Abundant Debt Loads & Business School

Image for post
Image for post

“In the United States we have great schools like Harvard Business School, Stanford, Yale, NYU, Colombia and many more, but America is also the country with the greatest debt in the world.” — Unknown

People don’t simply plan to fail but they do go through life for a long time failing to plan. At least for most individuals, the last thing we’re willing to do is sit down, map out and design a short and long term plan to get out of debt. Whether that be student loan debt, credit card debt, a car payment, mortgage or whatever it may be, as American’s we’re carrying too much debt on our shoulders. It’s crippling many of us to be honest.

The average 2016 graduate holds a little over $37,000 in student loan debt. And to top it off with a cherry, a recent Citizen’s Bank survey found that 59% of Millennial graduates said they have no idea when their student loans will be paid off.

Most individuals I’ve asked the past 2 years have said, “I’ll just pay them back” when I asked what their plans were to get out of debt. Well no shit we’ll pay them back, we have to! I mean a logical response would be I’m paying back $400/month, every tax return I get is going towards paying my debt, any bonuses at work will help pay it down and my goal is to be out of debt by the time I’m 30 years old. That’s more like it! The quicker we unshackle ourselves from debt burdens the sooner we’ll be able to start accumulating wealth. That is the goal for most individuals living the American Dream, correct?

I was fortunate enough and blessed that my father worked at Dickinson College in Carlisle, PA for many decades which afforded me the luxury of tuition assistance when I attended Washington & Jefferson College from 2011 to 2015. In addition to that, I was “smart enough” to keep my scholarship money by keeping my grades high enough while I completed my B.A. in economics and minor in business.

However, with all of that being said, I knew one thing was certain once I graduated. I was not going to get myself into more debt by getting a masters degree or even going further to pursue my MBA in my mid or late 20’s. That’s not to say it won’t ever happen. If it does though you can bet it’ll be 100% paid for. No more debt!

Good so let’s start there. There’s absolutely nothing wrong with the traditional path of medical school, law school or even business school after an undergraduate degree. What is wrong though is coming out of an institution or residency and having no clear cut plan to get out of debt or accelerate your career path. More often that not people suspend their common sense because they get drowned in theoretical models and Harvard business school teachings.

I’ve run into too many people with $45,000 in debt and no plan, $100,000 in student loans and being content in paying them back into their years of marriage or even individuals coming out of school with $200,000+ in debt, having a plan to get out of debt but mathematically being unable to until their late 50’s or 60’s. I don’t know about you but I don’t want to carry a mortgage sized loan on my head or with my future family. Have you ever thought about what that would do to you and your family?

Debt avalanching focuses on paying back higher interest rate loans first. So for example, if you have loans at 7.9%, 6.8% and 5%, you would work on eliminating your 7.9% interest rate loan first, regardless of the balance. Once you’ve paid it off, you’ll then focus on the 6.8% loan, then lastly the 5% loan.

Pros:

  • You save money on interest!
  • You’ll pay off your loans faster.

Cons:

  • It can be hard to sustain motivation.
  • It may feel like it takes forever to pay off the high-interest debt.

On the other end, debt snowballing aims to start with small wins and build momentum in becoming debt free over time. Let’s say you have 3 student loans (maybe 2 subsidized, 1 non-subsidized) with balances of $26,698, $8,685 and $9,935. Using the snowball method you would:

  1. Focus on paying off the $8,685 balance first, throwing as much money as possible toward this loan.
  2. Pay the minimum on your $9,935 loan.
  3. Pay the minimum on your $26,698 loan.

Pros

  • Starting with the smallest payments first can provide quick wins and a sense of accomplishment.
  • It’s a tried and true method to pay off debt.
  • As you eliminate your smaller balances, you can free up extra funds to focus on the next balance.

Cons

  • It will take longer to pay off your debt.
  • You will pay more in interest over time (especially with interest rates rising over the next few years).

I believe that many people who go to business school and learn ways to play it safe ensure they avoid some of the pain and practical mistakes that entrepreneurs and traditional business owners endure while taking less calculated risks. What we need are more risks takers and individuals who are willing to go into business for themselves but not by themselves. What they’ll learn on the fly by making mistakes and failing will far outweigh any theory they’ll ever learn in the classroom. But more importantly, the lessons to be learned behind the scenes and after meetings will be huge. All by simply adopting a growth mindset and expecting challenges, obstacles and hurdles along the way.

