As assumed in the prompt, I don’t yet have a job lined up
for when I graduate. This along with a variety of other factors has and will
continue to effect my consumption spending both now and after I graduate. For
the most part everything I have done in college has had an opportunity cost
associated with it that also has had an effect on my consumption spending. From
my understanding of the prompt, two key factors must be looked at when
considering my future consumption spending potential: 1) What type of job I
will have after graduation and its location
and 2) Decisions I have made in college that have contributed to an
increase in my savings account vs. cost me money that I could have saved.
Ultimately the largest factor associated with my future consumption
spending is what type of job I will have after graduation and where it is
located. I will first focus on the location of the jobs as it has a variety of
interesting and important factors that come along with it. Like most of us, if
I choose to get a job close to home I would be able to live with my parents for
a short time period if need be in order to save up more money towards a nicer
place of my own. This would allow me to save the money that I would be spending
on rent, property taxes, food, and/or a variety of other factors that would be
added in that come with living on your own. I could save up this money for a
later use, which I’m sure would be the best use. This could also create an
opportunity where I would have a lot of extra spending cash to spend on toys
and/or vacations with my friends. However, my parents would never allow this,
and by now I realize this would be a terrible financial move in the long run.
Either way, living at home would directly correlate to the possibility of
increased consumption spending. Another aspect of getting a job close to home,
but not living at home, is that where I am from the cost of living is much
lower than in larger cities like Chicago and some of the nicer suburbs.
However, there is the trade off of wage difference included to this as well.
For an entry-level job, the salary difference would be minimal, but later on in
life I would have much more income potential in a larger city. This is a trade
off I need to consider when deciding if going back home to work would actually
be worth it. If I decide to go straight to living in a city like Chicago or
somewhere similar, I would be spending much more on rent and other living
expenses. I would have less extra spending cash and probably be saving/
investing less, but ultimately would have much more business connections
(friends from school) and long run income potential.
The type of job I have after college is also an important
factor in the potential of my consumption spending. For the most part, a lot of
entry-level jobs I am applying for have roughly the same starting income. Some
of these also have commissions attached to them that could be used as an
incentive to work harder in order to make even more money. Being an economics
major, there are a lot of possible career options I could pursue. As compared
to say an accounting major, there are a lot less “guaranteed good money” jobs
for recent graduates, that could also contribute to my own consumption spending
as compared to a friend of mine studying accounting. I see this at only the
entry-level though, as I believe after a few years economics students have the
possibility to have just as good, if not better jobs that accounting majors.
Now I will shift to focusing on the choices I have made in
the past and considering their impacts on my consumption spending in the
future. As a full time college student without a job during the school year, I
have mainly relied on money I have saved up from summer jobs as well as
received from my parents in order to pay for the majority of my things at
school. I could have worked part time while being a student and saved this
money up, but I feel I would have missed out on a lot of things I have had the
privilege of experiencing during my time here on campus. We have all learned
early on in our economics education that there is opportunity costs associated
to almost every decision. This is especially true to how one decides to live
while being a student in college. I could have spent my free time making
minimum wage at some job here in town, but decided not to. On top of studying
in my free time, I joined a variety of groups on campus that I was interested
in. I could have been making and saving money in a job, but I decided to get
the most out of my college experience through these organizations. One of these
organizations is a prominent social fraternity here on campus. This
organization has cost me a lot of money (dues, going out multiple nights a
week, special clothing for events, etc.) that I could have been saving or investing.
This is money that I won’t have to spend upon graduation. However, justifying
this, I believe my experiences in the groups I have joined have been an
investment in myself. I might not have as much spending cash when I graduate,
but the experiences I have gone through within my fraternity will benefit me in
the real world when I graduate. My decision to join these organizations might
have cost me more money, where I could be working, but I believe they will pay
off in the future.
Working as a lifeguard/head lifeguard during summers during
high school and a few of my college summers, I was able to work 40 plus hours a
week every summer and save up a decent amount of money to bring with me to
college. However, instead of working in college, I used this money to live off
as well as for leisure times such as vacations and new electronics. Because of
this, I will have less of a savings account upon graduation, and will need to
rely more on the income from my job.
