Author Topic: Why are business majors likely to be financial trainwrecks?  (Read 21963 times)

cheapass

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Why are business majors likely to be financial trainwrecks?
« on: August 02, 2016, 02:52:57 PM »
I've noticed the phenomenon that there are a lot of people highly educated in business (CPA's, MBA's, etc.) who blow through money and structure their household finances to the point where any unexpected cost is an absolute emergency. The part that is so mind boggling is that of all people, they are the ones who understand finance, economics, opportunity cost, compound growth, and how money works. They sat in the same finance classes I did (I'm an engineer undergrad and finished an MBA last year).

Why in the fuck are they not realizing that they don't have to be cogs in a corporate wheel their entire lives if they just show a little restraint when it comes to spending? The math isn't hard!
« Last Edit: August 03, 2016, 09:59:09 AM by cheapass »

dandarc

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #1 on: August 02, 2016, 02:57:25 PM »
Personal finance isn't what is taught in business school.  Sure it is easy to see how a lot of the concepts overlap, but a lot of people, in my experience, lack the ability to think abstractly.

SeaEhm

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #2 on: August 02, 2016, 03:00:00 PM »
Math is a science
People are emotional
Spending for some is closer to a science while spending for others is closer to emotional


marty998

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #3 on: August 02, 2016, 03:04:46 PM »
The guys at the top of business are used to abundance, or they are conditioned to believing the good times will never end (hit with an eternal optimism gun?)

There's also the "spend money to make money" mentality...

cube.37

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #4 on: August 02, 2016, 03:05:44 PM »
Maybe it's because they see their bosses making 500k-10 million and assume they'll be there soon enough. I'm in financial services, and my best friend saves $0 while making $80k/yr since he'll be making $200k+/yr in 6 years.

The mentality he has is: why save now when I can save the same amount in a month's pay when I'm 30 making at least 200k year.

That, and having upper middle-class parents means you don't need an emergency fund.

Obviously we know about this mentality of saving more when I make more being carried on into your 40's and 50's. That and lifestyle creep means you're saving $0 even if your income goes up.

SeaEhm

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #5 on: August 02, 2016, 03:09:55 PM »
That, and having upper middle-class parents means you don't need an emergency fund.


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Re: Why are business majors likely to be financial trainwrecks?
« Reply #6 on: August 02, 2016, 03:10:40 PM »
When my wife worked in public accounting, many of her co-workers, from Staff/Junior accountant to managers to directors/partners drove very fancy cars. One junior partner had a sports car, a truck, a sports SUV, and a tuned minivan (natch). I think my wife and 3 others were the only ones who drove boring Hondas. Funnily, these 4 have become close friends. 2 of them married each other.

The general reasons given by all these ex-coworkers of hers (who we meet a few times a year at parties) was that they work long hours. Especially those who work in Tax. 60-70 hours weeks are common. One year, my wife calculated that 5-6 months the company catered dinners, and people has only Sunday afternoons off. "I work long hours and hence I deserve a fancy car." Mind you, they are salaried, so no overtime pay, and the shitty bonus was no more than 5-10% of annual salary.

Many of these folks have serious money woes. Oy vey!

LadyStache in Baja

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #7 on: August 02, 2016, 03:13:30 PM »
That, and having upper middle-class parents means you don't need an emergency fund.



+1

slugline

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #8 on: August 02, 2016, 03:13:55 PM »
Many doctors and other health professionals continued to use tobacco products long after their ill effects were proven. Human beings in general are disappointing at long-range planning.

cheapass

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #9 on: August 02, 2016, 03:19:20 PM »
There's also the "spend money to make money" mentality...

lol this reminds me of a comment my spendypants boss made... "It's expensive to look cheap!"

Yeah, you know what's guaranteed to be expensive? Looking expensive, ya schmuck! We're married men, who cares?

The mentality he has is: why save now when I can save the same amount in a month's pay when I'm 30 making at least 200k year.

I suppose, but that "logic" ignores the time value of money and the compound growth one can yield between now and then

"I work long hours and hence I deserve a fancy car."...

Many of these folks have serious money woes. Oy vey!