That’s business baby! As we wrap up the month of June, and summer approaches, the last topic of this week involves going into business with the approach and mindset of learning more through experience than you ever would in the classroom. I can confidently say I’ve learned and retained more from May 2015 until this present day 1) by going down a path in financial services, 2) reading over 60+ books on the topics of business success stories, communication, leadership development, emotional intelligence, psychology and financial/cashflow quadrants and 3) building an asset and brand for myself as a self-employed business owner. I don’t say this to impress anyone but merely impress upon individuals what it takes at a young age to propel anyone’s career in the right direction.

The way most people approach business — and the way they mostly teach in business school — involves the analytical mind. My green personality is tingling! But in all seriousness, it divides it up and simply tends to look at parts in isolation. I’m not entirely sure but I think there could be a better approach.

I’m not here getting paid to promote books nor do I think that is the solution for everyone. We’ve seen both ends of the spectrum where we have CEOs of company’s today who read on average 40–60 books/year. Then we have Gary Vaynerchuk who openly admits to maybe reading 4 books in his lifetime, still being the CEO of Vayner Media in New York City and absolutely revolutionizing the way digital agencies, advertising and social media works in 2017 by hustling and day trading attention. What I do know is that its worked for myself and I would love to recommend a few books that have helped me and one I’m looking forward to reading.

The first is called The Mackay MBA of Selling In The Real World by Harvard Mackay:

Image for post

The second is The Monk Who Sold His Ferrari by Robin Sharma:

Image for post
Image for post

The third is Man’s Search for Meaning by Viktor Frankl:

Image for post
Image for post

Finally, we have 5 Dysfunctions of a Team by Patrick Lencioni:

Image for post
Image for post

We’ve misled ourselves by pretending we can make someone an effective manager by putting them through a few courses in business school. That’s like getting ready the next generation of leaders in the fashion industry. All jokes aside as I have nothing personal against that industry, the point I’m looking to make is that leadership is much more effective than management is in today’s economy. Yet it’s incredibly convoluted at the same time.

“We become leaders the day we decide to help people grow, not numbers.” — Simon Sinek

The switch was made in my eyes and life when I encountered a great opportunity to partake in essentially a month long entrepreneurship class in January 2015 called the Fullbridge Program. What this opened my world lenses to was the fact that we need more risks takers and people willing to go into business for themselves but not by themselves. Teamwork was a key principle in addition to selling ideas and concepts. For 4 weeks I worked 9–6pm for 0 credits and at first didn’t know what the hell I was getting myself into. At least the program was funded for the month and we got free lunches, right! It wasn’t until the last week I realized it was all about the experience and skillsets being molded throughout the process. How naive a young 22 year old can be.

It was humbling to learn from financial consultants & former NASA employees who then went on to work for big hedge funds in New York City. The knowledge these men and women displayed was like nothing I had seen before. Also their generosity to help young students develop into skilled businessmen and businesswomen was something I didn’t take for granted.

I always knew I wanted to get into business for myself it was just challenging after graduation coming out with student loans, barely having any experience, no established network, a minimal skillset, 2 resources to pull from and without the capital of $100,000 or even $1M to put into a portfolio, trust or business venture. Looking back at it these were all excuses I came up with in my own mind instead of being resourceful as fuck in our internet age. It took me a while before I caught onto that one on the way home!

We hear it all the time by entrepreneurs we follow on Facebook, Instagram, Snapchat and Twitter but we most definitely are in the right place, at the right time, with the right resources and ability to capitalize on the greatest invention of the 21st century that’s barely been around for as long as we have at this scale and magnitude.

As business owners or even someone looking to own or start your personal venture, be aware you will have to go into debt and no you will not turn a profit overnight. It takes time and anyone saying otherwise is lying! But I do want some of the people reading this to understand it’s logically better to go down this path as opposed to digging yourself a deeper whole with a masters degree or an MBA from a fancy business school in the Northeast or out West.

All that will do is land you a high paying job in middle management, a consulting gig where you’ll have to travel more than you’re in the office or at home or eventually down the road a C-suite position for a private or public company. Again, there’s nothing wrong with this but there is a problem with solely trading your time for money. If you want to go your own way, great! But recognize there are many more alternatives today than our parents, aunts, uncles and grandparents had decades ago. Invest in yourself before anything else because odds are if you don’t no one else will my friends.

Like, share or comment if this post had any positive impact on you. And as always, thank you for reading!

My Very Best,

Donovan Vogel

Written by

Philadelphia based teaching financial literacy | Prospering all other hours | Writer | Lifter | Reader | Traveler | Freedom & Wellness

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store