Saturday, October 4, 2014

THE BIG QUESTION: Spending Money for Masters' Tuition Or Saving The Money In Case of an Ebola Outbreak

An EPJ Reader emails:
With the recent decline in the stock market, the possibility of getting out of control, now that Ebola is in my home state, and I have my Master's tuition coming up next week, would it be wise to save that tuition money, and keep some extra liquidity in case Ebola gets worse and the money supply crashes again?

My reply.:

In my view there is very little reason to set aside money for an Ebola outbreak. I side with Dr. Paul on this that the dangers are way overblown (SEE: Ron Paul Warns of Ebola ‘Overreaction’).

As far as putting money on the side in anticipation of a money supply crash versus paying tuition, I think you are looking at things very wrong here.

In your lifetime, you are likely to go through many ups and downs in the business cycle, as long as a central bank like the Federal Reserve is around. Some of them could be very severe cycles with very strong price inflation and potential destruction of the dollar.

Your Masters' degree question is a long term question about career moves over more than just the current cycle.

The question you should be asking is whether a Masters degree will make a significant difference in your ability to survive and prosper over these periods of crazed Fed manipulations of the economy.

I can't answer that question for you without knowing many more details about you. Just for starters I would need to know the college that you would be attending, your major etc.

The specific college may be very important. I would advise almost anyone who has the opportunity to go to Harvard, MIT, the London School of Economics, Stanford etc. to go. Largely because of contacts that can be made and because of the cachet that comes with a degree from one of these institutions. A degree from one of these institutions signals to most in the business world that you are smart, even if you are an idiot. It helps you get a foot in the door. And the contacts could be very important because they might provide access to money and brain power, while not everyone in the Ivy leagues is bright, there will be some that are very bright and you will be rubbing elbows with them. It is a great way to build a powerful, quality Rolodex, but, of course, there are other ways to do so.

Any other college or university would depend on your major. If you are attempting to learn a skill such as accounting or engineering,  then an advanced degree may be valuable from almost any college or university. An advanced degree in English literature will be much less valuable, and an advanced degree in, say, gender studies might set you back to your thumb sucking infancy.

So you have to compare what a masters degree will mean specifically for you long-term versus alternative uses for the money. Holding back tuition money to prepare for an economic crash is unlikely to be a sound move. Preparing to protect wealth during periods  of economic volatility is for people who already have significant money. Periods of economic volatility are very tricky and it is about trying to protect significant wealth rather than protecting tuition money.

On the other hand, there will be people who make major money from a small pile by correctly trading the business cycle, these people will emerge. But there will be very few of these people and it will be extremely difficult to pull it off, most who try will eventually lose most of their money from swashbuckling trading.

Tuition money could also be used alternatively for a business project. If you are the next Bill Gates and you have an idea comparable to Windows then it makes no sense for you to continue in college (as it didn't for Gates).

Another alternative is to do what James Altucher has suggested and use the tuition money to travel the world for a year and learn what is going on. A good part of eventually being a successful entrepreneur is to have many experiences so you individually get to see how different pieces of the world come together and how you might be able to rearrange a couple of the pieces for serious profit.

BOTTOM LINE: It is your world, make it interesting but think long term and take steps that will be important long term. For each individual these steps will be different.


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