How To Be Financially Smart (Blog)

[Erin Pavlina]

Use this thread to discuss the following entry from Erin Pavlina's blog:

How To Be Financially Smart

[wolverine]

As I read this I was thinking 'but this is just common sense!' but apparently it's not, given the amount of people who seem to be in debt. I'm getting there on most of the points (some aren't applicable -- I can't even get a credit card currently, which is a bugger for online payments). The one I'm out on the most is the education, but it's a little different here; most universities have government supported places, where you pay about half of the full fee. I'm sure there are some universities that have lower paying places, but most here follow the system, especially the ones I was considering. Given that I'm a learner 100% and will probably benefit from my particular degree no matter what profession/career I get into, it's definitely worth it.

Just one question. What's water delivery?


Wolverine

[Erin Pavlina]

Here in America there are companies who deliver 5 gallon jugs of water to your home where you put it on top of this cooler, which dispenses cold, purified water to drink. Most people I know would never drink the water coming out of the tap, so we purchase water or buy a filtration system.

[Ninja]

I have skimmed the article and will read it later, but I just have to say this: 55.000 dollar for an education? WTF?! I assume that comes with satin seats in the classroom, a personal chef for all your caffeinated needs and a goldplated laptop with diamond keys? Even if you consider the fact that non-Europeans have to pay much more than European residents, going to college/university in Europe is much cheaper (and sometimes even better, depending on the institution and country). I guess I finally found out why my university is crawling with foreign students!

[Erin Pavlina]

It's even higher for things like law school and medical school. My friend the philosophy major paid that just for his bachelor's degree! He ended up moving into a different field entirely and recently got his PhD about 15 years after getting his Bachelor's.

[seeker5]

I got a $60K federal school loan to get a Masters in Business Administration degree. Tuition is only $34K over the two year period, but the rest would be to pay for living expenses. This is on top of the $10K scholarship I got, so conceivably, it could cost $70K for me to go to school. If I go that is, since I still got 4 more days to finally decide whether I truly want to abandon that plan

One of my biggest sticking point is I don't want to graduate with all that debt, especially since I don't really want to get a job when I graduate. So the timing of your post Erin is interesting .

[Ree]

This is a timely article, Erin, considering the state of the economy these days.

It's a disgrace that a college education costs so much in this country these days. Back in the '70s when I was in college, it was much much more affordable and no one was really excluded if they wanted to go. Even in state universities and community colleges, the cost has gone up considerably. After the economy and health care, the next thing our government needs to address is the cost of a college education.

[prasunsen]

That's the first aricle from Erin I read, and I liked it a lot. Yes, it's mostly common sense, but nicely put. And most people need to be constantly reminded these things. I fully support the idea about living by your means. Not only because it's financially the best thing you can do, but it also makes you value the things. Life is not about buying luxury things (even if one can afford it)

[wulph]

Erin,

Thank you for sharing this valuable information. The more people who use these techniques, the better!

I would like to point out one important thing regarding your "ask for help" section: it's crucial to choose a reputable credit counselor. Many scammers prey upon people trying to repair their credit, and they only make the situation worse.

The Federal Trade Commission has addressed this at Credit Repair: Self Help May Be Best

But you're right, the best way is to avoid debt in the first place

[Steve Pavlina]

FYI if you ever need to recover from bankruptcy (or are considering it), the best place to go for legit advice is Personal Bankruptcy Information | After Bankruptcy Foundation. Stephen Snyder is definitely one of the good guys when it comes to dealing with credit problems.

[Dan.Linehan]

Also, Veracity Credit Repair for credit repair -- very worthwhile.

[Pegasus]

Hey Dan, the link didn't work for me...

[Ninja]

Originally Posted by Erin Pavlina

It's even higher for things like law school and medical school. My friend the philosophy major paid that just for his bachelor's degree! He ended up moving into a different field entirely and recently got his PhD about 15 years after getting his Bachelor's.

Your kidding, right?

...

Please tell me your kidding! Why on Earth aren't Americans rioting over this? If they tried to pull a stunt like that where I live, the streets would have been filled with angry people holding banners.

