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New Graduates Facing Unemployment May Never Reach Income Potential

by Flexo on October 19, 2009

in Career and Work

The unemployment rate for young workers between the ages of 16 and 23 is 18%, and that is an increase of five points from a year ago. That age group includes high school drop-outs as well as college graduates, and for these people the future looks bleak. Adults are taking the minimum-wage jobs teenagers might be offered in other economic situations. Older workers, otherwise approaching retirement, are not leaving the workforce as quickly. The openings for younger workers aren’t there.

The bad news is starting your career in a recession is one of the worst things you can do for your long-term financial security. More bad news is that there is little any one person can do about the economy at large. Here are the numbers, from a study at Yale quoted in the cover story in today’s BusinessWeek:

For each percentage-point rise in the unemployment rate, those who graduated during the recession earned 6% to 7% less in their first year of employment than their more fortunate counterparts. Even 15 years out of school, the recession graduates earned 2.5% less than those who began working in more prosperous times.

Young adults might be destined to be a “lost generation.” Here are some suggestions for 16-to-23-year-olds who find themselves having a difficult time starting their career in this recession and want to mitigate its effects on long-term income.

1. Finish your education

It’s an issue of supply and demand. First, if you have not done so, completing your Bachelor’s degree will have two important effects. First, it will improve your marketability among entry-level employees when fewer open positions will create a competitiveness that ensures that the best qualified candidates will win. A Bachelor’s degree is a gateway to at least the middle class, and that’s going to be more important than ever.

Second, finishing college now will keep you out of the worst of the recession. This will allow you to stay out of the worst fight for jobs, but it has some drawbacks. Delaying the start of full-time income can also have detrimental effects on your long-term income — but if you wouldn’t be working anyway, this isn’t much of a disadvantage. Also, if you are relying on student loans, you will be amassing more debt that will require payoff down the road, perhaps shacking you to a job or career that is not best for you. New student loans have higher interest rates than they have in the past, adding to the pain of debt.

If you have your Bachelor’s degree, consider spending a few years to earn your Master’s or Doctorate degree. Are you worried about being overqualified? Don’t be. As we’re seeing in the recession where many workers are competing for few jobs, anything that helps you stand above the rest will be an advantage rather than a disadvantage. You might want to consider adapting your desired career to one better suited for an advanced degree, however.

2. Become an apprentice

In general, apprentices earn more throughout their careers than those who don’t hone their skills in a formal training program. Traditionally, apprenticeships are common for certain crafts and trades. Electricians, plumbers, and carpenters often get their starts through apprenticeship and there is significant income potential in these fields.

One creative answer is to become an apprentice for a career that does not traditionally fit this profile. For example, if you have musical talent and would normally consider performing or teaching in a better economy, consider composing music for films or television. You can contact a professional currently in the field and contact them about becoming an apprentice. One key to successfully finding an apprenticeship is the willingness and the ability to work for free.

3. Start your own business

I’m not talking about selling your possessions on eBay, but padding your savings account with cash rather than padding your home with useless objects is never a bad idea. Everyone has at least one marketable skill. It may require some time brainstorming to determine exactly how you can turn your skills into a service you can offer people or other businesses.

A recession is perfect timing to start a business, particularly if you can dedicate all your time to making it work (that is, you are otherwise unemployed). Many new businesses suffer because the owner needs to devote his or her time to the day job, a spouse, and perhaps even children. For young workers, the time will likely never be better for starting a business with the ability of giving it your full attention.

4. Save money

As a recent graduate or drop-out, you may have the option to move back in with your parents for a short time. After all, there is a recession and being able to save money on rent or a house payment is worth the temporary shame you might feel for going home with your tail between your legs. This is most likely the biggest opportunity for savings, but you don’t want to take advantage of the situation. Show your parents that you’re working hard to make the recession work for you, and they’re more likely to give you a break. And don’t forget to express gratitude.

Consider frugality as a way of life. In an economy where you have less control over your income thanks to fewer employment options, you can still control your expenses to a point. Take the extra time to determine what you are willing to cut back in order to help your money go farther. Occasionally, generic brands and store brands are good compromises.

