Jonathan Pond


Continuing Education – Consumption or Investment?

Obtaining more education is usually a good thing, but it does have financial implications or else I wouldn’t bring it up. Education, particularly adult continuing education but also degree programs, can be acquired either for “consumption” or “investment.”  Taking an art criticism course would be classified as consumption unless you’re in the art business. Consumption makes you a better rounded and perhaps more interesting person, but probably not a more economically valuable person.  On the other hand, additional coursework in your chosen occupation is (hopefully) an investment in a more lucrative financial future.

If you’re thinking of a career change that is going to require a considerable amount of formal education, you need to consider the economic potential of leaving your current career in favor of a new one. It’s fine if you move into a less lucrative career if you understand that in advance.  For example, perhaps you’re tired of the drudgery and stress in your job as an engineer earning six figures. You dream of getting into psychology or teaching, both of which would require a lot of full-time college work. You certainly need to factor in the income hit you’ll be taking in the future on top of the financial sacrifice of returning to school. You also need to be realistic about job prospects when you complete your schooling.  In the above example, psychology jobs may be scarce while teaching jobs are likely to be plentiful, with attractive fringe benefits to boot. 

Smart Money Tips

  • Some things haven’t changed. It’s easy to conclude that so much has gone on in the economy and in our financial lives that the old rules of sound financial planning no longer work. While some things may be a bit different, most of the old rules are still valid. Two rules that will never change are, first, living beneath your means. If you don’t get into the habit of spending less than you earn, you can’t build the resources necessary to become financially independent while having the wherewithal to weather the inevitable financial storms that come along, like now. If, as many are predicting, future investment returns are going to be lower than in the past, saving regularly and regularly increasing the amount you save will become even more important. Second, diversification has, is, and will always be essential to protecting the investments you have so laboriously built up. Diversification is crucial in all investment market and economic conditions.
  • “I’m too old to risk my money in a declining stock market.” This refrain is ubiquitous among the older set when investments are sinking. And why not? The fear is that it will take so long for the market to recover that the hapless retiree will run out of money along the way. But isn’t the alternative – letting the money languish in safe investments that have no real return potential – just as risky? It’s usually risky whenever you view a dilemma as requiring an “either/or” resolution. In this context, the investor either settles for the safe choice and the money relentlessly loses ground to inflation or continues to invest in securities that have been losing value with no promise that the losses will stop, much less reverse. As is usually the case with such quandaries, there is a middle ground. Earmark a portion of the money to safer investments while continuing to give the rest a chance to grow. Take advantage of your advanced years by recalling that all bear markets end, and the subsequent recovery is both robust and fast. You don’t want to get caught midway through a recovery with most of your money on the sidelines.  
Food for Thought

There are two kinds of people who lose money: those who know nothing and those who know everything.     
      -Henry Kaufman

Money Can Be Funny

Pond’s Law of Bedrooms:

The more bedrooms you have in your home, the more likely your adult children will move back in.

Word of the Week

widdershins (WI-duh-shinz) – Moving in an anticlockwise direction; usually regarded as being unlucky.
Origin: From the Old High German widar meaning “against” and sinnen meaning “to travel.”
According to Scottish legend, it is bad luck to walk widdershins around a church.