Come on guys, you don't have to take that! Stand up for yourself!

[Ninja]

Okay, I read the whole post and I like it

I think you forget one important thing though: lifestyle inflation. If people get that raise or second job, they'll make more money. But often they will also start spending more money! Robert Kyosaki says in his book "rich dad, poor dad" that wealth is not measured by what you have in the bank: it is measured by how long you can survive on that money if you get fired. If two people have 10.000 bucks saved up, and A's expenses are 5000 a month while B's expenses are 2000 a month, B is wealthier than A.

[silicon toad2000]

Here in oz the government pays for our university fee's, but takes it back through our taxation system. It is the cheapest loan I have, they charge interest which is less than the inflation rate. The longer you leave it to pay back, the less it is in real terms (personal wage growth and reality asside).
My shopping trips are plagued by the value question or oportunity cost. Before I buy anything i look at how much it is and consider what else do I have the opportunity to spend that money on. Is spending this dollar in this way going to give me the highest return in satisfaction.
One of the key things I do is buy many things second hand. If I want something I will always check on ebay and see what the market is like.

[Erin Pavlina]

Originally Posted by Ninja

Your kidding, right?

...

Please tell me your kidding! Why on Earth aren't Americans rioting over this? If they tried to pull a stunt like that where I live, the streets would have been filled with angry people holding banners.

Come on guys, you don't have to take that! Stand up for yourself!

We're not rioting because it's a choice and no one forces you to go to college. This is why American parents are told to start saving for their kids' college educations when the kid is born! I personally have never understood why people pay so much for certain schools. I know people who went to USC (a private university) for their psychology degrees. They're no more employable than those who went to UCLA (a public university at a fraction of the cost of USC) or even a state school like California State University, Northridge. Especially for undergraduate degrees! If prestige is so important to someone I recommend using your money on graduate school, not undergraduate education.

When I was headed to college a lot of my friends would actaully attend a community college (lowest level of college) to get all their general education done cheaply. Then they would transfer to a university for the classes in their major.

I also don't think all the best teachers necessarily teach at Universities. In my graduate program our teachers chose to teach at the state college level because they said if they worked for a university all their research belongs to the university, but at a state college they are allowed to keep their own research and use it how they like.

While all my friends were clamoring to get into a university, I was swimming along at my state school with extremely low expenses.

Just think it through before you decide. In the end, most employers don't care what school you got your degree from, they just want competent people who can do the job.

[pianoperformer]

Oh, $55,000 for a bachelor's is nothing. At my university, we're paying near $40,000 per year, so it's going to be around $150,000 by the time I'm done.

what sickens me is that there are still students who slack off and don't take it seriously, because their parents are paying for it.

Anyway, excellent article. I've always been rather good at managing money, and can't imagine why people don't record absolutely every transaction that goes through their account, down to the last penny.

[pianoperformer]

Originally Posted by Erin Pavlina

We're not rioting because it's a choice and no one forces you to go to college. This is why American parents are told to start saving for their kids' college educations when the kid is born! I personally have never understood why people pay so much for certain schools. I know people who went to USC (a private university) for their psychology degrees. They're no more employable than those who went to UCLA (a public university at a fraction of the cost of USC) or even a state school like California State University, Northridge. Especially for undergraduate degrees! If prestige is so important to someone I recommend using your money on graduate school, not undergraduate education.

When I was headed to college a lot of my friends would actaully attend a community college (lowest level of college) to get all their general education done cheaply. Then they would transfer to a university for the classes in their major.

I also don't think all the best teachers necessarily teach at Universities. In my graduate program our teachers chose to teach at the state college level because they said if they worked for a university all their research belongs to the university, but at a state college they are allowed to keep their own research and use it how they like.

While all my friends were clamoring to get into a university, I was swimming along at my state school with extremely low expenses.

Just think it through before you decide. In the end, most employers don't care what school you got your degree from, they just want competent people who can do the job.

Erin, you're making me rethink why I'm at a private school, lol.

Unfortunately my mom never created a college savings for me, so we're really in trouble.

It seems though that many graduate schools even look at where you got your undergrad. From what I know, some don't accept those who went to what they consider to be too easy of a university. That's usually just at the extremes though I think.

