Blue Collar and Proud of It: The All-In-One Resource for Finding Freedom, Financial Success, and Security Outside the Cubicle (30 page)

Chapter 7
The Blue-Collar Savings Plan

W
ho do you think has a better standard of living, a plumber or a doctor? That’s the question economics professor Laurence Kotlikoff asks in his book
Spend ’til the End
, and he was admittedly a bit surprised with the answer. Kotlikoff, a professor at Boston University, and his coauthor Scott Burns argue that depending on the circumstances, it just may be the plumber who ends up with the better standard of living.

Why? A lot of it starts with the cost of college and the loans you need to pay for such an education. “For a lot of people it doesn’t pay to go to college, ” Kotlikoff says. “It may not pay if you don’t make the median earnings.” Kotlikoff says college has been oversold, what with the exorbitant loans and the interest rates attached to them. “It’s a questionable investment to be borrowing that much money at a high interest rate.”

Kotlikoff says the college route makes even less sense “if you haven’t been a stellar student.” If youmake it through the four years and end up being stuck at an annual income of $50, 000 a year for the rest of your life, Kotlikoff argues that your loan repayment will weigh you down. The plumber, free of college debt, has an opportunity to save or even spend on vacations, meals out, or new home appliances.

Plus, when it comes to the skilled trades and blue-collar jobs, Kot-likoff points out that “some of these jobs can extend beyond retirement.” That’s not typical with white-collar workers, though. Usually when you retire froman executive job or a sales position, or frombeing a company manager, that’s it. “There aren’t many people who work as a banker until they’re seventy. If you want to, you may be able to be a plumber until you’re seventy, ” says Kotlikoff.

In his book, Kotlikoff compares these two hypothetical people—the plumber and doctor—and after college loans, medical school loans, interest, malpractice insurance, and a higher tax rate, the example illustrates a point worth considering. “[College] has been oversold, ” says Kotlikoff. “Everyone is focused on education as the panacea without strong support for that.” Kotlikoff says that when it comes to standard of living, the bottom line is that “whether you went to college matters, but it matters less than you think.”

All that said, it’s still important to invest in your future. Training is key to getting into the blue-collar workforce today, and it’s crucial for moving up the ladder.You may need to spend some money before you can start making money. In other words, even though you may not be planning to finance a college degree you will likely need to pay to get trained. Few things are totally free, including the training and certifi- cations needed for many blue-collar careers. You may be able to pay cash, you may have parents who are willing to help you out, you might have a savings plan, and, yes, you may have to take out a loan.

We’re not planning to give you actual personal financial advice or tell you where to invest yourmoney or how to get a loan. But we can try to help you think about the financial aspects involved in going blue collar. There may be a training program you have your eye on, an associate’s degree that will get you where you want to go, or even enrollment costs for that cost-free apprenticeship. If you’re going to go out on your own, you’ll need to be able to fund your start-up.

While the unions usually cover the actual costs associated with their apprenticeships, it’s possible that you’ll need certain books or work clothes. You may have to buy basic supplies such as notebooks, if there is classroomtraining. Small expenses add up—as does the gas to get to and from your training—so it’s a good idea to find out in advance just how much money you’re going to need for all of the related expenses.

Loans are available for students interested in going into trade school. I know I’ve been pretty critical of college loans, especially the kinds that send thousands of students and their parents into long-term debt. But what we’re talking about here are programs that havemuchmoreman-ageable fees and tuition attached. These programs will not cost you $30, 000 a year for four years the way some private colleges will, but rather youmay have to pay $5, 000 for a license or a certification. Think about what you want to do, how badly you want it, how serious you are, and remember that you have to invest in your own future. That $5, 000 to learn to drive a truck, for example, may seem like a ton of cash, but in the end it may be your ticket to a good career as a truck driver. More important, you’ll have earned thatmoney back in no time at all. I call that a smart investment.

Brian Greenberg works with families who are saving for college, many of whom are looking to sock away (or borrow) more than $100, 000 to pay for their son or daughter to attend a private college or university. When it comes to saving for a trade school, Greenberg, an accountant with Brian C.Greenberg &Associates inMarlton, New Jersey, says basic principles of saving apply, only on a far smaller scale. Allocating a bit from each paycheck until you reach your goal is the first step toward saving. “There is nothing special or exotic about saving for a blue-collar career, ” he says.

But he points out that paying for a trade school is a whole lot less money than a four-year college tuition bill. And when it comes to the payoff, he says borrowing or spending savings of $5, 000 to $8, 000 could be an excellent investment. Greenberg says a young adult who is borrowing or saving for an $8, 000 auto mechanic degree could be earning $40, 000 their first year on the job. “That’s a great investment. It’s a nice deal.”

