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12.16.2005

End of quarter rant #1: Finance 101 (Cash-Flow Analysis) 

Apparently at large state schools like UCLA, a good number of students hold down one or more menial part-time jobs. Sometimes it's to pay for tuition and living expenses. Sometimes it's to pay for luxuries (where "luxuries" is defined relative to the standard of living of a college student).

I have to say that with few exceptions, this is unwise. (I'm talking about jobs like stuffing envelopes, sitting by phones, and operating cash registers, as opposed to TAing/grading, working in a lab, or managing a store). The salary is minimal. The job does nothing to increase your future earning potential, and skipping class surely does a lot to decrease it.

Let's say you have a job that pays $10 an hour, and you work 20 hours/week for 30 weeks a year. That's $6000 for the year. Let's also say you invest in some amazing money market account that pays 5% interest per annum and is risk-free. (Like I said, amazing). That ends up as $7300 in 4 years. A decent amount of money, but not if it means lowering your post-graduation salary by a few thousand bucks annually.

If you really need the cash, get a loan from a bank or play online poker.

If you don't need the cash, you could not work and blow off class and do something fun like play Ultimate frisbee. That's what I did.

Comments:

It's really too bad that they don't base financial aid off calculations like this. I think that one should be able to take out student loans sufficient so that you don't have to work during the school year. For law and medical schools, it is already this way. The advantage of student loans over normal personal bank loans is that you don't need an income and payments don't start until you are out of school.
 


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