We Must Change the Way We Live: An Introspective View of the Value of Education and Financial Prudence in a Changing World

By Pat Obi

Presented with striking simplicity, We Must Change the Way We Live is a thoughtful and compelling narrative on financial prudence. It offers a simple-to-follow guide on how to plan for advanced education, retirement, debt elimination, and personal investments. It also lays out a reasoned view on how to strengthen Americas leadership in higher education and fiscal discipline.
Unlike most other resources on financial education, the approach in this book is grounded on how we, as individuals, can be best prepared to not only become financially independent, but also, and perhaps even more important, offer a helping hand to others who otherwise would be limited in their own efforts to succeed. The authors early struggles in life, his humble beginnings as a naturalized American, and the unparalleled opportunities that America continues to offer, bolster the argument for self-empowerment. In that sense, this book begins with a thoughtful reflection on the core American values of hard work and excellence, both of which helped build this nation into an enviable destination for those seeking to actualize their dreams of a better life.
At the dawn of the 21st Century, two important phenomena that gained renewed attention were globalization and financial crisis. Globalization is the reality of how economic integration among nations has heightened the pace of international competition, especially in commerce and technology. The collapse of the U.S. housing market in 2007, and the financial crisis that followed it, exposed the fragility of our financial system, in particular, when financial prudence is overlooked. In We Must Change the Way We Live, these events are used as a backdrop in articulating how we can advance our competencies to meet the rising challenges of the highly competitive and ever changing global economy.

• Language: English
• Publisher: Archway Publishing
• Release date: Aug 8, 2014
• ISBN: 9781480808539

Pat Obi

Pat Obi holds a Ph.D. in finance and has an endowed professorship at Purdue University Calumet. With professional engagements in five continents, he’s the author of over 50 publications and has won numerous awards, including Teacher-of-the-Year and Distinguished Faculty Lecturer. A 1960’s child of war-torn Nigeria and educated in the United States, he lives in Chicago.

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Copyright © 2014 Pat Obi.

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ISBN: 978-1-4808-0852-2 (sc)

ISBN: 978-1-4808-0853-9 (e)

Library of Congress Control Number: 2014910651

Archway Publishing rev. date: 10/6/2014

Contents

Acknowledgements

List of Tables

Preface

PART I

EDUCATION, EDUCATION, EDUCATION

Chapter 1. First, a Personal Story

Chapter 2. Industry Trends and Education Planning

Chapter 3. Education versus Income

Chapter 4: A Paradigm Shift for Public Education

PART II

PERSONAL FINANCIAL PRUDENCE

Chapter 5. Financial Planning

Chapter 6: Planning for Life and Death

Chapter 7. Managing Personal Debt

PART III

A NATIONAL PERSPECTIVE

Chapter 8: Attacking Our Crippling National Debt

Chapter 9. Lessons from the 2008 Financial Crisis

Chapter 10. Final Thoughts

To Megan

Acknowledgements

It is almost impossible for me to imagine the successful completion of this book without the help of Cheryl Nichols, Uche Onyebadi, Shomir Sil, and Jade Lee Lynch-Greenberg. Your suggestions for editorial and content improvements were invaluable. I remain in your debt.

The compilation of data for this project began in early 2009, as the global financial crisis was unfolding. Later that year, I had an opportunity to go on a study-abroad trip to China with my students in the MBA for Executives program at Purdue University Calumet. The various discussions we had, during that trip, about the impact of the crisis on America’s global competiveness partly informed my views in this book. For that, I am grateful to the students. I am also grateful to Mayor Thomas McDermott, Jr. of Hammond, Indiana; Chancellor Thomas Keon of Purdue University Calumet; my colleagues in the College of Business; and the entire Purdue community for their support of my professional endeavors. I am forever grateful to the Board of Trustees of Purdue University who, on February 20, 2014, ratified my appointment to the high academic honor of an endowed professorship—White Lodging Professor of Finance.

A world of thanks to The Rev Michael Pfleger for his encouragement through the years. Friends and colleagues who have greatly inspired me and without whom the good story of this book could not have been told include Angel Vargas, Bradley Hassee, Calvin Richards, Casimir Barczyk, Charles Capek, Daniel Doyon, Daniel Gbedzeker-Williams, Dushan Nikolovski, Elvia Fuentes, Emuboh Gbagi, Enrique Mendez, Felicia Middlebrooks, Gregory Ash, He Li, Joshua Lybolt, Karen Bishop Morris, Kasia Firlej, Mahdee Iqbal, Marc-Anthony Doyon, Michael Preston, Mita Choudhury, Neeti Parashar, Odion Clunis, Regina Biddings-Muro, Renate Schneider, Robert Lendi, Sebastien Zerbib, Wole Gansallo, and Wonga Hexana. Thanks to all of you!

My deepest gratitude to my beloved dad, mom, and siblings: Chiggy, Winnie, Austin, Ekeoma, Greg, Francis, and Felix. My dad, who lived to see me rise to the rank of full professor in academia, was, unfortunately, deceased before this project began. Together with my mother, he instilled in me the enduring values of hardwork and personal discipline, which I now seek to pass on to my beloved daughter, Megan, the best child there is.

A big thank-you to my publishers at Archway Publishing for their valued advice and guidance. Finally, to all who read this book, thank you for making the choice to seek the wisdom within it. I hope it enlightens you in the best of ways. Any deficiencies in the content and writing are of course mine. And for those, I apologize beforehand.

List of Tables

Table 2.1. How Much Should I Save for College?

