Sunday, September 18, 2016

Learning as a fundamental skill in personal finance.

If you look at the news on the glut of law students, one lesson becomes clear : there are no clear career paths with guarantees of comfortable middle class lifestyle. Engineers have always lived in this reality because when times are good, foreigners will be deliberately introduced into the economy to keep salaries and business costs on the low side. The only solution is extreme austerity, career gamesmanship and savvy investing.

Moving forward, I no longer think that my classmates are destined for a good life anymore. For even the select few who can get into the big four law firms, their constitution and resilience will be severely tested. Even with the high incomes, the glut will ensure that the legal industry remains an employer's market for the next 5-10 years. An employer's market based on my personal experience means that you have to accept the working conditions no matter how bad things get. Law students who cannot get a training certificate would have to think of creative ways to have a legal career as a non-lawyer, which can be just as lucrative if played right. Advantage will go to the more creative folks.  

This reflects a problem in personal finance, where no one has really bothered to study pre-employment issues in wealth accumulation. Most of us are stuck with the belief that we need high earnings to generate high savings before investment can even take place. 

But what enables you to get the high earnings in the first place ? In China, a vocational skills certificate enables the same pay as a graduate degree because skills are in a much higher demand in Chinese society. In Singapore, an NUS graduate can hand-in-heart expect $500 more per month than an SIM graduate. 

From this point onwards, a thought leader in personal finance must be focused on Learning as a skill.

Learning is pre-requisite to earning. In knowledge-based economies, the best learners can command the highest salaries. In the book Head in the Clouds by William Poundstone, people who can answer questions on the world history and current affairs were found to have higher salaries. But that's not all, Poundstone adjusted the statistical models to account for education and age and still found that folks who knew more still commanded higher incomes than those who did not. The differences were stark, a graduate who is knowledgeable about world affairs can command almost twice the salary of a similarly aged graduate who was not as knowledgeable. This is in spite of knowledge losing its currency in a world of search engines. 

Learning is also a post-requisite to financial independence. Once all your financial goals are met, your curiosity and open-mindedness will probably determine the quality of your life after you dispense with the need to work for someone. Otherwise it's just meaningless existence of sharing food photos and watching cat videos on the Internet.  

I am only halfway though the Poundstone book, after which I will read The Five Life Decisions by Robert Michael on how Millenials make key decision on what to study and who to marry. 

The aim is to find a way to instill curiosity into someone regardless of his/her academic talent. 

I hope to be able to have enough research material to establish Learning as a fundamental personal finance skill. 


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