Creativity leads to success

Surviving in a recession where it’s difficult to find a job relies on creative thinking. Use the opportunity to rethink your career path. If the acquisition of money has been your ultimate goal, realize that money by itself is not a goal. You may use the opportunity to break into a less popular field with a lower income potential but with a greater satisfaction potential.

Accept that the odds are against you if you want to compare yourself and your bank account against people who began their careers in the height of the economy, people who, on average, will out-earn those entering the workforce right now.

Photo credits: CarbonNYC, roland
The Lost Generation, Peter Coy, BusinessWeek, October 8, 2009

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Podcast 21: Student Saving Tips and How to Survive on a Teacher’s Salary

by Flexo on September 13, 2009

in Podcast

In today’s Consumerism Commentary Podcast, I offer a number of suggestions for students heading back to school, particularly for new college freshmen. Tom Dziubek and I discuss tips that will help students take small steps now to ensure they will start the rest of their lives on a sound footing.

After the discussion for students, we offer tips for teachers with our guest, Danny Kofke. He is the author of How to Survive (and Perhaps Thrive) on a Teacher’s Salary.

 

To listen, use the player above (Adobe Flash required), download the podcast here, subscribe to the podcast RSS feed, or use the iTunes link. Note: open links in a new window (Ctrl-click or Command-click) to avoid interrupting the podcast.

[00:00] Introduction from Flexo
[00:43] Interview with Flexo about money saving tips for new college students
– [01:45] What new students should be thinking of
– [02:21] Budget planning
– [04:05] Savings and checking accounts
– [06:34] Using a Roth IRA
– [08:36] Acquiring college textbooks
– [16:44] Online budget resources
[18:39] Interview with Danny Kofke, author of “How to Survive (and perhaps thrive) on a Teacher’s Salary”
– [18:53] Danny’s teaching experience
– [19:16] Starting salaries
– [22:09] Ways for teachers to reduce expenses
– [23:32] Danny’s tips from his book
– [25:58] How teachers can increase income
– [26:41] Danny’s experiences teaching special education students
– [28:12] Career recommendations for new teachers
[34:53] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

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Top Ten Highest Paid CEOs: What Would You Do?

by Flexo on August 17, 2009

in Career and Work

Are you on this list? Chances are the following list of the highest paid CEOs does not include you, Don’t feel bad; I am not included either. In 2008, these ten individuals accounted for $2.2 billion in compensation in aggregate.

Whether or not CEOs deserve compensation at levels 17,000 times higher than the average worker in the United States or 50,000 times higher than the average worker across the globe is still up for discussion, particularly if compensation is not based on results. But for whatever reason, here are the amounts of total compensation for the ten highest paid CEOs of American companies.

  1. Stephen Schwarzman, Blackstone Group: $702,440,573
  2. Lawrence Ellison, Oracle Corp.: $556,976,600
  3. Ray Irani, Occidental Petroleum Corp.: $222,639,705
  4. John Hess, Hess Corp.: $159,566,940
  5. Michael Watford, Ultra Petroleum Corp.: $116,929,392
  6. Aubrey McClendon, Chesapeake Energy Corp.: $114,286,867
  7. Bob Simpson, XTO Energy Inc.: $103,485,972
  8. Mark Papa, EOG Resources, Inc.: $90,471,784
  9. Eugene Isenberg, Nabors Industries Ltd.: $79,333,079
  10. Michael Jeffries, Abercrombie & Fitch Co.: $71,795,744

According to the report from The Corporate Library, the organization that reported these figures, Schwarzman’s compensation amount includes the vestment of equity shares in the company he was granted when taking the company public. Only twenty-five percent of his total grant vested in 2007, and another twenty-five percent will vest each year until complete. That will keep him on top of the list for a few more years.

What would you do with $702 million — let’s say $350 million after tax? That would leave me with more than enough to start a foundation with an endowment and still have some left over to invest conservatively and provide myself a nice income for the rest of my life.