I work long hours so I want to ensure that I'm chained to this job for as long as possible!! GAAAAHHHHH!!!
« Last Edit: August 02, 2016, 03:23:52 PM by cheapass »

Reynold

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #10 on: August 02, 2016, 03:20:35 PM »
One particularly egregious example I saw long before this forum existed was a columnist in a financial magazine (Money Magazine?  Not sure any more.) who wrote about sitting down to really look at their several thousand dollar credit card debt, and work out a way to pay it off, and offer tips for the reader to do it.  Mind you, this wasn't hypothetical, this was debt the writer of the advice column actually had.  They didn't even know the total before doing sitting down to write the column. 

More recently, during the 2009 financial crash, I saw a story about a family where the guy had a high level job at a bank, and they had spent their entire life savings, including retirement accounts, within 6 months of when he was laid off.  NOW, as the story was being written, they were planning to cut the trips to Vail, private schools, full time nanny, cleaning services, etc. out of their budget.  It had never occurred to him that a banker might take more than a month or two to find another six figure job in the early 2009 time frame, say soon after Lehman Brothers collapsed and the government was thinking of nationalizing the big banks. . .

Trudie

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #11 on: August 02, 2016, 03:26:07 PM »
Math is a science
People are emotional
Spending for some is closer to a science while spending for others is closer to emotional

Mustachian here, and a CPA.  I think this explains the dichotomy for some business people.  I also think that for some in business who are so used to money coming and going through their hands each day they don't even think about it.  It's like water.  Many of them are heavily leveraged.  Your typical Mustachian isn't.

This is similar to a lot of professions -- you can't really make a generalization, though.  How many of us have known an overweight doctor?  The professional musician who smokes?  The teacher who doesn't like to read books?  Luckily, I would say such examples aren't the norm, but they're out there.

Eric222

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #12 on: August 02, 2016, 03:28:31 PM »
That, and having upper middle-class parents means you don't need an emergency fund.


I'm going to go hang my head in shame now....

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #13 on: August 02, 2016, 03:36:51 PM »
My ex is definitely someone you want to run your business finances.  However, if I gave her $1 out of the family budget she would figure out a way to spend $2.  She said the she dealt with this crap all day at work, doesn't want to deal with it at home.  If she would have stayed out of the bank account and not fuck the neighbor, we might still be married. 

cheapass

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #14 on: August 02, 2016, 03:38:09 PM »
This is similar to a lot of professions -- you can't really make a generalization, though.

In my experience, based on the number of people age 55+ who have made high salaries for a couple decades but hate their jobs/commute/stress, the only reasonable conclusion is that they're total idiots with their money.

Based on their logical understanding of financial concepts, you would expect there to be business majors retiring early all over the place, right?

Maybe all of the smart ones just ride off into the sunset before age 45, never to be heard from again...
« Last Edit: August 02, 2016, 04:11:30 PM by cheapass »

arebelspy

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #15 on: August 02, 2016, 03:39:37 PM »
Haven't seen what I think is the answer posted yet, so I'll chime in.

Quote
Why are business majors likely to be financial trainwrecks?

They aren't.  Just just notice when they are.  It's simple confirmation bias.
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gooki

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #16 on: August 02, 2016, 09:03:17 PM »
Same reason psychology majors are likely to have mental health issues.
« Last Edit: August 02, 2016, 09:55:11 PM by gooki »

arebelspy

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #17 on: August 02, 2016, 09:06:13 PM »
Same reason psychology majors are likely to mental health issues.

I think you accidentally the whole thing there.
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Re: Why are business majors likely to be financial trainwrecks?
« Reply #18 on: August 02, 2016, 09:36:30 PM »
Because the tie cuts off blood flow to the brain?

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #19 on: August 02, 2016, 11:54:19 PM »
I've always subscribed to the theory that there's a certain amount of self-selection going on there. These professions have the reputation for being quite high paying, so they attract people who want/believe they need high salaries.

I also think you can separate out CPAs and actuaries from bankers and financial services professionals in terms of the severity of the effect. The later two had certain reputations for really crazy money for quite some time, and so people who wanted really crazy money went there. Of course, that often came at the expense of having a life outside of work, and so people who didn't prize money above all were discouraged.

And what do you do with money? You spend it, and money you don't actually have. Bonus points if its some status item that only someone above you in the company food chain cares about.

ShortInSeattle

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #20 on: August 03, 2016, 09:50:31 AM »
Haven't seen what I think is the answer posted yet, so I'll chime in.

Quote
Why are business majors likely to be financial trainwrecks?

