Sacrifice Determines Value

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In the comments of a recent DFA article – highlighting how we always have options to help us overcome fear and unhappiness – one DFA reader tells of his lack of financial resources necessary to receive a degree he’s interested in.  My reply to his comment made me realize how perfectly personal sacrifice determines value… which is a concept well worth an article all its own.

Here is our comment exchange:

Comment: You know, I really like the way you track your financial progress openly and publicly like this. I especially like the “education loan” part, I think that’s the amount that I have to churn out if I want to get the advanced degree that I have been eying for the last 4 years.

My reply: Thank you, putting the information out there helps me to better realize my mission and reach my goals. I would encourage you to think long and hard before taking on new debt. I hope that you come away with the understanding that you should avoid paying later. If you want the education, save, work, and pay as you go. That way you value the education more because you are FULLY aware of how hard you are having to work to get it. Where as, if you get the education before paying for it, not only will you have to pay it back later at the expense of freedom of choice, but you run the risk of not valuing it as highly since you haven’t sacrificed for it yet.

What do you think?

Do you value things more if you sacrifice to get them as opposed to getting them, then having to pay for them later?



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1 Heather

I think it depends on the person and what is being financed.

My initial response was that paying for it later builds resentment, but sacrificing in the moment can build resentment, too.

Appreciating an experience is more likely (in my opinion) than appreciating a thing.

I’m still paying for grad school, though I finished in 2005, but I’m still using what I learned in grad school, and my life changed dramatically for having done it. Would that be different if I’d saved up and done it later? Possibly. I quit my job and moved across the country to do it — it’s the kind of leap you take when you’re ready. I hate my student loans and I will be glad to be rid of them. But the opportunity was worth it.

What it comes down to is: are you really living it, or are you entitled to it?

2 Peter

I think having to sacrifice to get something really makes you appreciate it a lot more. While I didn’t work my way through school, I did have to sacrifice quite a bit to pay my student loans off early, and that sacrifice made me appreciate my education that much more.

I only wish I had worked more during school, and paid it off a lot sooner! I just feel bad for people who overpay for their schooling to get a middle of the road degree, and then end up saddled with thousands of debt, without a high paying job to go along with it.

3 nick

I absolutely do! When i work hard and sacrifice to get something it means much more to me than if something was simply handed to me.

I think this is an important thing to know when raising kids. Do no give too many handouts, let your kids learn the value of hard work.

4 Steve in W MA

I think it’s important to learn how hard it is to earn money and what it’s really worth. I don’t think it’s important to do it all yourself though.

And I do think it’s important for parents to steward their children in learning how to account for and deal with their financial resources. Sit down with your child on a regular basis and go over their earnings and expenses with them. Make it a condition of employment (until they are 18) that they track their income and expenses and learn how to construct a budget and make a monthy income and expense report because that’s something that is more important to their future success in managing their financial life than the amount of dollars you can or will bequeath them.

5 Steve in W MA

I guess I didn’t answer your original question.

I do value/guard the things that I’ve worked for more so than the things that were just given to me. But as I’ve gotten older (and hopefully wiser) i’ve come to realize that ALL of my assets, whether given to me, inherited from my family, or earned by myself, are valuable in the same way. Without going through a period of soul searching and absolute honesty and integrity with my own finances, and digging myself out of debt, I didn’t feel this same way and I think I didn’t value ANYTHING highly enough, including myself.

6 Steve in W MA

As to the REAL original question, which is should the LW wait for his advanced degree: I say NO. You should do it now if it is possible for you, the sooner the better. This is not consumer spending or a new car, it is your life path and your career training. If you have thought it out, have a career path and goal and the degree is the way to it, it is an investment and is worthy of using debt to accomplish. This is assuming you have a plan in place of how to pay it off with realistic figures and you know the odds of getting work that uses that degree.

Some things in life are time sensitive and for those things there is a higher value to acting quickly than there is to waiting to be able to fully fund something, something I have learned in my own life at dear cost.

7 Matt Jabs

“Some things in life are time sensitive and for those things there is a higher value to acting quickly than there is to waiting to be able to fully fund something, something I have learned in my own life at dear cost.”

Like what Steve? I think readers would really like for you to elaborate… I know I would – what you’re referencing is actually something I’m going through now.

8 Steve in W MA

Sure, Matt, I’d be glad to elaborate. One recent example is in my city–a very promising retail location opened up because the business owners at that location bought the adjacent building and moved their business there. I noticed the promise of the location for a cafe/sandwich shop because I know the business environment of that area of town very well and knew there was no convenient cofee/sandwich type cafe in that part of town (and there is a well-used public bus stop nearby as well).
In this case I failed to act quickly enough and contact the landlord and another business owner in town secured the site for his second business. I’m very sure that he will be successful in this site so that location is basically locked up for the next 10-20 years.

This is an example of an opportunity that exists only for a short period of time that requires fairly quick action to capitalize on. And the business itself would have required me to take on a loan (although I have favorable loan sources).

In my everyday life (for basic living) I am very debt-averse, at least at this point in my life. I had to dig myself out of consumer debt over the past 5 years and was very happy to be able to get myself out of that. I consider consumer debt to be largely negative because it limits one’s freedom, usually just because of purchases that were not necessary and which you could easily have lived happily without. So such purposes are not, in my mind, a valid compensation for the debt that they incur.