Table 2.2. How Much Should I Invest Monthly for College?

Table 3.1. Average Unemployment Rate by Level of Education

Table 3.2. 2012 Unemployment Rate by Ethnicity

Table 3.3. 2013 Earnings and Unemployment Rates by Educational Attainment

Table 3.4. Calculating the Total Cost of Financing Higher Education

Table 3.5. Calculating Education Loan Payment and Residual Income

Preface

This book is about money and is written for a general audience. When we plan carefully and use money wisely, we are the better for it. When we ignore the prudence the use of money requires, we face problems that often lead to a life of misery and lack. With this in mind, this book shows how our choices regarding the use of money can be the difference between a life of financial hardship and a life that is financially secure.

There are three parts to this book, all of which ultimately deal with financial prudence. In the firm belief that knowledge is power and that a good education is the foundation for a secure financial life, I dedicate the first part to the overarching value of cutting-edge education. It addresses the question, how can we—both individually and as a nation—make the type of educational choices that can improve our chances of having a fulfilling career, as well as maintaining America’s global competitive edge?

Part II deals with personal finance. I present easy-to-understand working models on how to prepare a financial plan, manage a budget, and invest for retirement. I also discuss how to make optimal choices concerning life insurance, estate planning, and personal debt. For many of us, debt is a major impediment to enjoying a fulfilling and peaceful life. It is also a major factor that can undermine our quality of life. For this reason, I devote the last chapter of this section to explaining the difference between, and the financial impact of, the so-called good debt and bad debt. I then show a path for eliminating overbearing debt.

The third and final part offers a national perspective on a key issue that threatens our economic strength and financial independence: excessive debt. Our national debt is excessive because, since 2011, how much we owe as a nation has exceeded our national output. I address this worrisome matter by pointing out, quite rigorously, that it will most definitely require financial sacrifices across the board to successfully tackle this problem.

When all parts of the arguments are connected, I conclude with a big picture that places service to others as the ultimate confirmation of our personal success. It is also, as I point out, the basis upon which the American nation is positioned to remain strong and competitive.

PART I

EDUCATION, EDUCATION, EDUCATION

Chapter 1. First, a Personal Story

A dream is your creative vision for your life in the future.

—Denis Waitley

In his 1931 book, The Epic of America, James Truslow Adams writes that the American dream is the dream of a people in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. This view of our national ethos captures the thrust of this book—self-empowerment. Since I first began my life in America in the mid 1980s, I have found that the realization of this dream is premised on three crucial factors: education, hard work, and financial prudence.

From time immemorial, education has been rightfully regarded as the singular factor that unlocks the myriad of opportunities that enable one to compete in the global sphere. The renown of civilizations past and present—Roman, Byzantine, Ottoman, and the epoch of Western civilization, among others—would not have been possible without the advances they made in science, technology, and leadership. In almost every society, the collective value and potential of educated people is reflected in how, individually, everyone contributes in building up the wealth and strength of the nation. Education is also the means by which one is able to help lift up others who are less fortunate. Without the benefits of the skillset that a good education provides, one is limited in his or her ability to be of service to others.

Needless to say, the value of a good education cannot be sustained without hard work and financial prudence. The American nation, from its inception, has exemplified strong work ethic and creativity by being at the forefront of some of the greatest inventions in modern science, such as the gas-powered automobile, the television, rocket science, electronics, appliances, the computer, and the Internet. These discoveries have made it possible for Americans to enjoy one of the highest standards of living in the world, which is the reason many people in and outside of the United States view America as the land of opportunity. Precisely for this reason also, millions of people from different corners of the globe have endured hardships and paid obscene amounts of money for a chance to study, work, and live in the United States. I happen to be one of them.

Unfortunately, some cynically view America as an empire whose time will someday come to an end, just like the empires in the past. I disagree with this assessment for three key reasons. First, unlike other powerful nations and empires, the United States is a nation of immigrants and a union of free-willing states and peoples. Second, the United States does not, and has never, coerced any other nation to become a part of it. Finally, while it remains a work in progress, the United States is a self-contained, self-sustaining, and vibrant democracy where personal liberties are written into its Bill of Rights.

As I see it, however, the real threat to the strength and stability of the American nation comes not from political excesses but rather from the combined effects of an underprepared, noncompetitive labor force and financial imprudence. Whereas the benefits of cutting-edge education can never be overemphasized, money remains the fuel that runs the engine of our free-market economy. For this reason, when prudence is lacking in the use of money, we face a debacle that could easily undo decades, if not centuries, of hard-won successes, as was hinted by the 2008 financial crisis. My concerns in this respect are informed by what I see as a dichotomy between recent trends in American life and what I have always cherished as the America of my dreams.

Growing up in the late 1960s and early 1970s in the war-ravaged southeastern Nigerian enclave once known as Biafra, I dreamed earnestly of living in a country where food, peace, and opportunities abound—in that order, actually. In my dreams, I saw America as one such place. Although I was little more than a toddler at the time, I remember how we starved and lived in great fear during most of the years of that horrendous civil war. Bombs fell everywhere we ran. Babies and children were often abandoned by their parents in the chaos. Many were killed. Many more died of starvation. Millions of children suffered from acute malnutrition and a severe form of protein deficiency called kwashiorkor. We lived mostly in the inner countryside, in our attempt to escape the onslaught of falling bombs from the incessant daily air raids of the Nigerian military.

The Nigerian Civil War was the result of a deep-running mistrust between