The top 10 highest paid CEOs are…, David Goldman, CNN Money, August 14, 2009.

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4 Important Tips for Graduates Beginning a First Real Full-Time Job

by Flexo on June 29, 2009

in Career and Work

The summer following graduation is an interesting time for recently-former students. The newly-commenced young men and women, those not opting to pursue an additional number of years in an institution of higher learning, spend their time amongst activities such as attending backyard barbecues in celebration of their achievements, traveling to distant lands with newfound free time, and possibly beginning the first real job on their career path.

Not every job is the same, but for the most part there are a number of things in common.

  • You need to make a positive impression on people you are meeting for the first time.
  • How you perform on your first job sets the stage for your work ethic.
  • If you stay in the same career throughout your life, your initial salary will be your most important negotiation.

Here are more specific tips for making the most of your first job.

1. Look the part. As much as it is superficial and stupid, people will judge you by your appearance. You need to dress and carry yourself in a manner that is expected and accepted by the people who work in your field. What is acceptable varies. If you work in banking in New York City, it’s almost guaranteed you will be expected to show up in a suit every day. If you work in the graphic arts, more liberal clothing might be acceptable. Find out what your manager or supervisor wears and emulate.

If you have not been accumulating attire during college, you may find the need to buy a variety of clothing at the last minute. This is one reason it may make sense to accept a controllable level of debt. Attire is a start-up cost associated with accepting a first job, and if you are required to dress well, your salary should cover these costs before long.

2. Negotiate. Graduates may be experiencing a “sellers’ market” while starting new careers this summer. With stories of the difficulty of finding a great job in the right field, it may be tempting to jump at the first offer. It is true that times like this call for adjusted expectations, but the dance of negotiation is an important and expected part of every job offer.

Not every job has this flexibility. For example, if you start as a teacher in New York City, your salary and benefits are determined by the union contract and you have no room for negotiation. If your first job is with a cash-strapped non-profit organization, you may face resistance. But the first salary offer you receive is almost always lower than the company’s true ability to pay.

The best suggestion is to be prepared to support your desire for a higher salary by researching your peers’ compensation and by explaining well the skills you can bring to the table above other candidates. As you may not have much experience in your field when you start your first job, you may not have a list of accomplishments, so be creative while being honest.

Here are tips for dealing with a low salary offer. Remember to look at the total compensation, not just the salary. You may have more wiggle room if you ask for more vacation days or for quicker establishment of your retirement benefits.

3. Enroll in your company’s retirement plan. When I started at the company where I currently work, I qualified for the company’s 401(k) on the day I began. Although a portion of my company’s matching contributions wouldn’t vest (become officially mine) until I had been working there for three years, my first paycheck included a deduction for my 401(k) and a matching contribution from the company. While enrollment is often automatic, some companies don’t start helping you put aside money for retirement until you tell them how much you want taken out of your paycheck.

Young adults with their first job often do not think about retirement, an event likely to be more than forty years in the future. Not enrolling in a 401(k) with matching contributions is the same as throwing away money. I understand that people who are just establishing themselves at work and in life have expenses, and retirement savings cuts into income. But putting aside two or four percent of your income — or up to the maximum matched by your employer — should not be a stretch.

4. Open an IRA. Your 401(k) contributions are taken right from your paycheck, so you might not even notice your money is being transferred to your future self. It may be more painful to your wallet to open an IRA, but if there is no pain, there is no gain. So open an IRA at a low-cost brokerage like Vanguard. When I started my IRA, I didn’t have the $3,000 minimum, so I jumped right in with TIAA Cref. I suggest saving money periodically in a special bank account until you have the $3,000 necessary to open an account at Vanguard because I have encountered some problems with TIAA-Cref.

If you already have a 401(k), open a Roth IRA. These two types of accounts have different tax treatment, and it’s good to diversify. If your company does not offer a 401(k) or its non-profit cousin the 403(b), split your money between a Traditional and Roth IRAs, if you can, to get the same tax diversification.

