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Financial Compass Part II: The Value of Education

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By Rick McKinstry – Dallas South News Contributor

Last month I introduced the concept of the Financial Compass.  Similar to a directional compass, the Financial Compass is comprised of four key components: Earnings, Savings, Wise Spending and iNvesting. Over the next few months my objective is to delve deeper into each of these components, beginning with the all important first component of Earnings.

As stated last month, the single greatest factor determining average Earnings is Education. The following chart was produced by the Bureau of Labor Statistics for the year 2008. The chart clearly supports the assertion that on average, those with higher levels of Education Earn significantly more over their life time than those without comparative levels of education. Another equally important point depicted on the chart is the fact that the unemployment rate for those with higher levels of education is significantly lower than those without it.

Education pays in higher earnings and lower unemployment rates

In addition to the financial benefits resulting from higher education, there are also significant societal benefits. Those with higher levels of education are far less dependent on society for support, tend to smoke less, enjoy generally better health, and experience an incarceration rate that is far less than that of the rest of society. 1

Beyond the education attained through traditional institutions of higher learning, it is also important for individuals to educate themselves on important personal financial principals such as budgeting, saving, spending and investing, the latter three to be explored in greater detail in the future.

There are a number of computer programs available today, many of which are free, which can help individuals in each of these very important areas. Additionally, the personal financial planning profession has changed considerably over the past few years. In the past, most planners focused their efforts almost exclusively on wealthy clients, offering very little in the way of service to those who did not fall into the wealthy camp.

Today, there are planners who are willing to work with clients in all socio-economic classes, including those who are very early in their wealth building careers and even those with negative wealth. If you are not a do it your-selfer, don’t be afraid to reach out to a financial planning professional. A good financial planner who honors his fiduciary responsibility to the client can be worth his weight in gold.

In today’s economic environment, dependence on a single source of income for most of us is a very risky proposition indeed. Given corporate America’ insatiable appetite for downsizing, rightsizing, outsourcing,  the financial well being of many of us is at risk. To mitigate this risk, one should seriously consider developing additional sources of income.

Those of us who are fortunate enough to still have a job are being stretched to do not only the work that we’ve done in the past, but also a portion (if not all) of the work of those who are no longer with the company. Given that, the thought of securing a second job for many is not at all appealing.

For that reason I suggest that you consider those things that you enjoy doing, the things that you have passion for, then figure out a way to make money with it. By doing so, you enjoy all the benefits that come along with having an additional stream of income, and because you enjoy doing what you’re doing, it doesn’t feel so much like work.

Most of the benefits associated with additional streams of income are obvious,  but others – not so much. The most obvious benefit is that you’d have additional income that can be used to lessen your financial dependence on your primary employer as well as help you to reach your financial goals faster. The not so obvious benefits, especially if you start a small business or work for yourself, include the availability of a tremendous array of tax benefits available to small business owners and the self-employed, as well as the basic personal satisfaction that comes along with doing what you love.

Please come back next month and we’ll delve deeper into the next component of the Financial Compass, Savings.

Rick McKinstry is Personal Financial Planner (PFP) and owner of RLM Financial. He has an MBA from Indiana University and can be reached via email at or at (972) 821-8948.

1 College Board “Education Pays 2004”

Edited by Shawn Williams

Categories: Business, Featured, Rick McKinstry
  • Travis Singleton


    I agree 100% with the need to get educated. Getting your degree is new lease on life. If you are concerned about the cost and student loans intimidate you then you have to seriously think about the risk of investing in a education? You could finance your degree by students loans, pell grants, and most employers offer tuition reimbursement. You need to check with your HR rep. However, I think by not doing the research on obtaining a higher education will lower your chances of improving your lifestyle. Take baby steps. Attend a Jr. College and take the basics. Then look at the surrounding 4 yr schools to get a professional or major degree. Remember you have the chance to become anything you want to be. It is never too late! I wrote an insurance policy for a dental student who was in his late thirties.
    Also, like Rick stated we need to look at our finances. Savings is huge. Also, live below your means. If your total household income is $90,000 live like you only make $70,000. This practice will help you save for a raining day(and there will be storms) and afford you a to be debt free and not live pay check to pay check. Treat yourself but don’t over indulge. Cars don’t need big rims and you don’t always need the latest kicks, however, you do need money for retirement and cash reserve.
    Also, as stated earlier, use your talent i.e. writing, speaking, sewing, cooking, giving a lesson, to supplement your income. Start small give private lessons or small catering. Build up a client base and this can give you some extra income.

    Thank you,

    Travis D. Singleton
    Insurance Agent
    Financial Advisor

  • John Cooper

    Rick, your point about education is so true. If you don’t speak the “Kings Language”, he knows he can pay you less. Nothing wrong with speaking another language as long as you are speaking two languages well.

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