Hours for experience vs entrepreneurship, adn what to do with my cash?

[pj86]

NOTE: Sorry for length of post. Also, the average household income in Belgium is about 31K net yearly (40K USD or so).

Hi all,

I am so glad I found this board. Looking for something like this a while now.

Let me introduce myself: I am 21, graduated as a bachelor in applied economics 2 days ago and will pursue a one year master degree next year. I live in Belgium and single. My main assets are 15k euro in cash, top academic results, fascination for PF concepts and an internship offer from one of the 3 famous management consulting firms.

I am facing the following 'problems':

1. About the CASH: I am planning to put the 15K in the market (Vanguard index funds), but I feel like the market is not so cheap and that the USD will crash soon(-er or later). From what I read, random lump sum investing has been proven not to be inferior to dollar averaging, but I don't believe in the 'random' part of that hypothesis. So, what would you do: Putting 20K USD in Vanguard now or dollar averaging 2K USD a month till I graduate? Or maybe keep the 15K in euro, and use it as a downpayment on a small studio in my hometown (these go for around 60K)? (In that case it will be to live in, not to rent out.)

(My basic problem here is that I hate timing the market. A side note is that I will probably save an extra 8 to 10K in the next 12 months, mainly from private tutoring.)

2. About the JOB: I am a firm believer that trading hours for money generally sucks wealth and desire to live out of you. I consider the following career options:
A. Management consulting and wondering when to get out:
+: Car paid, sponsored MBA in 2 years, potentially partner by age 31 to 34.
-: When will I get out? My first 2 years I will be underpaid but hoping for the sponsored MBA, after that the pay goes exponential.
Initial pay is about 1800 euro net/month, so I will only be able to save 1000 euro/month at most.

B. EU official + sidebusinesses
+: 4800 euro net to start with (gross=net almost), I will be able to invest 80% of that and live comfortably too.
-: Boring job, chance of depression increases. My sidebusinesses must succeed or I won't be able to get out.

C. the sidebusinesses I am talking about are:
1. Peer-to-peer business idea, I will manage it the Plenty Of Fish way. (Plentyoffish.wordpress.com) Could earn limitless amounts.
2. Poker, I am in a small but VERY smart group of people learning to REALLY play poker. Could easily amount to 500$/hr, as we will write a semi-bot to guide us in our play (mostly prevent us from stalling and as a second opinion).
EDIT: Made a mistake here, 50$/hr while 10tabling is the goal, but not easy. 20$/hr/table is easy. Just to clarify, as 'easily' and '500$/hr' in the same sentence sound a bit naive.

D. Phd is an other possibility, but rather as a 'hobby'. (I am actually thinking of doing one in Personal Finance, as this field is extremely underestimated in our academic system imho.)
+: I like teaching
-: Only 50k net/ year after 4 years of study at 1500 net/month.

The way I see it, A can not be combined with any other initially, while B&C, or C&D are very doable. In the long term (after 'retiring'), I will probably do D anyway.

Thanks for reading all this, looking forward to your reply!

In http://www.early-retirement.org/forums/f26/introduce-yourself-here-13857-71.html#post532158 I explain the framework of my financial plan.

 

[chinaco]

I wish I had your awareness of this issue when I was your age. That alone increases your probability of achieving Financial Independence at a young age. If you are careful enough and driven enough, I believe you could ER @ 45 in style.

Of course, it sounds like you are focusing your attention on Business... You might decide that your work is your passion. There is nothing wrong with working at something you like.

Whatever decisions you make as you traverse life and career... I am sure you will be successful.

 

[pj86]

Thanks for the compliment, Chinaco!

Any suggestion on the cash problem? This is my main issue currently, the job thing is rather a luxury problem.

 

[when?]

well, about the $:

what's your current living situaiton? Are you happy w/ it?
If not, I would def. use some of the $ for a downpayment on my own studio.

 

[pj86]

I rent a student room - parents pay half of that.

So no home equity yet.

 

[xyz]

pj86,

Let me start by complementing you on your wisdom at age 21 to ask and consider such important questions.

Many of your considerations and concerns are right on... I have followed many of the routes during my 30+ year career and can provide you with my experiences...

1. Management Consulting.. I have been in and out of consulting from the time I was 21 for a total of about 8 years (working for firms and independently ) .. You are right on here trading hours for cash is somewhat of a no win solution if your goal it to make big money fast... You can make a very good living (believe me I did but worked 100 hours a week too!) If you are considering this route I would only go into a situation where if your work will result in comission when placing others into contracts. (that means sales).