Your career and the skills and tools you use to thrive in that career are your biggest assets, even though you won’t see them measured on any balance sheet. Protect, refine, and showcase your self and your skills when you can. If your career is important to you, go above and beyond the call of duty.

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Five Jobs For People Who Like Money and Five Jobs For People Who Don’t

by Flexo on May 12, 2009

in Career and Work

There are many people who believe that the when choosing a career path and life direction, one should steer towards the highest paying career for which they could possibly qualify after several years of education, training, and 80-hour work weeks. To demonstrate, there is never a shortage of investment bankers looking for work. I have an alternate point of view: self-fulfillment usually has little to do with career choice or money earned, but having money (that is, not spending money) opens doors for more choices (for spending money among other things).

Did potential earning power play a role in your decision to pursue a career path? Let us know in the comments.

While I cite investment banking as a high-earning job, it’s not the highest according to data compiled by the government’s Occupational Employment and Wage Estimates from 2008 and published recently. If you are in search of the almighty dollar, it pays to go to medical school.

Surgeons top the list with an average annual salary of $206,770, up 8% since last year. Following surgeons, the next highest earners on average are anesthesiologists with $197,570 each year. Third on the list are orthodontists, who earn an annual $194,930 on average. Obstetrician and gynecologists earn $192,780. Oral and maxillofacial surgeons round out the list with an average annual income of $190,420.

I would have expected higher salaries for these jobs on the coasts, as many cost-of-living calculators adjust for high salaries in New York and Los Angeles. According to the survey, however, if you want to earn more money in these jobs it pays to move to the mid-west. Surgeons and obstetrician and gynecologists earn more in Wisconsin than in any other state. New Hampshire, the lone east coast representative, is lucrative for orthodontists, and oral surgeons do best in Michigan.

On the other side of the spectrum are the jobs that do not command high salaries. In fact, these jobs usually feature hourly wages and are often not full-time. They probably should not be compared with the other careers since they are in a class of their own.

The lowest earning job is the combination of food preparer and server, including the fast food industry. A worker in this job will expect to earn on average $17,400. Fast food cooks do slightly better with $17,620. The next rung on the income ladder contains dishwashers (of the human, not machine, sort) who earn an annual $17,750. If you are a dining room or cafeteria attendant or a bartender helper, your income averages $18,140. Shampooers deserve bragging rights among the low-paid with their annual pay of $18,300.

Of these top worst-paying jobs, you’ll do better by moving to Washington, D.C. Shampooers, fast food workers, and food preparers and servers earn the most there. Dishwashers earn more in Nevada, and dining room or cafeteria attendants, or bartender helpers maximize their income in Hawaii.

Did potential earning power play a role in your decision to pursue a career path?

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Education Opportunities for the Unemployed

by Flexo on May 11, 2009

in Education

Although the latest figures indicate job loss is slowing, at 8.9% the unemployment rate is continuing to increase. Some unemployed individuals who want to take classes to build skills while looking for a job experience some roadblocks:

  • Searching for work can be a full-time job. Finding time for all your responsibilities and desires can be a challenge in addition to tailoring resumes, connecting with contacts, traveling to interviews. There may be more daylight in the summer, but there are still only twenty-four hours in a day.
  • If you expect long-term unemployment and want to use the time to go to college full time, under current rules, you lose your unemployment benefits. You have to be actively searching for work in order to qualify, and full-time education usually disqualifies you.
  • Financial aid is based on the prior year’s income, so newly unemployed individuals may not qualify despite their lower income this year.

The key to building a strong community, a competitive country, and prosperous world is education. This is true not only for education in finance, but for education in science, history, and the arts. It’s good to hear that education is back on the agenda. President Obama wants to change the rules to benefit the millions of unemployed individuals who want to increase their knowledge.

The President has proposed using current rather than the prior year’s income to determine whether an student qualifies for the Pell Grant, financial aid for low-income families. Another proposal would ensure that students would not lose their unemployment benefits while enrolled in classes and training.

As the proposal takes shape over the next few weeks a government website, Opportunity.gov, will provide resources for unemployed individuals who wish to expand their knowledge through education. States will also be sending letters to residents receiving unemployment benefits to inform them of the new opportunities coming soon.