They aren't.  Just just notice when they are.  It's simple confirmation bias.

Agreed, ARS. I'm a business major, sitting here, rolling my eyes at all the assumption-making in this thread. But to the rest - don't let me slow down ya'lls judgement party.



SIS


dcheesi

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #21 on: August 03, 2016, 10:03:28 AM »
Why in the fuck are they not realizing that they don't have to be cogs in a corporate wheel their entire lives if they just show a little restraint when it comes to spending? The math isn't hard!
Because business majors are the folks who bought into the corporate wheel and its associated "life"style enough to want to specialize in maintaining it.

kayvent

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #22 on: August 03, 2016, 10:17:22 AM »
There were articles like this that MMM wrote a post about: If You Have Savings In Your 20s, You're Doing Something Wrong. I think a similar rational holds for business majors. Despite my doubts, I am told that they are people.

If you're salary is going to double in a few years you may fool yourself into thinking "Oh, when I start making 40K more a year, I'll start saving." Or maybe you enter a treadmill of incrementally raising your (presumed) standard of living as your salary raises. It is a greedy heuristic, each step it is better to spend more because that 4K/year raise can raise your quality of life immediately if you spend it but it has a delayed affect to save it. It is a well-understood concept in economics that people hyperevaluation present day consumption, or monetary gains, over future consumption ( la savings).

Same reason psychology majors are likely to have mental health issues.

I thought the old trope is that people went into psychology to self-diagnose their health issues? Maybe people with poor financial skills go into finance while the mustachian artists who can live on 20K go for their passions?

MgoSam

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #23 on: August 03, 2016, 10:42:36 AM »
I can certainly understand why people that think their income is going to treble in the next few years would want to hold off saving money, but I still think it's just stupid to think that way for the following reasons

a. If you are spending all that you earn now, you are very likely to continue doing so even with a significantly higher income
b. Even if A is not true, as you climb the corporate ladder your colleagues will be making as much as you, thus raising pressure for you to spend more on clothes, cars, house, ect, thus raising expenses.
c. Unless you find yourself at the peak of your career with no upward advancement possible, you will continue to long for more salary and thus put off investing what you are currently earning.

Please note that in situation c, it is highly unlikely for someone to ever feel like they've reached the zenith of their career. People always want more and with ambitious businessmen(women) this is even more true. Let's say that they are a Fortune 50 CEO, they still will think that they can increase their income by raising their company's EPS.

Crusader

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #24 on: August 03, 2016, 10:47:03 AM »
I also like to think people just think they can get a way with small margins over long periods of time. Most businesses are lucky to have two digit percentage profit margins. So why would you deprive yourself with to get a savings rate of two digit percentage?

Even though I went to business school, I was in the IT side so I did not really care for the flashy side of business. I always detested the crappy profit margins of businesses and I did not having to worry about my next paycheck or no savings. So try to maintain as high a savings rate I can while still buying somethings I enjoy. So far it has been about 50%~.  So I have a lot of savings to shield myself from life's unfortunate events. I also have a considerably lower stress job than what these people deal with.

GrumpyPenguin

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #25 on: August 03, 2016, 11:45:32 AM »
Are business majors more or less likely than average to be financial trainwrecks?  This, I don't know.

I am intimately aware of the (lack of) my heart health and the slowly growing size of my belly, yet I don't exercise enough. Still, I probably get more exercise than average.

cheapass

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #26 on: August 03, 2016, 12:24:08 PM »
Are business majors more or less likely than average to be financial trainwrecks?  This, I don't know.

You have a point, they may not be more inclined to be a disaster. But given the knowledge of financial concepts and the high stress jobs, I would expect many more businesspeople to have their shit together and be retiring early compared to other demographics. This does not seem to be the case.

Digital Dogma

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #27 on: August 03, 2016, 12:46:06 PM »
I've noticed the phenomenon that there are a lot of people highly educated in business (CPA's, MBA's, etc.) who blow through money and structure their household finances to the point where any unexpected cost is an absolute emergency. The part that is so mind boggling is that of all people, they are the ones who understand finance, economics, opportunity cost, compound growth, and how money works. They sat in the same finance classes I did (I'm an engineer undergrad and finished an MBA last year).

