Long Term or Short Term Commitments: Which is Better? (Part I: Education, Work, and Money)
There are a lot of aspects of life as our existence is a pretty complicated thing. From a subject matter perspective there are big things as it relates to work (education, money and retirement, career planning, etc.. ) and big stuff as it relates to everything outside of the job (relationships and family, housing, etc). I’m constantly discussing all of the different associated topics. Normally a whole lot of my focus is on where our work and life worlds collide. Healthcare provided by your employer is a great example of this. But sometimes I look at the two areas independently. I sometimes focus my attention and commentary on something that is just about work, and sometimes I will focus on stuff that’s just about life. No matter what the topic is, I realize there’s one thing that they all have in common which is their horizon. What I mean by horizon is the timeline, the short-term versus long-term thinking that’s involved in how we make decisions all about these topics. I have spent years contemplating all these things that affect us at work and life and where the two meet but I never really analyzed them from the perspective of short term vs. long term horizons. I’m going to try and rectify that here.
These topics, at least when you consider the average person, are not universally black and white, or I should say absolutely one option or the other. In many instances they tend to be a bit of both. For example, the first topic is one that could include both short term and long term investing.
Education:
Education is an interesting thing. I would argue that the long term option has much more mindshare than short term. With long term we are thinking degrees and more degrees. Most people think vertical, i.e. Get your Associates, Bachelors, Masters and maybe even move on to a Doctorate. I am very familiar with this route as I’ve made it to Masters, started the PhD, and then backed away from it for a variety of reasons. Each layer creates an entry point to some jobs that you can’t usually get with the prior degree. Usually is the key term here. The vast majority of jobs usually use the term ‘X degree preferred’ which means the degree isn’t absolutely necessary. This makes spending the money on the advanced degree somewhat more risky. The caveat to the risk is the advanced degree that is aligned with licensure or a specific technical job. MD really stands for doctorate in medicine. It also comes with a license to practice medicine. Going down to the bachelors level, the BA or BS in teaching includes a teaching license as part of the curriculum. Those licenses are the key to the value of those particular degrees. A degree in engineering is tantamount to a license to be an engineer.
You can also do horizontal degrees which, if properly managed can be complementary to each other. In my case. I have a Masters in Information Technology and I have also considered an MBA. My thought process is that the combination will allow me to teach in both the business schools and the technology schools if I stayed teaching at the community college level. It’s also a nice educational safety net for a good management position should I go back into the private sector. I know from experience it’s not a guarantee by any stretch, but two is definitely better than one, even if only by a little bit. I can say that being involved in the process of getting the degree is nearly as valuable as having it. If you are looking to get hired into a job that requires a Masters, and you are deep into a Masters program it’s usually just as good.
No matter what route you take, the long term option takes years of effort and requires lots of cash that usually comes from student loans. The alternative is the shorter term educational options. Shorter term educational credentials generally means certifications and sometimes licensure, the purpose of which is to just prove that you know a specific thing. They can be very profitable. A high school dropout with a CDL typically doubles their income. Certifications in some form of equipment operation will help nail that job. Certs can be good, especially if they are stackable. An A+ IT certification by itself is meaningless, but having A+, Security +, Cloud +, Cisco, VMWare, and a litany of other certifications will very quickly identify someone as having strong technical skills for any IT shop that needs a good well rounded technician. It’s the same with industry certifications like six sigma. All those certs together will cost less than a single Bachelors degree. Certifications are helpful, especially if you want to get into an industry or move up a bit. Unfortunately senior management positions usually require a formal degree from a university.
Your horizon in education really equates to the specific job you want. The properly chosen longer term degree, at least to me, seems to be more related to the types of jobs that are married to a specific degree or organizational ladder climbing. For everything else it seems the short term certificates are the way to go, especially when you consider that quite a few technical jobs that only require certifications pay more than the jobs that are looking for the bachelor’s degree. The worst part of these options is that we tend to make these decisions before we understand the real consequences of the path we choose.
Work:
When we think of work, we really mean careers. The type of job or industry you are engaged in for the longer term. If your education is supposed to lead to work, then you have to think about what your work horizon looks like. This, like education, is tremendously difficult as we have horrible career sampling, at least in America. Good career sampling would be some sort of mandatory program where kids spend half a year or more in different industries while they are in high school. If you don’t spend six months working in a doctor’s office or a hospital, how could you possibly really know what the day to day life is like? Ditto for working on a construction job site. Putting this lament aside, what exactly does short term and long term look like when you consider your own personal horizon. Short term is short term jobs or even possibly gig work. If you are following a financial offensive strategy, this strategy is your chosen horizon by default. It’s very hard, but not impossible, to stay at one organization for years and be highly successful driving up your income and status. With a macro economic environment that favors workforce flexibility (i.e. hire and fire as needed by the company) and the resulting average job tenure being four years, this is the strategy that most people, statistically, have settled into.
