I recently went through the CSS and FAFSA application process with a daughter who is entering her fourth year at university. It was excruciating!
Those of you with college-age children know these acronyms well – and probably have elevated blood pressure at their very mention! – but to explain to all: CSS is the College Board financial profile that must be completed by anyone seeking financial support from their university…which, given the spiraling cost of university education, is pretty much everyone! And FAFSA is the portal to forms that must be completed to receive Federal college loans. As I worked through these forms and pulled together the disparate and detailed information required, reviewed for coherence, consistency and completeness, and tried to focus on my breathing so as not to throw something at the wall, I marveled at how poorly our education system prepares students to enter a world increasingly dominated by forms and (online) paperwork.
This week’s piece explores the pervasiveness of this problem and discusses what we can do about it.
When you complete your taxes every spring, do you know in advance how much you will owe – or are owed? Do you find completing and filing your return a simple process which you breeze through, or is it painful and something you put off? How much time do you really spend, not just preparing your tax return every year, but keeping up with your finances and paperwork during the course of the year so you will have everything ready for the IRS? Even if you have pretty simple affairs, I suspect that it takes a ton of time and you encounter surprises every year. Every year I am surprised at how long it takes, and at the size of the gap between the taxes I had withheld and the final liability.
Yes, the computation should be simple, and perhaps I should have a better idea, but it is more than the computation: the tax return itself is complicated. Sure, the 1040-EZ attempts to make this simpler, but do you complete a 1040EZ? I bet you wish you did! You’re not alone, though: only 13% of American filers complete this form. The majority (59%) complete the full 1040 (the balance complete the intermediate 1040A). And the very existence of three different forms – along with a multitude of Schedules that may or may not need completing – is a testament to the complexity of the system. I have spent a lifetime dealing with audit reports, legal agreements and complex business systems, and been well trained to think in this way, but even so I find this whole process so cumbersome and painful that I pay someone to prepare my taxes. And I realized a few years ago that paying someone to do my taxes not only saves me time, but it also saves me money, since they do it better than me.
If someone with a lifetime of relevant training finds this so hard, how much more so those without this training? How much time and effort are wasted by people struggling to keep up? And how many people lose out by sub-optimizing outcomes or leaving large amounts of money on the table simply because they don’t know which stones to turn? Much is said of wanting a simplified tax system, but perhaps the real benefit of such a change should not accrue to those with complex financial affairs, rather to those with much simpler affairs who simply don’t have the resources or training to handle the paperwork well. Perhaps a simplified tax system would be one in which the majority of Americans do not need to prepare a tax return at all? Surely we are capable of designing and implementing a system in which taxes are deducted at source and returns are not required for most people?
The Growth Of Forms and Paperwork
The problems of paperwork and forms go way beyond our taxation system. Perhaps even worse is the healthcare system, with its complex matrix of different kinds of healthcare systems (PPO, HMO, etc.), in- and out-of-network coverage, deductibles and co-pays, and so forth. And while the exchanges created by what is popularly known as Obamacare are designed to provide millions access to insurance, they also impose on those millions an obligation to complete and submit a massive and increasingly arduous set of forms and information. Have you ever applied for Obamacare? If so, write and share your experience, and if not, find someone who has and talk to them. You’ll be amazed: it is a brutal bureaucratic process requiring copies of bank statements, detailed analyzed lists of receipts and much more!
Assuming for now that you’ve completed all of the paperwork, do you really believe you have the optimal care for your current situation? That your tax deductible health spending account is set right? That you have appropriately set and are properly applying all of your deductibles and co-pays? That the charging, billing and reimbursement systems are working properly for you? And do you have the time and energy to dig into this to the extent you know you should to get it right?
There is more and more and ever more. Our mortgage application process continues to grow in complexity and is ever-more burdensome; processes for credit card application and opening bank accounts are cumbersome; and even such simple matters as applying for a passport and getting a drivers license are non-trivial. Thinking through what needs to be insured – from cars, houses and home contents to lives, disability and long-term health also presents a set of tough decisions. When is the last time you sat back and looked across all of these policies to make sure your coverage is appropriate? And how much of your reluctance to do that is because you know how time-consuming it will be, not just to undertake the analysis, but to complete the forms if you identify and need to adjust or fill any gaps?