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Smithee’s Best Advice for Graduating Seniors

by Smithee on May 1, 2009

in Career and Work

I’m not a financial planner, adviser, guru or anything of the sort. The reason I’m writing here today is because I screwed up big time. Fortunately for you, I think I’ve figured out where the mistake began.

Recently I’ve been taking an informal poll of some of the people I would consider to be relatively young and successful. I had a theory about how they were able to create financial security before liver spots started appearing, and while it’s completely unscientific, the results confirmed my hypothesis: almost none of them started their careers while relying on credit cards.

Before I go on: there are naturally going to be exceptions among those of you who’ve already been through this. In general, I’m talking about the average American who graduates a four-year college after High School and is living away from home within a month, and who is earning just enough to get by. Most of us, naturally, can’t wait to be out on our own, enjoying that delightful freedom. Your own experience may not match this, and that’s fine.

Usually what’s happens is this:

You pack up your meager belongings and you move into an apartment by yourself, or one you’re sharing with friends. You pay a deposit for the rent, which is much higher in some states than in others. You get someone to turn on the water, electricity, television, phone (or maybe you already have a mobile phone), Internet, etc., some of which may also have a deposit attached, because you have little or no credit record. Then you go grocery shopping. If you’re working in any kind of metropolitan area, you’ll also need your own transportation or a bus or train pass to get to the office.

Then, if you’ve timed things perfectly, you start work the day after you get settled in. Assuming you’re a young professional with a salary right out the gate, in another two or three or four weeks you’ll get your first paycheck. So, here’s my question: how did you pay for the rent and the utilities and the groceries? These are the options I’ve thought of:

  1. You had some money saved up
  2. You got some free money as a gift for graduating
  3. You used a credit card

For me, options 1 and 2 were not the case. I had exactly 20 cents. I consider myself lucky that I had no student loans, but at the same time, I only had that 20 cents to work with. Nobody was giving me any gifts of cash to start my grand life adventure. So, I got a credit card with a $2,000 limit and immediately started charging. I had to, otherwise I’d have no electricity or a place to sleep. It was a tool of necessity.

And it wouldn’t have been a problem if the money I charged to the credit card were just a temporary loan from the bank that issued the card (it was a Yahoo! Visa, but I don’t remember which bank). A temporary loan is exactly what it should’ve been, but by the time I’d been paid about one month’s worth of wages, the days had already come and gone when I was expected again to pay my share of the rent, utilities and groceries. So I didn’t have the money to pay my entire credit card bill. And interest started to accrue.

And I worked some more, then paid my bills, and paid what I could to the credit card company, and more interest started to accrue, etc., etc. The first few months were the worst. And the second few months, those were the worst, too. Before I knew it, I was close to the credit limit, so I got a second credit card. After that, things went into a bit of a decline. (Apologies to Douglas Adams.)

That was twelve years ago. I was on track this year to finally pay off that old credit card debt once and for all, when my employer announced 10% salary cuts so we can survive the recession. And that’s a perfect example of why it still hasn’t been paid off: crap happens. But I do have a good job, and a sensible mortgage, and the pets are well cared-for and things are generally okay. The problem is that I know people who managed to be in this same position just a few years after college. They’re steadily saving for retirement and that word still causes me to feel extremely nervous.

So here is the best advice I can give to graduating Seniors: find out how much you will need to live on your own for the first two months, and don’t move out on your own until you have that money in the bank. (That is, unless you snag a job that pays you at least double what you need to survive every month. My first salary was $22,100 before taxes. In New York City.) And don’t focus only on the rent. Include all the utilities, groceries, a little bit of extra for entertainment, and you should be much better off than I was.

And if you’re planning to take the train to New York City, living in New Brunswick, NJ is a reasonable option, but make sure you find out first how much the monthly train pass is. Twelve years ago, it was $336. These days, it’s probably the same as the payments on two brand new Hyundais.