If you want to think long term the answer is usually a government related job or the one of rare private sector organizations with long term ‘sticky’ benefits. The old school defined benefit retirement plan, i.e. a pension is one of these types of benefits. They are designed to keep employees from leaving the company and then to gently scoot them out the door as time goes on. You see this more in industry where parts of that sector still need reliable people for the long term. By their very nature of having people stick around it’s much harder to get a job in these types of environments. I think the biggest thing to keep in mind is your personality needs when considering what work horizon you are considering. If you like or even need change to be engaged this may not be the solution even if it has the better benefits by far. If you don’t like change then get whatever credential you need and then go be a soldier in the workforce army of whatever organization you can find that keeps people around for decades. Figure out what the culture there is, or at least the culture of those who are successful at that organization and adopt it for yourself.
Money & Financial investments:
Financial investments, or machinations are pretty easy. We make money, some of that has to go to things like food, housing and reliable transportation. Some of it should go to things like fun and some should be invested. My first financial investments were comic books. I was in high school at the time and I had no idea of the true aspects of the market. I only knew that if I bought a book for $.75, it could be worth hundreds of dollars some day. I also knew there were books that I wanted from decades past that were worth hundreds and thousands of dollars. Thanks to one Glenn Lightfoot, the charismatic proprietor of the comic book shop I frequented (formerly Superhero’s Unlimited, now Villains Comic Books), I did learn that the real money wasn’t in buying and holding. When it comes to collectables, the way to make money is activity, it’s in the buying and selling, the flipping if you will. This was a great introduction to short term financial investing.
Today short term investing looks like day trading in stocks, investing in the latest fashionable trends like bitcoin and other cryptocurrencies, or flipping houses or other big ticket items. It could even include a side business. I’d put rentals in the side business category even though they are longer commitments. Longer term investing from someone who has a day job usually includes buying and holding stocks in mutual funds. This can be in a retirement account or if you have enough additional cash, it could be directly into an investment account. It can also include investing in property that doesn’t have to be worked. Think: buying a piece of land to hold for a future sale or development.
On the financial side, there is work to be done in the short term. The benefits of the rewards for short term investing is that it can grow substantially, significantly more than the long term. There is usually a significant personal effort that must be made when it comes to short term investing. There are simply more transactions with it no matter what kind of short term investing you do. A rental property is a perfect example. It’s a huge amount of work to manage a rental property as the renter is always calling with issues. Even if the rental property has a professional property manager it mostly is a hybrid situation where you don’t have to do the daily work but you have to keep tabs on the management company. As anyone who has ever dealt with a property manager can tell you, there are always things you are unhappy with. With your average short term investing you still have to withstand the losses as you learn what not to do. We all make mistakes. The biggest benefit of short term, usually, is having cash flow. You can reapply that cash back into the investing, or use it to enhance your quality of life, i.e. spend it. My favorite story of this was when I had a technician I worked with offer to sell me his truck and everything in it for $200. He had a broken heart, was homeless, and wanted to move back home. I bought it sight unseen and wound up selling all of his junk for about a grand give or take. Unfortunately that situation isn’t really something you can replicate often.
Long term investing requires much less effort on your part. Put money into a mutual fund of any sort and you can simply forget about it. This positive is also a negative. On the negative side is that there usually is a transaction cost. For example if you have money in a retirement fund, the transaction cost is a penalty fee of 10% plus your taxes. If you are selling land then the realtor fees can be 1% to 6% of the sale price plus closing costs. If you hold for the long term the fees disappear or tend to be negligible compared to the profit. If you bought a piece of land for $50,000 and sell it for $200,000 twenty years later the $2,000 to $12,000 is small compared to the $150,000 in profit you will benefit from.
Your investing horizon will match your personality. I personally like cash reserves and I like not thinking about my investments, so I put money in the bank and in automatic retirement funds, month after month. That’s what works for me. The benefit of financial investing is that you can have both a short term and a longer term horization simultaneously. Occasionally I’ll do a short term investment deal, or at least I used to. The days of taking that sort of risk mostly ended as my free time got more squeezed and I couldn’t work those investments. I lovingly referred to those activities as horse trading.
This article, at least when I first sat down to write it, was envisioned as a short article, but sometimes, there is so much to be said that it becomes longer than I anticipated. In very rare cases, like this one, it becomes so long that I’ll break it up into multiple articles. My writing is about work and life, and where they collide. When you look at it, this first first part of this series of articles was really all about work, or things related to the working world. When I looked back and I considered the universal themes I could summarize with, it turns out that they weren’t as intertwined as I thought they would be. You could easily have a short term horizon with your education but long term with your employer. Your approach to your finances and investing can be short or long term regardless of what you consider is best for your education and work horizons. I say that but there are clearly some stronger, but not absolute, connections between long term investing and long term employment. I think the fact that each of these categories is somewhat siloed from each other is the most interesting aspect of this first narrative on horizons.
If this first article was about everything you need to consider long and short of your career, then naturally in the next article I’ll focus more on the life side of work and life. That’ll include social engagements, housing choices, and family options. I’ll try and keep my commentary on the more salacious aspects of ‘social engagements’ to a minimum but it’ll be hard to do. We do live in the age of swipe right for a booty call, which is probably the ultimate expression of short term.
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