In my more pensive moments, I often wonder why more schools don’t teach personal finance. This is a country in which many can recite the first lines of Lincoln’s Gettysburg Address, recall their literature class lessons about early Shakespeare, and wax eloquently about the principles of human evolution.
Yet they would be hard pressed to tell you the difference between a mutual fund and an ETF, why it’s crucial to start saving and investing early rather than late, and when it might be wise to begin taking Social Security disbursements.
After talking with Gene Natali for only a few moments, I could tell he and I think a lot alike. But we’re different in that he wrote a book about this disconnect between the lessons taught in school, and those needed in our daily consumer driven society. It’s called The Missing Semester, and it’s just out.
Of course, one of the first things I asked Natali was why he and co-author Matt Kabala titled the book The Missing Semester. “Schools do a great job of creating mathematicians, biologists and psychologists,” he responded. “But they don’t prepare students for living financially on their own. The Missing Semester offers these financial life skills.”
Today in America, 70 percent of households live paycheck-to-paycheck, he says. Nonetheless, many of them have been able to scrape by. But that may not be the case for the generation coming of age. Natali says people of this next generation have got to get it right, or at least a lot more right, than their parents did.
“You can’t understate the importance of understanding the consequences of your financial decisions, given the debt levels in this country, and the underfunded pensions,” he remarks. “This is the first year people claiming Social Security will get less than a dollar out for every dollar they put into Social Security. It’s time to take control of our financial futures as individuals.”
In an easy-to-read 63 pages, or 13 three-to-five-page chapters, The Missing Semester delivers concise lessons intended to leave young readers eager to know more. It doesn’t preach, Natali says. “The key to the book is to make our readers curious enough to take ownership of their financial lives,” he reports. “If we preached at them, they would shut the book. But my making them curious, you draw them in.”
After reviewing the consequences of personal financial decisions in Chapter 1, Natali and Kabala point out that personal finance isn’t a tough subject, but could be the most important to master. We can grumble that school hasn’t prepared us for financial lives, or we can do something about it.
The next five chapters delve into the concept of sunk costs, and the types of debt in which many young people become mired. “Student loans, credit cards, and car loans are the three big debt issues for young people,” Natali says.
“We break down all three of those types of debt. If you have four student loans, you pay off the one with the highest interest rate. You care about the interest, not the size of the loan. And then if you have student loans and credit card debt, the message stays the same. If you have a credit card at 13 percent, and a student loan at four, you make a dent in the credit card.”
Today’s graduates are generations removed from the days when immigrants arrived in this country desperate to work, and proud of their paychecks. That’s not necessarily true of every one of today’s grads, so Chapter 7, “Take Ownership of Your Future,” comes with the message that any job is better than no job.
“I have a friend who’s a recruiter, and he calls recent grads with job openings,” Natali says. “Often he gets the response, ‘That 25-minute commute is too long,’ or ‘Three weeks of vacation a year is not enough for me.’ With a job, you’re taking care of obligations, and providing for yourself.”
Chapter 8, “Cost-effective Career Moves,” focuses on ways to get a better bang for your educational buck and still move up. Too many use graduate school as a fallback, the co-authors believe. Better to get that first job, the experience and the earnings, then look at professional certifications, rather than turning four years of student debt into six or seven, Natali says.
Chapters 9 and 9-1/2 zero in on “Investing and Why it Matters,” with the miracle of compounding as the message’s center. Chapter 10, a chapter devoid of text, offers two charts under the title “Defining Moment.” One chart is based on good decisions, such as taking a job right out of college and sharing a flat with friends, the other on unwise choices, like waiting to see if a better job turns up, or living an excessive lifestyle funded with multiple credit cards.
Through pie charts, Chapter 11 examines the benefits of budgeting, and how saving a measly $50 monthly can pay huge benefits. Chapter 12, “Putting a Roof Over Your Head,” hammers home the idea of whether you’re young or old, it never pays to make yourself house poor. And in Chapter 13, the authors look at the years from 25 to 65, and offer suggested savings levels at each age.
“The concluding message is don’t expect help.” Natali says. “You are responsible for your action — and your inaction.”
Gene Natali and I were about to say goodbye when he favored me with a final anecdote. His good friend Dave Hunter, founder of Pittsburgh-based independent wealth management firm Hunter Associates, gave a recent keynote address at the University of Pittsburgh Katz Graduate School of Business.
Hunter acknowledged the graduates’ generation has a reputation for being spoiled brats needing continual entertainment, Natali noted. “And he said that image is well deserved, but I see something else. I see the best of you are the best we have ever produced, and you have an enormous responsibility.”