Why in the fuck are they not realizing that they don't have to be cogs in a corporate wheel their entire lives if they just show a little restraint when it comes to spending? The math isn't hard!
They haven't learned how to sandbag the budget to give themselves a buffer :)

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #28 on: August 03, 2016, 12:59:20 PM »
I've noticed the phenomenon that there are a lot of people highly educated in business (CPA's, MBA's, etc.) who blow through money and structure their household finances to the point where any unexpected cost is an absolute emergency. The part that is so mind boggling is that of all people, they are the ones who understand finance, economics, opportunity cost, compound growth, and how money works. They sat in the same finance classes I did (I'm an engineer undergrad and finished an MBA last year).

Why in the fuck are they not realizing that they don't have to be cogs in a corporate wheel their entire lives if they just show a little restraint when it comes to spending? The math isn't hard!

Are you sure those two are both true and related?  You have to remember, there are a lot of highly paid businesspeople, and if they don't have the whole RE thing as a goal, it's perfectly possible they are "blowing through money" from your perspective BUT not to the point of irresponsibility or recklessness.  They may just be able to afford more, and since they aren't trying to hit some 30-40-50%+ savings rate, they "can afford" (depending on your values and definitions) to spend some money.  Not everyone with nice things is a walking financial disaster ready to implode.

SeaEhm

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #29 on: August 03, 2016, 01:40:57 PM »
Not everyone with nice things is a walking financial disaster ready to implode.



Here is the easiest way to spot financial disasters
They:
1) eat lunch with coworkers and order drinks on top of that
2) drive a car that they paid more than $8,000 for
3) buy new clothes
4) have engagement rings/wedding bands that costs more than $300
5) had a wedding that was at a venue
5) have a house larger than 1,000 sq ft in a LCOL area and 200 sq. ft in a HCOL area
6) want to work until they are over 50
7) have two cars (see #2)
8) have their kids in preschool

Undefined

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #30 on: August 03, 2016, 01:43:00 PM »
It's still mind-boggling sometimes to realize that people who you assumed had their shit together, in all reality, don't.  Business majors, for one, but I'm sure if you look too hard at any group you'll find some of the same issues.

Still, it blows my mind.  My dad is a tenured professor at a private university in their school of business.  He's been there for 30 years.  On his salary - which I have no idea what it is or was, but now that he's got seniority, I'm fairly sure it's into six digits - he and my mom bought a house, raised four kids in private, religious schools, and didn't have my mom work until the youngest was in high school.  Were mom and dad frugal to get by on that salary?  Oh yes.  We were the odd family out as far back as I can remember - no cable, no AC, no new cars...

My mom retired early; he put in for phased retirement last year, where it's some kind of phased thing that he'll get less and less duties until he's done in three or five years or whatever.  He told me that he should have retired years ago, back when he still whole-heartedly loved work, but he wasn't sure then that he wanted to be retired.  Now he's sure.

My mom was frankly appalled at the comments from his coworkers when he announced he was going into phased retirement - tenured, respected professors of business, who have Ph.D's and teach folks going for their MBAs, etc - who stated they'd be unable to ever afford to retire.  Her exact words: "What have they been DOING with their money for the past thirty years?"  The people who think they are able to retire - much less retire before age 65 - are in the utter minority out of these people.

And these are the people who teach the businesspeople of our country.  I see a slight flaw here.

MgoSam

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #31 on: August 03, 2016, 01:53:39 PM »
Not everyone with nice things is a walking financial disaster ready to implode.



Here is the easiest way to spot financial disasters
They:
1) eat lunch with coworkers and order drinks on top of that
2) drive a car that they paid more than $8,000 for
3) buy new clothes
4) have engagement rings/wedding bands that costs more than $300
5) had a wedding that was at a venue
5) have a house larger than 1,000 sq ft in a LCOL area and 200 sq. ft in a HCOL area
6) want to work until they are over 50
7) have two cars (see #2)
8) have their kids in preschool

What is  your definition of "financial disasters?"

Frugal_NYC

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #32 on: August 03, 2016, 02:02:08 PM »
Not everyone with nice things is a walking financial disaster ready to implode.