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Resume Dos and Don’ts (Plus Resume Makeovers)

by Flexo on April 17, 2009

in Career and Work

This is a guest article by Ginger from Girls Just Wanna Have Funds. Ginger teaches women how to break financial ceilings one stiletto at a time! Join the social network, Girls Just Wanna Have Funds on Ning to connect with other financially savvy women.

This week I’ve been helping out my company’s HR department by reviewing resumes and conducting interviews. The experience levels range from those who are new graduates to people with years of experience. Sadly, I was disappointed with how many people didn’t have the basics down when it came to writing their cover letters and resumes.

Now isn’t the time to slack in this area if you’re looking for a job, you’re competing with literally hundreds to maybe thousands for one position. If you’re looking for work, take a second look at your resume and make sure your resume and cover letter at least falls within the following guidelines:

Do not:

… ask how much the position pays within the cover letter until you’re on the interview and/or sure that you will be offered the position. I personally don’t have a problem with someone asking but I think it rude to ask in an informally written cover letter without a resume, then telling me that you’ll send the resume after I tell you how much the job is paying. Seriously? HR managers and recruiters don’t have time for that, it’s rude and unprofessional. Needless to say I didn’t respond to said applicant.

… use an email user name that isn’t related to your government name. I can’t tell you how many times I saw email addresses like starzaligned@yourdomain.com, bustitbaby@yourdomain.com etc. I moved on to the next person because I’m a firm believer that if you don’t know these basic principles of resume writing then it will be questionable on whether or not you’ll conduct yourself professionally. Your email address should be some combination of your first and/or last name.

… use different fonts throughout your resume. Using different fonts makes your resume hard to read and it shows that you’re not as detail oriented as you need to be. Set the view on your resume to 70% and make sure everything is uniform and in line, especially bullets and indentation.

… extend your resume beyond one page. Unless you have 5-10+ years of relevant experience, you don’t need a 2-3-4-5 page resume, especially if some of your experience has nothing to do with the position. Try to keep the positions listed relevant to the job.

Do:

List your achievements throughout your resume. Time and time again applicants literally copy and paste their job description without any consideration to how their actual work contributed to the organization’s goals. You need to ask yourself: how does this description convey my worth to the organization? Does “putting files away at the end of the day” really convey my value? How about: “Systematically reorganized files to increase organizational productivity and efficiency.” Sounds highfalutin but it works!

Apply for jobs that are best suited for your skills and experience. Skip the long shot positions where your experience can’t possibly match with the requirements. Look at your resume and scan the job post, how can you honestly and ethically marry up what they are looking for and what you have to offer.

Maintain a consistent theme. If you’re a jack of all trades then it’s now time to settle down on one career area. Here’s a comment from a friend who works at Homeland Security: “When you have too many degrees and you’re not working in your field of study then most likely you are a risk to hire. Why? We are looking for people that are career driven and not job driven. Just some insight from looking over countless resumes.” How’s that for sage advice? Pick an area and stick with it or create different resumes for each area. Employers want to know that once hired, you’ll be committed to the job and organization, not planning for your the next jump 3 months in.

Have a friend, preferably someone in a managerial position, review your resume for errors. Sometimes having another set of eyes review your resume helps because they might see things you won’t after looking at it day in day out. Everything starts to look the same after a while.

Make your resume skimmable. Recruiters and HR Managers spend 3-5 seconds tops skimming resumes. If your resume is hard to read or the important information is lost in the layout then you put yourself at a disadvantage. Here’s an example of a resume makeover which resulted in the resume being easier to skim:

Before

Resume Before

After

Resume After

Take a second look at your resume and make a few edits if needed or revamp it for a bold and fresh look. Focus on your strengths and make them apparent throughout your resume. Recruiters are bogged down with countless resumes, make sure yours makes the first cut.

If you enjoyed this article, please visit Ginger’s blog Girls Just Wanna Have Funds and subscribe to the blog’s RSS feed. If you’re in the DC area, join the Girls Just Wanna Have Funds Meetup group here and for the Atlanta, GA area join here. We would appreciate your comments and reactions, so if you would like to contribute to the discussion, add your comment below.

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