The big boy jobs can wait

Sep 302007
Authors: David Thigpen Daily Mississippian

(U-WIRE) OXFORD, Miss. – As a graduate student, I often hear from people who say that I am either a professional student or that I eventually have to grow up and get a big boy job, as if when I go to work right now, I am somehow working with infants. But, with all of these comments, which situation is really better?

For the sake of simplicity, let’s assume that the average salary that you can get going to work directly out of college is $40,000 a year, which will give you $3,333 a month before taxes.

If you were to take out $900 per month in rent with no down payment, you will only be able to get a 6.5 percent fixed rate loan of $64,000 over 15 years and $85,000 over 30 years, which is not enough to buy a decent house or fix up a cheap crummy house – $100 per month or more for landline and cell phone service, $200 to $300 per month for electricity, $30 to $200 per month for gas, around $200 per month for auto insurance, $50 per month for health insurance, $20 per month for renter’s insurance and $50 per month for water, sewage and garbage. This leaves you between $1,513 and $1,783 per month.

If this sounds like it isn’t that bad, please keep in mind that you haven’t even paid or filed taxes yet. From personal experience, you could pay about one fifth of your income in withholdings and still owe the government money.

This doesn’t even count the cost of an accountant – it costs around $200 per year on average to get a tax preparer – or the time that you waste getting all of the forms from various employers and financial advisors for investments. This takes away from the time that you could spend working and making more money.

By the end of the day, you may have around $800 to $1000 of disposable income, and if you live like a monk, you may end up investing around $500 per month in a Roth IRA, a mutual fund or an emergency fund. You need to remember to have at least three months salary in a highly liquid asset such as a checking or a savings account.

This salary is more than likely going to remain unchanged for one to three years, which is the same amount of time that you would be in a masters program. Also, depending on the masters program that you choose, by the time you get out, you may have more than doubled your potential earnings, decreased the amount of experience you would have to have for certain jobs and raised a ceiling on the maximum amount of money you can make doing certain jobs. Some government jobs have a maximum amount that you can make, which is based on your level of education.

If you decide to stay in school and get a doctorate, you would see a marginal gain in income over a masters, a further decrease in the amount of experience for certain jobs and an elimination of the ceiling on the maximum amount of money you can make. The only risk is that you will price yourself out of jobs on the lower end of the pay grade.

In all of this, the hope is that you’ve somehow built up the necessary experience that you need for the nicer jobs while you were in graduate school, so that by the time you get out you can maximize your earnings and make your time in graduate school financially worthwhile.

Also, if, while you were in graduate school, you were able to match the savings that you would have made had you gone to straight to work, you would have completely mitigated any losses from not going straight to work out of college.

The best part of it all is that you get to do something that most of your friends in the big boy jobs only wish they could do, which is enjoy the college life a little bit longer. You have the rest of your life to work. Hopefully, going to graduate school now will help you avoid asking your parents for money further down the road. I’m sure the parents would appreciate this.

 Posted by at 5:00 pm

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