Here is the easiest way to spot financial disasters
They:
1) eat lunch with coworkers and order drinks on top of that
2) drive a car that they paid more than $8,000 for
3) buy new clothes
4) have engagement rings/wedding bands that costs more than $300
5) had a wedding that was at a venue
5) have a house larger than 1,000 sq ft in a LCOL area and 200 sq. ft in a HCOL area
6) want to work until they are over 50
7) have two cars (see #2)
8) have their kids in preschool

Is this mostly sarcasm?  I hope anyway

jinga nation

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #33 on: August 03, 2016, 02:08:14 PM »
Haven't seen what I think is the answer posted yet, so I'll chime in.

Quote
Why are business majors likely to be financial trainwrecks?

They aren't.  Just just notice when they are.  It's simple confirmation bias.
I agree. I have plenty of co-workers who are Engineering/IT and total financial fuckups. I mean FUBARs. They fuck the fuck outta their fuckups. But I making fun of fuckups in my wife's profession is funner. Dunno why, but it is what it is.

charis

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #34 on: August 03, 2016, 02:20:58 PM »
Not everyone with nice things is a walking financial disaster ready to implode.



Here is the easiest way to spot financial disasters
They:
1) eat lunch with coworkers and order drinks on top of that
2) drive a car that they paid more than $8,000 for
3) buy new clothes
4) have engagement rings/wedding bands that costs more than $300
5) had a wedding that was at a venue
5) have a house larger than 1,000 sq ft in a LCOL area and 200 sq. ft in a HCOL area
6) want to work until they are over 50
7) have two cars (see #2)
8) have their kids in preschool

Hmmm, this is extreme.  I can check off most of these, except 3 and 6, with qualifiers (out to lunch or happy hour only occasionally, cars are 10 years old, rings collectively cost just over 300, preschool = daycare).   I'm still a bit of a disaster, but not for these reasons.

kayvent

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #35 on: August 03, 2016, 02:35:08 PM »
It's still mind-boggling sometimes to realize that people who you assumed had their shit together, in all reality, don't.  Business majors, for one, but I'm sure if you look too hard at any group you'll find some of the same issues.

Still, it blows my mind.  My dad is a tenured professor at a private university in their school of business.  He's been there for 30 years.  On his salary - which I have no idea what it is or was, but now that he's got seniority, I'm fairly sure it's into six digits - he and my mom bought a house, raised four kids in private, religious schools, and didn't have my mom work until the youngest was in high school.  Were mom and dad frugal to get by on that salary?  Oh yes.  We were the odd family out as far back as I can remember - no cable, no AC, no new cars...

My mom retired early; he put in for phased retirement last year, where it's some kind of phased thing that he'll get less and less duties until he's done in three or five years or whatever.  He told me that he should have retired years ago, back when he still whole-heartedly loved work, but he wasn't sure then that he wanted to be retired.  Now he's sure.

My mom was frankly appalled at the comments from his coworkers when he announced he was going into phased retirement - tenured, respected professors of business, who have Ph.D's and teach folks going for their MBAs, etc - who stated they'd be unable to ever afford to retire.  Her exact words: "What have they been DOING with their money for the past thirty years?"  The people who think they are able to retire - much less retire before age 65 - are in the utter minority out of these people.

And these are the people who teach the businesspeople of our country.  I see a slight flaw here.

That story didn't come out like I expected. I was thinking you were going to end the story saying that despite your parents being frugal, some how they have no option of retirement. It is good to hear they were responsible. Having financial stewards as parents is a gift in and of itself; the lessons I presume they have taught and not having to worry about (financially) taking care of them for the next few decades.

RosieTR

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #36 on: August 03, 2016, 05:47:25 PM »
I know one person IRL who was an MBA and retired in his 50s, and my dad did accounting and also retired in his 50s. One other FIREd person I know was an engineer.
I also know a lot of the opposite. It would be interesting to compare field vs savings rate, controlled for income.

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #37 on: August 03, 2016, 06:22:48 PM »
I agree that confirmation bias probably plays a part. But so does school and firm culture.

There's a lot of ra-ra in business school about earning potential. If you wind up in a firm that has a high earning potential AND a bunch of spendy employees, it can seem normal to spend your way to success and cry in the bathroom when you're working 80 hours a week.

On the other hand, if you end up at a drab down-market accounting firm, where everyone brown bags their lunch and drives 10 year old cars, there's very little pressure to "keep up" with the cubicle Joneses.