2. Self employment... I have run my own business and it was one of the most interesting times of my life... Believe what you learn in business school because it is very true. IF YOU ARE GOING TO RUN YOUR OWN BUSINESS MAKE SURE IT IS SOMETHING YOU KNOW INTIMATELY.

3. Academia ... I spent 7 years teaching for a university (part time) and it was quite an enjoyable experience. Many of my friends are university professors and live a very nice life. This one comes down to what you as an individual want to do in your life... you say you will eventually want to do a Phd why not get it now ? It will certainly give you options in the future. As I have become older I have found the greatest sucesses in my life are not related to the money I have accumulated (although that helps) but more so the fullfillment I have had in the success of my children and those I now mentor in my current career.

Good luck you sound like you are off to a great start.

 

[cho oyu]

Regarding the cash, what time frame are you looking at? If you anticipate wanting a down-payment in the next several years, the market is not a great place to put the money. Look at short-term bonds, money markets, etc. Your returns won't be great, but they should beat inflation and your capital won't disappear.

If you are looking long-term, you have many more options. Because this will be a small portion of your total portfolio in a few years, the exact dispensation is not that important.


In the US, attrition in management consulting is extraordinarily high. The large majority of employees do not last past two to three years. However, the connections and business experience they have gained often give them multiple job opportunities. You might want to include this potential outcome in your analysis.

Best of luck!

 

[pj86]

Thanks a lot for the replies, xyz and cho oyu.

Xyz, you are right, selling consultants can be a very profitable businesess. My father does it in IT (he's ex-Peoplesoft) with just a few consultants on his pay roll, and the MC rates are way higher than those of their IT peers. However, a consulting firm is not a business idea that keeps me up at night.

About the Phd, I should clarify: By saying I will 'do it later anyhow', I meant I want to teach if I 'retire'. If possible maybe without doing the PhD first (so just being asked for your experience). A Phd is just an option, but not an idea fixe.

Cho oyu, the time frame is dependant on my career choice (that's the tricky part).
If I go for the EU career (= high pay early, but less amazing later) I am able to invest all my money now and invest a huge amount of my salary if I start working - even while paying for a small mortgage, which I will get at the best possible rate.
On the other hand, the job in MC pays way less early on, so it's wiser to keep the money as a downpayment. The reason here is that I want my first small studio paid off in 2 years, as after this period I will do an MBA (or another experience outside the company and country).

About the attrition, I of course hope to complete the first 2 years as un undergrad and get the sponsored MBA at the end. At the company, it's up or out every six months - up generally implies a 5% salary increase. (There's also a nice compounding effect in that system by the way.)

In conclusion, the best is that I will either love or hate my internship, or that the employer will love or hate me. I shall make a final decision at the end of this summer.

Keep the comments coming, they are really helpful.

 

[Nords]

Hello Pj86
What ever your plans and dreams, invest in yourself and your knowledge. The people who will buy are out there, you just need to get them to find you. Check out this link and have a look at my website. No experience beforehand.

Yo, Gem, just so it doesn't come as a big shock, I've reported your post as spam and recommended that you be banned as a serial spammer.

Oh, but wait, you've already been told that before...

 

[joesxm3]

So where do you play poker? Do you post or read the twoplustwo.com forum?

 

[pj86]

Poker.com mostly (now Carbon poker).

I read 2+2 but do not post there. I also read pokerclub.be

I just went on a trip with my company and the people are simply amazing. Also, the initial pay is rather 40-50K instead of the 30K I had in mind. So for now, management consulting is on top of my list.

Gem2007, if everybody can do it, it's something I don't want to do.

 

[UVaOK]

M/B/B consulting

2. About the JOB: I am a firm believer that trading hours for money generally sucks wealth and desire to live out of you. I consider the following career options:
A. Management consulting and wondering when to get out:
+: Car paid, sponsored MBA in 2 years, potentially partner by age 31 to 34.
-: When will I get out? My first 2 years I will be underpaid but hoping for the sponsored MBA, after that the pay goes exponential.
Initial pay is about 1800 euro net/month, so I will only be able to save 1000 euro/month at most.

Hi pj86,

I don't post here often, but, because I found myself facing similar decisions two years ago, your situation seems particularly pertinent. And so, I write.

Immediately following college, and only after a ridiculous amount of vacillating, I decided to accept a position with M/B/B for a number of compelling reasons that I won't now broach. I've learned an incredible amount about both consulting and life in the two years since.