But in business, when it may be necessary to secure a larger sum of money than I have in my current possession, I am willing to use debt as a tool. A loan can make it possible to secure ownership (or right-to-use) of property in the window of time that it becomes available on the market.

Education for an advanced degree could fit many of the same criteria as my above example: (1) somewhat time sensitive. There is a time frame in your life when the possession of such a degree has its maximum value. Generally, the earlier the better, because you can leverage it in the coming years and get the best return out of it if you start as soon as possible. If you can get a job with that degree and work for 30 years with it instead of 20, you will probably come out ahead. (2) Requiring a greater outlay of funds than most people at that stage of life have available to them from their earnings and savings. (3) In a field (I am thinking in particular of tenure track positions) where it is necessary to pursue it while still in your 20s or early 30s. A 40 year old doctoral candidate in mathematics, for example, can be anywhere from 5 to 10 years past the ideal career trajectory for his or her field.For some jobs, applicants over a certain age who have just received their degrees may not be seriously considered for a job.

These are a couple of thoughts I have a bout this matter. In general, my view is that one should always minimize debt, but not at the expense of taking advantage of truly great opportunities. (Of course, the hard part is learning to distinguish those great opportunities and promising investments from mere passing fancies!)

I do think that someone who is passionate about their field, has investigated the potential economic return of an advanced degree and has found that the return is there (compared to the investment of time and money reuquired, and who is willing to commit to the serious pursuit of his or her studies, has a very good reason to take on a loan for this purpose. It should be a well-considered decision though.

I am interested and curious as well about why you have been thinking about this topic yourself., if you care to elaborate in the future.

Best Wishes, Matt!

Steve

9 Matt Jabs

Thanks Steve. I recently resigned from employment to create a full-time opportunity to focus on my own endeavors. It is not exactly the same, but it is still risky. I weighed my options, and moved forward with my life as a full-time entrepreneur. I am slightly anxious, but much more peaceful, hopeful, and excited.

Also, as you read in another DFA article, I have also been kicking around the idea of purchasing land in Northern Michigan. Land up there is beautiful and extremely cheap right now. I will most likely hold off on this because I do not think the buyers market will change anytime within the next five years and possibly longer, but I am considering it nonetheless.

10 Steve in W MA

A great example of a time-sensitive opportunity is the situation referred to in the saying “Strike when the iron is hot”.

When iron is pulled from the blacksmith’s forge and placed against an anvil it is red hot and malleable. Several strokes of the blacksmith’s hammer can shape it into the desired form, bend it, lengthen it, or even cut it in two.

A mere minute later, the iron will have cooled enough that it is very difficult to form. In another half a minute it will have cooled enough that you could hammer on it continuously for most of the coming year and not get positive results.

It took me a long time to realize what this saying is trying to tell us but some life experiences and introspection finally revealed it to me and the saying now speaks volumes to me about certain situations.

11 Steve in W MA

A final thought for the evening (actually, early morning!):

One of the best practical reasons for leading a conscious and frugal financial life and for balancing spending with appropriate savings (beyond the peace of mind and spirit it contributes to) is that when certain opportunities present themselves to you, the savings and general financial state that you have built up through careful stewardship of your resources can allow you to “pull the trigger” on time sensitive strategic opportunities. This is both from a psychological and a practical/financial standpoint. Feeling secure financially and having great cash reserves allows you to move more boldy than you would if you were constrained by debt and/or had little cash of your own to call upon.

12 Matt Jabs

Exactly. That is why it is best to “pull the trigger” after building cash reserves. It reduces risk. It can be done before reserves are built, but the risk increases.

13 Jenna

When it comes to education, either way you have to work hard and pay for it. So whatever choice you make, it is ultimately up to you to enjoy it and put it to good use. Another way to look at this is, if you work hard in high school and get a good scholarship, you can enjoy college and not have to worry about paying for it (or at least not the full price).

14 Matt Jabs

Great point. I think the sticking point for most high schoolers is that they may have no idea what they want to do with their lives, so committing themselves to anything is too risky, be it college prep or whatever else. Our culture of distraction doesn’t help, and though the responsibility of personal success always lands squarely on our shoulders, the culture seems to breed folly rather than success, which is simply another hurdle to overcome.

15 Lisa Morosky

Your question has me saying: “It depends.”

My husband is in chiropractic school right now. He went from undergrad to this 4 year program immediately (we went to college together, I’m the sole-provider, and I have no intentions of ever going back to school…ever). If we had waited to do this, it would take forever to save the money (saving six-figures, plus paying off undergrad student loans). Plus, we wouldn’t be able to do the other things we want to do before we’re “old” – like start a family – because all the money would go to saving for this, for years. It makes sense for us to do it this way because he’ll have a higher income when he’s done (for us, this is definite, I know it’s not definite for everyone), we’ll be able to bootstrap for a few years, then still start a family fairly young.

BUT, if you asked me about MY undergrad education, I’d tell you that it would have been better for me to sacrifice my way through it – because if I had had to do that, I would have taken it more seriously or maybe not even have gone (it wouldn’t affect what I’m doing now, owning my own online businesses).

It all comes down to priorities and situations, I think. In general though, I tend to appreciate things I’ve had to bootstrap for – like my nice computer, and my car. It’s that feeling of accomplishment that makes it worth it.

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