Don’t let debt crush you.
Today is the last working day of a 29-year young professional in my team. A month ago, he walked into my office with a long face and with timid words, he said he wanted to quit his job. He was an above-average performer, and was clearly competent in his job. While I could have simply accepted his resignation and let him go, his facial emotions told me that he wasn’t particularly happy about resigning. So, I probed a bit.
While I was sad to see him go, what made me ‘sadder’ are his reasons.
Make the most of it, every day is pricey.
He had accumulated large student loans from his MBA program, which 3 years after graduation, is still looming large and is showing no signs of coming down meaningfully. After all, paying barely $100 a month on a loan worth $50,000 barely covers interest payments, leave alone the loan balance. His MBA was from a tier-2 school, which is not as valuable from a starting salary perspective as a tier-1 MBA would’ve been. He said he is hardly able to save money as he had to bail out his dad recently on a financial crisis, who apparently still has a mortgage close to retirement.
Hope the honeymoon was worth it.
The young man had also recently gotten married, and the wedding expenses led to another loan. He took his new bride to a memorable honeymoon in a beach resort, paid for by maxing out his credit card, which he is paying off monthly while suffering a ridiculous APY.
I saw that his face mellowed during the conversation. He said he is getting paid a fair salary in our company but that simply wasn’t enough for him with the kind of debt he has. He said he is joining a new high-pressure sales job in a different company (one that is not as well-known as ours), which promised to give him a 50% jump from his current salary with ambitious sales targets. I clearly told him that we cannot possibly match that kind of increase.
I was prepared to make a case with our HR head for something of the order of a 10% increase considering his performance record, along with some new responsibilities. But 50%? No way can our company match it. Even if we tried, it would upset the applecart so much with our current employees, it wouldn’t have been worth it. On balance, considering company’s interests and his situation, I accepted his resignation and even agreed to his request of one month notice. I assigned another team member to take over his project responsibilities while we started looking for a replacement.
Debt squeezes all your dreams.
At home that evening, the conversation left me wondering. How can a smart young person get into so much debt in so many areas so quickly? What is it about un-affordable pleasures that drives a person already saddled with debt to take on more loans? What drives people to spend so much on marriage and even after that, splurge on an expensive honeymoon? Remember, this was not an average guy who didn’t know his finances. He was a managerial-level professional with an engineering undergraduate degree and an MBA! He was doing business plans and financial analyses of new ventures in our company, so this is not a ‘typical’ debt-laden case of an average consumer who had no clue about money. The terrible retirement crisis is an obvious result of spiraling consumer debt, but this guy? I never would’ve guessed.
At the farewell lunch, he asked me for parting advice. I told him to never put himself in a position in the future where he is forced to either take up (or) leave a job for money. I said do what’s required to separate your job from your financial needs in the future. I said every decision taken only with financial worry in your mind cannot be the best decision for you.
He didn’t understand it at first, but as I explained the concepts of financial independence, things started becoming clear for him. I told him that FI is mandatory even if you don’t choose to retire early. I could see his eyes brighten and at one point, a light bulb went off and he finally said, “the work I did for this company is what I should have done for myself”. I thought that was an apt comment because his job in our team involved analyzing which new business venture has a better return on investment.
It is disappointing that the good lessons a job teaches don’t get applied to personal life. What makes an employee focus on cost reductions and increasing profits in his/her job for a company and yet, ignore those very principles in daily life? He said our conversation gave him the motivation to take on the goal to totally get rid of all debt within 2 years, and then find a job that he would really like doing than the high-pressure sales job he was now forced to take just to make more money.
Debt = Desperation. Period.
Raman Venkatesh is the founder of Ten Factorial Rocks. Raman is a ‘Gen X’ corporate executive in his mid 40’s. In addition to having a Ph.D. in engineering, he has worked in almost all continents of the world. Ten Factorial Rocks (TFR) was created to chronicle his journey towards retirement while sharing his views on the absurdities and pitfalls along the way. The name was taken from the mathematical function 10! (ten factorial) which is equal to 10 x 9 x 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1 = 3,628,800.
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