First, let me say that, for the work you'll be doing, the consulting salary you quote is quite low. The pay is quite a bit higher in the US, and only still on the edge of what I would consider reasonably commensurate with what is demanded in return; and, in my experience, my European cohorts work just as hard as I do. In other words, you are quite correct that you'll be trading hours for dollars.

However, the difference is, in the US, the risk is lower because the payoff basically begins as soon as you start. Only one career track is higher paying right out of school: I-banking. And we won't even discuss the lifestyle in that arena.

With nothing spectacular to show in the meantime, sticking it out for two years with the hope that you'll be directly promoted or sponsored for the MBA, is, in my opinion, probably not the best bet for you. Granted, the odds of lower-level promotions aren't infinitesimal, but, not everyone is promoted, and, if you don't like the work at the lower levels, I can virtually guarantee you won't like it at the post-MBA levels (despite significant pay jumps). As for factoring making partner into this option, don't. You'll be working with the best, brightest, and most motivated of your peers, and, additionally, many of them will attempt to stay because they love the work. The odds of that promotion are low.

With my comments, bear in mind that I worked at arguably the most employee friendly of the three firms, whereas, from your mention of the 6-month promotion track, it sounds as though you'd be working for arguably the least.

So, I guess the crux is, unless you think you will genuinely love both the work and your coworkers (VERY important), which is entirely possible, go ahead and eliminate consulting as an option.

Just my $.02.

--UVa

 

[pj86]

1. First, let me say that, for the work you'll be doing, the consulting salary you quote is quite low.

2. in my experience, my European cohorts work just as hard as I do. In other words, you are quite correct that you'll be trading hours for dollars.

3. I-banking. And we won't even discuss the lifestyle in that arena.

4. With nothing spectacular to show in the meantime, sticking it out for two years with the hope that you'll be directly promoted or sponsored for the MBA, is, in my opinion, probably not the best bet for you.

5. With my comments, bear in mind that I worked at arguably the most employee friendly of the three firms, whereas, from your mention of the 6-month promotion track, it sounds as though you'd be working for arguably the least.

--UVa

Thanks for your 2cents.. they are worth more to me btw

1. It's indeed too low, as I learned on a company outing last weekend. The 1800 net is the (undergraduate) internship salary. The entry level pay ranges from 30K in Portugal up to 65K in Scandinavia, and my guess is Belgium will be around 45K. Anyway, your comment is right.

2. I know several colleagues in my firm now, and the Germans work the hardest (14h+ daily). In Belgium, I expect 12 hours a day. I will be trading hours for dollars, I just hope that I also trade my hours for (relevant) experience. (I will see when I do my internship next month.)

3. I-banking, imho, sucks. The way I see it, you have thousands of suckers working 24/7 in the hope of getting on the million dollar job level. If I ever go into IB, it will be coming from MC after getting offered one of the million dollar jobs. I'll pass for the sucker level, and probably IB as a whole too. Funds seem to offer good work/life balance though.

4. You are probably right. Last weekend, the people were amazing. I was expecting a lot of snobism and arrogance, but I found intellectuals instead. I never met so many interesting people in such a short time span. So I am a bit less sceptical than I used to be.

5. You have a PM.

 

[Enuff2Eat]

you're a very smart kid. congrats. i can't believe at your age u can see and plan your future so well.

i will bet $1000 that you will be "comfortable" and ready to retire at the age of 45-50

enuff

 

[pj86]

you're a very smart kid. congrats. i can't believe at your age u can see and plan your future so well.

i will bet $1000 that you will be "comfortable" and ready to retire at the age of 45-50

enuff

Thanks a lot. Somehow it feels good people want to bid money on my future

Fyi, I talked to a partner at my firm and he said I can ask to be staffed wherever I want in the world. This yields many pleasant options, fiscally as well as intellectually.

For the moment I am thinking of starting for a couple of years in Dubai to get the most out of my gross salary (100% actually). The cost of living there is quite high, but spending almost nothing is cheap everywhere according to my back of the envelop calculations. The rent is at London levels though, but still way less than the Belgian tax burden I escape from.

The other advantages of the Dubai office are that
1. They specialise in portfolio companies (/holdings/multibusiness conglomerates) so I should be able to travel the world working on these projects.
2. The Middle East offices are developing, so I might enjoy an accelerated career track after/during helping them out.

Anyway, thanks again, I'll keep you posted on what the future brings.