True story: As a tax professional, I was only brought onto audits during the off season. On one such occasion, I was with a team of 5 accountants. I was looking at our 401(k) booklet and changing my investments. One of the other people inquired about it and said she was intimated by the choices, so hadn't done anything with her 401(k) funds, they were all in cash. Two more chimed in and admitted that they hadn't really understood what to do - one was in the default Conservative portfolio, despite being 25 and the other one was engaged in some other type of ridiculousness like 100% bonds.

I told them they all ought to be ashamed to be accountants who audit 401(k)'s while being too intimated by their own 401(k)'s to make reasonable investment choices. The fifth person was the manager, and he was equally horrified. He and I helped them pick appropriate funds and make the changes. Two of them just went into Target Retirement funds (which is fine), and Default-Conservative decided he liked the look of Default Aggressive Portfolio instead, but made some changes to it after we had a talk about expense ratios.

I was relieved that they were all at least contributing to their 401(k)'s, even if none of them were doing anything with it.

kayvent

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #38 on: August 03, 2016, 06:51:36 PM »
I agree that confirmation bias probably plays a part. But so does school and firm culture.

There's a lot of ra-ra in business school about earning potential. If you wind up in a firm that has a high earning potential AND a bunch of spendy employees, it can seem normal to spend your way to success and cry in the bathroom when you're working 80 hours a week.

On the other hand, if you end up at a drab down-market accounting firm, where everyone brown bags their lunch and drives 10 year old cars, there's very little pressure to "keep up" with the cubicle Joneses.

True story: As a tax professional, I was only brought onto audits during the off season. On one such occasion, I was with a team of 5 accountants. I was looking at our 401(k) booklet and changing my investments. One of the other people inquired about it and said she was intimated by the choices, so hadn't done anything with her 401(k) funds, they were all in cash. Two more chimed in and admitted that they hadn't really understood what to do - one was in the default Conservative portfolio, despite being 25 and the other one was engaged in some other type of ridiculousness like 100% bonds.

I told them they all ought to be ashamed to be accountants who audit 401(k)'s while being too intimated by their own 401(k)'s to make reasonable investment choices. The fifth person was the manager, and he was equally horrified. He and I helped them pick appropriate funds and make the changes. Two of them just went into Target Retirement funds (which is fine), and Default-Conservative decided he liked the look of Default Aggressive Portfolio instead, but made some changes to it after we had a talk about expense ratios.

I was relieved that they were all at least contributing to their 401(k)'s, even if none of them were doing anything with it.

Would you classify this as a paradox of choice?

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #39 on: August 03, 2016, 07:07:32 PM »
I agree that confirmation bias probably plays a part. But so does school and firm culture.

There's a lot of ra-ra in business school about earning potential. If you wind up in a firm that has a high earning potential AND a bunch of spendy employees, it can seem normal to spend your way to success and cry in the bathroom when you're working 80 hours a week.

On the other hand, if you end up at a drab down-market accounting firm, where everyone brown bags their lunch and drives 10 year old cars, there's very little pressure to "keep up" with the cubicle Joneses.

True story: As a tax professional, I was only brought onto audits during the off season. On one such occasion, I was with a team of 5 accountants. I was looking at our 401(k) booklet and changing my investments. One of the other people inquired about it and said she was intimated by the choices, so hadn't done anything with her 401(k) funds, they were all in cash. Two more chimed in and admitted that they hadn't really understood what to do - one was in the default Conservative portfolio, despite being 25 and the other one was engaged in some other type of ridiculousness like 100% bonds.

I told them they all ought to be ashamed to be accountants who audit 401(k)'s while being too intimated by their own 401(k)'s to make reasonable investment choices. The fifth person was the manager, and he was equally horrified. He and I helped them pick appropriate funds and make the changes. Two of them just went into Target Retirement funds (which is fine), and Default-Conservative decided he liked the look of Default Aggressive Portfolio instead, but made some changes to it after we had a talk about expense ratios.

I was relieved that they were all at least contributing to their 401(k)'s, even if none of them were doing anything with it.

Would you classify this as a paradox of choice?

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His Ted Talk was nice as well.

MrsPete

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #40 on: August 03, 2016, 07:43:19 PM »
My father was one of those people.  I think part of his issue was that he grew up with a surplus of money, so he didn't really learn to prioritize and needs vs. wants.  I think he also assumed that the gravy train could never end. 

I thought the old trope is that people went into psychology to self-diagnose their health issues?
It's a stereotype, of course, but some of my most messed up students opt to go into psychology. 