Here is the economic puzzle that you didn't quite get at in your post. If your future income was known with certainty and if it was substantially higher than your earnings in college, which you indicated were only from the summer work, then you might consider borrowing off of future income so as to boost your current consumption. Would you actually want to do that. You indicated your parents wouldn't let you do that if you were living at home. But what is it that you want?
ReplyDeleteWith uncertain future income and that being quite poor collateral, you are liquidity constrained regarding current consumption. You then indicated some ways to soften the constraint, either living at home or in you hometown, which has relatively inexpensive housing. But it sounds like you haven't worked that through yet and the choice will ultimately depend on what sort of job offers you get.
I wish that you had spent more time on choices you already made. For example, was the choice to be an Econ major dictated by the potential future income path or because the subject matter interested you? or perhaps still other reasons? You did talk about the social fraternity that you are part of. Yet you didn't make clear with that whether there was much consumption value from it or not. It would have been good to include something on this to address the prompt.
Let me address one other possibility that you might have considered, which is your time to degree. I actually don't think it is a good think to rush through college, but from a pure dollar and cents point of view if you have not don't the social activities perhaps you could have taken more courses and then graduated earlier. You might consider why doing that didn't make sense in your case. As it is, you didn't consider it in the post, treating time to degree as fixed instead.
Thank you for your feedback. I see that the questions you highlighted in you comment should have been answered in the material I presented in my initial post. One thing that really stood out was how you brought up the time it has taken me to graduate with my degree. Having switched my major after an entire year and deciding to add a minor, I am currently in my fifth year. Had I not pursued all of the organizations I have joined over the years, I definitely would have been able to take more classes per semester and been able to graduate earlier than I will be able to. From a monetary standpoint, this is something that I probably should have considered more a few semesters ago. I ultimately chose to take a lighter course load in order to pursue some other interests that came up. Looking back on it now, I believe the opportunities I have had due to joining these social organizations have really supplemented my school work, making them worth it.
DeleteGreat post,
ReplyDeleteI liked how you touched on the importance of all the factors that go into choosing a job. I agree that location is a crucial factor in determining the type of job you will accept after college. As you said, it is smart to live at home right after college if you have the opportunity to because once you cut out living expenses, most of your money can go straight to your savings account for later down the road. Also, if you have student loans it is easier to pay them off quick if you are living at home instead of on your own.
As for the type of job I think it is important to look far beyond starting salary and look towards what the company can offer you years down the road. My older brother just graduated and entered the job market and he turned down many offers with higher starting salaries with commission options for a job with less money at the entry level but great stock options and potential for growth within the company.
Bill,
ReplyDeleteGreat post. It is unfortunate to hear that you are still in the job hunt. Looking for employment senior year while also trying to focus on school is very annoying I will say. I wish you the best.
I like your point about weighing the choice between living at home with your parents to save money vs. moving downtown Chicago and having less savings in the SR for long term connections. I definitely agree with either side of that argument. I am planning on living with my parents after graduation but I a lucky enough to be commuting from their house in the Chicago suburbs. I encourage you to weigh these options heavily against eachother when you are deciding on a career. I will say from other parts of your post it seems like you are a man who enjoys his leisure time- Chicago is a great place for that even if you aren't immediately saving a ton of money.
As far as the 3rd paragraph and choices go I feel like I have made very similar ones as you have. I usually rely heavily on money I make from summer jobs/ internships to sustain me during the school year. Also, I agree with your point about choosing not to work to have more experiences while on campus. Although I am employed at a bar in Champaign, for 2/2.5 years I was there I was making trash money. It would have been so hard to work enough as a doorman to make enough money for my subsistence costs; I mainly took the job for the social aspects and the perks that come along with being employed there. If I did not work there I would probably have not worked anywhere- I believe it is very important to try and have eye-opening, new experiences while you are in college and I think how you summarized it explains my exact sentiments on the subject as well.