Greenberg knows that for some families the $5, 000 can be taxing, but he still suggests loans as one way of financing something that could get you into a great paying job. “More people should look at that rather than just going off to college.” Although the money is significant for some, he says you can typically earn it all back in a relatively short amount of time. “The nut is a lot smaller than if you were saving $100, 000 for college. You can go through a lot less hoops.”

Talking Money with Mom and Dad

If you’re heading off to a training program or apprenticeship, you may not have enough to go out on your own. Will you be living at home until you’ve saved? Lay down the ground rules with your parents or your family. It’s important to make some decisions so that there are nomisunderstandings. Maybe you’ll live at home for the first year until you can pay rent on your own place. Perhaps your parents are even willing to front you some of the money they would have been spending on college. Also, if you’re living at home, set a time line. How long do expect to live there? Until you’ve completed an apprenticeship? One year from the start of your first job? Two years from the end of high school? No matter what the length of time, it’s a good idea to have an agreement upfront.

Maybe you’re entirely on your own. Make a budget. Map out how much you need for the basics, like food, rent, and utilities. Are you working for a boss, or are you running your own one-person business? You need to think about advertising costs, gas, and other small fees. Don’t get caught spending too much on your weekend fun, and don’t forget to save. Just because you won’t have college loans doesn’t mean you couldn’t end up in debt quite quickly.

When it comes to figuring out what you may need to save for and what you may need to spend to get yourself on the right track, we’ve outlined a few areas below. Each one of you will have a different set of circumstances and obstacles. You’ll likely be coming from different family and financial situations. No one situation will be the same, but this list should help you start thinking.

Fees
. Find out whether you will encounter fees to register, apply for, or enroll in any of the programs you’re considering. Ask unions that cover apprenticeship costs if you are responsible for any of the extras, such as books or materials fees. Know the tuition fees associated with training programs. When it comes to certification costs, be sure you know howmuch you are expected to pay up front and whether you will need to apply for a license (which could mean an additional cost).

Roomand board
. Will you be living away fromhome? If you are living at home, will your parents expect you to contribute somemoney on a monthly basis for food? You may have to start paying car insurance, health insurance, or phone bills. These things add up.

It’s important to have a conversation with your parents about what kinds of expenses you’ll have once you’ve graduated from high school. Often parents want to see you demonstrate that you are responsible and that you are taking your decisions seriously. Maybe they will offer to contribute a portion toward healthcare, or auto insurance, or food costs. Maybe they’ll cover everything, in which case you should have a plan for saving your money. Talk to them, so there is no misunderstanding, and think about asking them to split some of the costs with you. Maybe they are even willing to loan you some of the money that it takes to get the license you need to be on your way to earning a living.

Loans
. Federal Financial Aid (or FAFSA) is the best place to start. More information and applications can be found at
www.fafsa.edu.gov
. This is one of the most common ways of applying for financial aid. Check out the Department of Education website as well for other links and resources at
www.edu.gov
.Your guidance counselor should be able to suggest loan options and may even have ideas about local scholarships or grants that are available.Use your guidance counselor and even your school or town librarians as resources. There are some private loan programs that have been set up specifically for trade schools and for community colleges. The websites mentioned above can direct you as can
www.collegescholarships.org
.

As for financial aid and applying for money, you should know that there are two main ways of paying for tuition costs. The first is grants and scholarships, money that you generally won’t have to pay back. And then there are loans, which youmust pay back but these could offer you an opportunity to take courses or earn certifications. I know I’ve talked about howmuchmoney people owe on college loans, but becoming certified or trained for many blue-collar jobs is no longer a luxury; it’s a necessity. Perhaps you know of a course that willmake youmuchmore attractive to employers. Take it. If you’re choosing wisely, the payoff should come soon after you start working. Just do your homework, figure out exactly what you need, rather than just signing up for classes you may never use and loans that will be hard to pay back.

My final piece of advice: if you’re looking to save money or borrow money to finance your blue-collar training, spend less. Spend less on clothes, on food, on your car, and on entertainment. I know, I don’t need to lecture you about this. I’ve told my kids this over and over, but you have to make some sacrifices. If you’re trying to save to get some training so that you can get the job you want, now is the time to skimp on spending and make a budget. You can reward yourself with a vacation, a night out, a new jacket, or a new tool once you’ve completed your training and are on your way to earning. But for now, spend less.