MgoSam

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #41 on: August 03, 2016, 08:38:38 PM »
My father was one of those people.  I think part of his issue was that he grew up with a surplus of money, so he didn't really learn to prioritize and needs vs. wants.  I think he also assumed that the gravy train could never end. 


That's a good point, my dad and his dad grew up affluent. During the recession, his company barely scrapped by. I'm slowly taking over control from him, and have helped him bring back stability so I know how hard it can be to make money. This has helped inspire me to be a mustacian. My mom also helped as she's extremely frugal and has imparted this on me.

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #42 on: August 04, 2016, 10:26:58 AM »


Here is the easiest way to spot financial disasters
They:
1) eat lunch with coworkers and order drinks on top of that
2) drive a car that they paid more than $8,000 for
3) buy new clothes
4) have engagement rings/wedding bands that costs more than $300
5) had a wedding that was at a venue
5) have a house larger than 1,000 sq ft in a LCOL area and 200 sq. ft in a HCOL area
6) want to work until they are over 50
7) have two cars (see #2)
8) have their kids in preschool

That's a little harsh!   you just listed 98% of the working population.   
I suppose dry humour doesn't always translate well on the 'net.



Goldielocks

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #43 on: August 04, 2016, 10:37:27 AM »
Back to the original question about why some professions seem to be more spendy (business majors named)... 
  (although the whole thread has been great).

I have a MBA and am an engineer.   What is taught is very different, and attracts different people.

Engineer -- learn to improvise and create novel solutions, while padding a huge safety factor in and getting everything double checked before it goes out the door.  Lots of discussions in school about the impacts to society and public safety focus in the professional charter.    (and If you are a person without that safety factor, you aren't an engineer, more of a daredevil.)

Business person -- CPA, Controller - very conservative operational line accounting.  These guys conserve money like you wouldn't believe.  Some smaller bankers are also like this. Those that do not work at it at home likely still have a pay yourself first plan, then spend the rest.   Not the person the OP was thinking of.

Business - MBA, Finance, Business degrees -- they teach you in school and work how to shave safety for profits and optimize for everything.   Options, going into debt to expand, taking risks with minimal backup if the upside is larger than the downside.  This actually mirrors the personal behaviour. Attracts people who see others in a flashy lifestyle and want the same, etc.   

Think about it -- entrepreneurs are often struggling badly or they have "hit it big", and the business /finance people are trained to help them in that.

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #44 on: August 04, 2016, 12:00:09 PM »
Haven't seen what I think is the answer posted yet, so I'll chime in.

Quote
Why are business majors likely to be financial trainwrecks?

They aren't.  Just just notice when they are.  It's simple confirmation bias.
I agree. I have plenty of co-workers who are Engineering/IT and total financial fuckups. I mean FUBARs. They fuck the fuck outta their fuckups. But I making fun of fuckups in my wife's profession is funner. Dunno why, but it is what it is.

I once thought that the USA was mostly Mr. and Mrs. Cleavers. Mostly doing okay, mostly making reasonable choices matching their spending with their income. Then I grew up a little and started reading this forum.

Now I assume 90% of the population is $150 from bankruptcy. Alot more people around us (DW & I) just barely getting by than we thought before. It isn't a topic we openly discuss but tuned in we hear lots of little indicators. Someone buying something they can't afford (look at my new thing, two weeks: is it payday yet?).

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #45 on: August 05, 2016, 10:28:07 AM »
Back to the original question about why some professions seem to be more spendy (business majors named)... 
  (although the whole thread has been great).

I have a MBA and am an engineer.   What is taught is very different, and attracts different people.

Engineer -- learn to improvise and create novel solutions, while padding a huge safety factor in and getting everything double checked before it goes out the door.  Lots of discussions in school about the impacts to society and public safety focus in the professional charter.    (and If you are a person without that safety factor, you aren't an engineer, more of a daredevil.)

Business person -- CPA, Controller - very conservative operational line accounting.  These guys conserve money like you wouldn't believe.  Some smaller bankers are also like this. Those that do not work at it at home likely still have a pay yourself first plan, then spend the rest.   Not the person the OP was thinking of.

