“Dear parents, I am fully aware that money doesn’t grow on trees.
Sincerely, that is why I’m asking you for it.” ~ Anonymous

Richard Ziemski

With regularity our media rings alarm bells about student debt. The lament, often sensationalizing in nature, leaves us with discomfort and guilt over these graduates who apparently struggle hopelessly under the burden. Phrases like “spiraling costs” and “mountainous debts” create visions of a generation of Canadian students in unprecedented financial hardship. Add to this the pictures of protesting Quebec students, and we are surely in a crisis. Or are we?

Recent reporting with a more contrarian view has addressed the issue of misleading media references to student debt. Analysis of government and other studies serves to dispel the myth that most students are in debt, showing that nearly half of graduates had no debt at all. As well, approximately one quarter of those graduating with debt hold most of the debt; on average $27,000. It seems that the perceived crisis may be narrower than often presented and also might be the result of factors other than the alleged unprecedented “spiraling costs”.

It is 1969 and a young man (unnamed to not embarrass the writer) graduates from McMaster University with a $4,500 student loan. Other than free room and board at home in the summers, he has paid for his education with summer and part time work. An average annual starting salary after graduation at the time is $7,000. His debt amounts to 64 percent of gross wage. This ratio taken today assuming a debt of $27,000 and average starting wage of $40,000 is 67 percent and is relatively comparable.

Years later, a postmortem of the circumstances and factors behind this debt revealed no unprecedented “spiraling costs” even though media alarms were common then just like today. There were however a couple of uncomfortable personal truths behind the creation of this debt; namely a failure to budget/ manage money properly plus a sense of entitlement:

• Purchase of an used red MGB sports car $1,400
• Speculative stock buy on advice of a professor (an asbestos mine!) $1,000
• Ski trip to Mt. St. Ann, Quebec $500
• Steady girlfriends and pubs (guys paid in those days) $1,600

Human nature is often not unique and I would venture a bet that dissection of today’s student loans in that “one quarter group” would reveal many cases of self inflicted excessive borrowing related to our two culprits: poor money management and a sense of entitlement.

Good parenting means preparing our kids to stickhandle their own way in life. To ensure university is the right direction, a parent needs to ask some hard questions:

• How badly do you really want a university/college education?
• Are you sure you’re not just in need of leaving home?
• Are you ready to make the sacrifices necessary for this investment in yourself?
• Are you willing to learn money management and to stay within budgets?
• Are you ready to put “some skin in the game” by paying your own tuition?
• If necessary can you accept a lower living standard than at home? (No iPhone 5?)
• Does cheap beer make you throw up?

W. R. Ziemski, C.A.
Management Consultant
rickziemski@cogeco.ca
www.linkedin.com/in/rickziemski

“We didn’t actually overspend our budget. The allocation simply fell short of our expenditure.”

~ Keith Davis

Most of us would agree that adding some “spice” to warm up a marriage is good, but if you want a sure way to overheat it the wrong way, just ignore the issue of sound money management and watch what happens. Couples that know this lesson first hand and also those avoiding it are turning to financial experts for advice.

Much financial advice is sound. However, beware of both the weak and the self-appointed breed of financial experts who lack adequate experience or skill and may not be subject to any uniform professional standard. Backgrounds can be varied and often riddled with conflict of interest, so pre-caution is mandatory. For those seeking advice, my advice is to look hard at the individuals behind the advice.

Some of the more useful advice on money and marriage from both personal experience and that of others rolls up into one hand:

1. Early Dialogue

Frequently, the same courting couples that intimately discuss personal interests, family, religion, sex, child rearing, blood types etc., will not mutter one word about personal finance. It’s almost like talking about money and marriage is the ultimate insult or deal breaker. Well, you need to get over it. Family finance is highly integral to the success of all marriages and unfortunately is today a leading source of marital breakup. So put the conversation at the front end of your screening process and if it kills the romance then consider yourself lucky. It probably saved you from some longer term grief.

2. Financial Literacy

The overall level of financial literacy in Canada has proven inadequate and a key contributor to poor personal financial hygiene. It’s also true that financial matters have become much more complex and it is very difficult for the average person to go it alone without financial advice. Nonetheless, like learning to brush teeth, it’s incumbent on us to establish a base understanding of financial matters. Couples must commit to this learning.

3. Long Term Goals

In the romantic pursuit years people often share life dreams with prospective partners. These dreams make excellent seeds for developing goals which, in turn, are fundamental to financial planning; both long-term strategies and short term budgets. It’s a very naturally flowing process. Whether you want to be an Olympic equestrian medalist or raise a family of six, there is always a financial impact. If you translate your dreams into a good financial map, they can be realized and shared comfortably within your marital partnership.

4. Sense of Discipline

Maybe you’ve noticed that “nature” is all about balance, including the way we humans live our lives. Unfortunately, achieving life balance is not possible without discipline. If we eat too much of the wrong food we will get fat and put our health out of balance and at risk. Likewise, excesses in spending money will imbalance and ruin financial health. Typically money is always a scarce resource, so both partners must exercise financial discipline. Remember that you can only spend or save what you earn. Those of us who ignore discipline and don’t leave our personal sense of entitlement at the marital doorstep will risk becoming irresponsible partners and will contribute to an unhappy marriage.

5. Proper Financial Structure

For the best financial structure many advisors follow the “whatever works for you” thinking. My view is why grope around re-inventing wheels. Take a page from business structures:

1. Combined simple structure with all financial activity transparent
2. Proven software: Quicken recommended
3. Simple joint banking with one of each; chequing, saving, credit card, credit line
4. Proven process; annual balanced budget, monthly reports and review meetings

Richard Ziemski

Ok, now let’s go out for dinner————————-spicy of course!

W. R. Ziemski, C.A.
Management Consultant
rickziemski@cogeco.ca
www.linkedin.com/in/rickziemski