On top of this, there has been an explosion in what is called “occupational licensing”. Sure, it seems fair to expect your doctor or lawyer or CPA to have a state license to practice. And you certainly find it reassuring to know that the electrician who is rewiring your house has some level of training, so looking to the state to certify to this is not unreasonable. But a hairdresser? A florist? A ballroom dance instructor or manicurist or interior designer? A travel guide?
Occupational licensing has grown from covering approximately 5% of all US jobs in the 1950’s to around 30% today. And it is growing. The effect is both financial and bureaucratic. If you want to make a livelihood in one of this growing number of fields, you not only need to undertake the state-mandated training (which varies by state and must often be repeated if you move…and which can often take a considerable time (for example 733 days to become a travel guide in Nevada)), but you must also go out of pocket for the certificate, and you must remember to stay up to date with required annual training and payments for license/certificate renewal.
Beyond being a potential restraint of trade – great when you get in, but exclusionary and often with surprisingly high barriers to entry – this can be a painful and expensive process and, like insurance, taxes and college financial support, it is not something our schools teach people to expect or manage.
In a recently conversation Jeanne Ward (soon to be a #NewBusinessMindset guest) talked about internal controls (showing up on time, cleaning one’s room, grocery shopping, etc.) and external controls (governing interactions with others, etc.) in the context of helping inmates of the penal system, many of whom lack internal controls and do really well in the prison system but find it hard on the outside. She told me one story about a man lacking internal controls who knew the ins and outs of the penal system sufficiently well that he managed to stay in jail but not go to prison. Jeanne worked with him and got placed in a home where he would have the support he needed…but one day she received a call from the home inviting her to talk to the man because he was about to be kicked out. When she visited to try to help him, the man told her they wanted him to clean his room, prepare his meals, etc., and he couldn’t cope. “Please let me go back,” he said
While in principle our school system provides a framework for kids to learn basic internal controls such as timeliness, cleanliness, discipline regarding homework, etc., as a practical matter it not only fails a large number of our students, but actually trains the opposite attributes. If a student dislikes and disrespects school to the extent many do, and if contempt of the system is as high as it is in many schools, then behaviors that cultivate lack of internal controls are socially rewarded among the peer group.
This is really important because internal controls are critical for holding down a job, even more so for entrepreneurial livelihoods such as an independent artisan (a plumber, carpenter, etc.). The deficit in these skills cuts across a huge proportion of our society and leaves behind many who could and should be contributing, setting them up for failure, diminishing society by all that they could have contributed, and creating a huge societal burden of crime, social welfare, and prison/jail cost on our national purse.
What Can You Do
Ken Robinson, who has delivered many wonderful TED talks on education (including Do Schools Kill Creativity and Bring On The Learning Revolution) argues that we have an education system designed wrongly and that “success” in this system is continuing until eventually one becomes an academic. He goes on to say that academics live in their heads and slightly to the left and regard their bodies as transport mechanisms to get their brains from one meeting to the left. I quote this only to point out that our education system has a huge blind spot and fails to train an enormous number of our nation’s young people in the very basic skills that they need to function in the world. Before worrying about STEM vs STEAM or bemoaning the creativity gap, we should look at the most basic skills that people are not learning and bring them into the schools. So what you can do is as follows:
- Inform yourself about our education system and the gaps. Watch a couple of Sir Ken Robinsons talks;
- Every time you fill out a health insurance application, complete your taxes, or apply for a mortgage, think of how much specialist knowledge and experience is involved, skills and experience you take for granted but that a huge proportion of the population lack;
- Consider getting involved in education at the local school board level. You don’t have to have a child in the system to do so;
- Consider alternative ways of helping others acquire these skills. Many social services NFP’s – food pantries, etc – are increasingly looking for ways to use their platform as a foundation for helping the whole person. This seems to be a general trend and there are plenty of opportunities to get involved and help. Maybe you could volunteer to train people in skills you have;
- Think on the problem of occupational licensing and if you come up with a good solution, let me know!
- But perhaps most importantly and practically, if you have children or spend time with youth and young people, help them learn how to fill out insurance forms, tax returns, and financial aid applications…and do what you can to help them build internal controls.