Business - MBA, Finance, Business degrees -- they teach you in school and work how to shave safety for profits and optimize for everything.   Options, going into debt to expand, taking risks with minimal backup if the upside is larger than the downside.  This actually mirrors the personal behaviour. Attracts people who see others in a flashy lifestyle and want the same, etc.   

Think about it -- entrepreneurs are often struggling badly or they have "hit it big", and the business /finance people are trained to help them in that.
I'm not sure I would say that CPAs and Controllers are taught to be conservative, although many are.  I'm a CPA applicant (passed tests but not officially licensed yet) and I think it's overly generous to say they all have their shit together.  I do know that the CPAs/Controllers I work with are big on hard numbers and don't care for estimates that aren't backed by data.

I do kind of agree with your assessment of MBAs though.  Many of the MBA students I interacted with while getting my masters seemed willing to take on more risk than I would be comfortable with, and had an "earn it and burn it" attitude.

kayvent

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #46 on: August 05, 2016, 06:03:30 PM »
Haven't seen what I think is the answer posted yet, so I'll chime in.

Quote
Why are business majors likely to be financial trainwrecks?

They aren't.  Just just notice when they are.  It's simple confirmation bias.
I agree. I have plenty of co-workers who are Engineering/IT and total financial fuckups. I mean FUBARs. They fuck the fuck outta their fuckups. But I making fun of fuckups in my wife's profession is funner. Dunno why, but it is what it is.

I once thought that the USA was mostly Mr. and Mrs. Cleavers. Mostly doing okay, mostly making reasonable choices matching their spending with their income. Then I grew up a little and started reading this forum.

Now I assume 90% of the population is $150 from bankruptcy. Alot more people around us (DW & I) just barely getting by than we thought before. It isn't a topic we openly discuss but tuned in we hear lots of little indicators. Someone buying something they can't afford (look at my new thing, two weeks: is it payday yet?).

In people's defence, they aren't being extremely illogical. Just slightly. A person, depending on the state/province/country may have a third or more of their employment income supplied by government programs when they reach age 65/67. If their employer gives any retirement benefits (401K or RRSP matching), the rest may be covered. So saving for retirement? For some, that may already be covered by them doing nothing. And if its not, politicians can be trusted to exploit them as a talking point pity them to increase the benefits1. Saving for emergency? Only a 'few' of use have issues that would drastically exceed our insurance or government coverage.

I could go on. At this point in my life, the spendy people in my life don't bother me. They're unintentionally being logical in a way. Debt is cheap. Retirement is covered or subsidized. Work is fairly easy. Marginal consumption does give marginal benefit. The people who complain and don't seek a solution (ex. income supplementing or cost cutting) are the only ones that bother me. And even then only sometimes and having a bad day.
« Last Edit: August 05, 2016, 06:07:54 PM by kayvent »

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #47 on: August 05, 2016, 07:57:26 PM »
I wonder two things:

1.  How many people on this forum think "not pursuing RE/MMM path" = "pending financial disaster". There are lots of people who can save 10-20% AND live a "flashy" life with a little leverage (car payment, maybe carry a small CC balance for a splurge occasionally) but who aren't $500 away from living in a van down by the river. I sometimes wonder if MMMers can tell the difference.

2.  How many people, here and IRL, take at face value statements said in jest. I say all the time things like "my wife took my daughter shopping this weekend; I never wanted to retire anyways" as a joke but it has zero actual bearing on my real financial situation. It's just empty talk. Or "got no money till Friday again!" But that really means "because I don't want to transfer any out of savings."  It really can't be that everyone you know is a walking financial disaster, I think people downplay stuff all the time, or they say they "can't imagine retiring" because they don't want to think about retirement not being a million dollar beach house, not because they'd be eating cat food in week two.

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #48 on: August 05, 2016, 08:38:07 PM »
It is funny. My big boss has a couple of business degrees (including a master's), and couldn't even get a car loan because of bad credit. His cards were frozen once, and he asked me if he could borrow some cash to get him by. It's laughable that he makes twice what I do, and his net worth is probably negative. This isn't due to a divorce/kids/medical either, it's pure spending.

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Re: Why are business majors likely to be financial trainwrecks?
« Reply #49 on: August 05, 2016, 09:22:22 PM »
My big boss manages a region that averages over $200k in sales per day however the situation came up once where he couldn't get $200 out of the bank because he was "a bit tight that month".

No idea how he thinks his employees function on what we get paid.