no viable employment in your area and you may need to look elsewhere or find a degree that gives you a better opportunity.
Solution Two: Transferable skills
I’ve heard this term drop from our vocabulary over the past number of years. Skill that can be taken from job to job are transferable skills. Post-secondary institutions generally do not teach transferable skills, all the focus is on theory. Some of the top transferable skills that come to mind are:
- Dealing with people in various types of situations
- Being able to effectively utilize time
- How to focus on getting done the right things
- Completing the job done efficiently
Solution Three: Start early
Yes we have all heard it before but starting early involves making the right connections in the field of your desire and acquiring the skills potential employers are seeking.
Remember youth are not only competing with those in their local area but those across their countries and around the world. Here are ways to start early:
- Enroll in a cooperative education course while in high school. These programs are great to get some experience and start to develop transferable skills. Utilize this opportunity to finding out whether you’ll like the job and career!
- Work during your high school days. Your time is limited between school, work, and friends and the rest of life. Learn how to determine how to get the right things done and to do those things efficiently. The money earned goes a long ways to reduce debt early in life which lets you start on the ground when you graduate.
- If you cannot find a job go into business for yourself! In Ontario the government is throwing money out there for youth entrepreneurs. Starting your own business may be the best experience of your youth. Set your own hours, have no debt when starting the business, start to develop many great skills and make some good money. This gives you a wonderful opportunity to try your hand in the industry you love without a lot of risk. With government sponsored entrepreneur programs low risk and high reward isn’t too good to be true.
Solution Four: Be SMART with your education
Students should not be bothered with overpriced education. Forget about Ivy league schools. You can receive a good education at a better price going elsewhere. Later on in life you’ll be ahead of them financially in life while at the same career level. Other respectable schools have excellent entrance scholarships so get your marks up and you’ll have already earned some dollars!
Smart debt has changed over the years and we can see it is no longer universal for everyone. As with the case with making money work for you, you need debt to work for you so be SMART about it.