The major reason I'm at the university I'm at is they have the best music school in the area, and is probably something I couldn't get at a public school, or at least not as good.

[Ninja]

Originally Posted by Erin Pavlina

We're not rioting because it's a choice and no one forces you to go to college. This is why American parents are told to start saving for their kids' college educations when the kid is born! I personally have never understood why people pay so much for certain schools. I know people who went to USC (a private university) for their psychology degrees. They're no more employable than those who went to UCLA (a public university at a fraction of the cost of USC) or even a state school like California State University, Northridge. Especially for undergraduate degrees! If prestige is so important to someone I recommend using your money on graduate school, not undergraduate education.

When I was headed to college a lot of my friends would actaully attend a community college (lowest level of college) to get all their general education done cheaply. Then they would transfer to a university for the classes in their major.

I also don't think all the best teachers necessarily teach at Universities. In my graduate program our teachers chose to teach at the state college level because they said if they worked for a university all their research belongs to the university, but at a state college they are allowed to keep their own research and use it how they like.

While all my friends were clamoring to get into a university, I was swimming along at my state school with extremely low expenses.

Just think it through before you decide. In the end, most employers don't care what school you got your degree from, they just want competent people who can do the job.

I think, in a way, people are forced to go to college. Not with a burning stick, but with social pressure. We can say it's their own fault for not thinking things through, but most people get badgered to go to college from the day they can walk, and by the time they read blogs like yours that say "guess what, there are other roads you can take in life!", they are almost ready to graduate. Perhaps the prices in america are so high because some universities are hyped. Even I know about Harvard and I don't even live in the states! We don't really have that my-uni-is-better-than-yours culture where I live, though we're heading in that direction, with our government allowing some schools to charge more tuition money than others for 'exclusive' programs offered only to 'top students'. We're like frogs in a pan of water that is slowly heated...

I have nothing against paying more for a better education, but when the butcher gets to do quality controll on his own meat...

Anyway, when I think about it, the fees aren't really the problem. It's the fact that people are made to believe they are forced to pay them. No one holds a gun to their head, but when they decide that college is not worth the money, people will shun them. What? You're not going to college? But you'll be a loser for the rest of your life! Everyone goes to college! Bad sheep! Go join the rest of the herd!

I think that if not going to college was just as acceptable as not playing football in your spare time, the rates would go down. Because then people would pay solely for the education they get, rather than the social acceptance that comes with it.

[Erin Pavlina]

I sort of had the opposite experience. My parents were surprised I wanted to go to college. I had to somehow make them understand that with higher education I could command a higher salary when I was done. They were really mystified when I wanted to go to graduate school. They thought I was just delaying going out into the "real world."

As it turns out, what I do today is not at all based on what I learned in college so I'm glad I didn't waste the money.

However, there are certain jobs that really require higher education like being a doctor or lawyer, etc. It's true that there are a lot of high paying jobs you can get without college, but there are some that do require that degree. In that case, find out what you need to do to succeed in your field, how important the college you choose is, and make your decision accordingly.

[Ninja]

Originally Posted by Erin Pavlina

I sort of had the opposite experience. My parents were surprised I wanted to go to college. I had to somehow make them understand that with higher education I could command a higher salary when I was done. They were really mystified when I wanted to go to graduate school. They thought I was just delaying going out into the "real world."

As it turns out, what I do today is not at all based on what I learned in college so I'm glad I didn't waste the money.

However, there are certain jobs that really require higher education like being a doctor or lawyer, etc. It's true that there are a lot of high paying jobs you can get without college, but there are some that do require that degree. In that case, find out what you need to do to succeed in your field, how important the college you choose is, and make your decision accordingly.

Very true. I go to college and am not regretting it so far, but I do remember a guy in my class who looked very unhappy. Turned out that his parents had pressured him into going. I felt sorry for him.

[Love]

I think this is so important...money and debt. No one in my immediate family (mom, bro, dad, etc). handles money well at all. Fortunately, I have some aunts and uncles who inspire me to reach the other side. I handle my money very well--even though I currently don't have very much at all.

Re: colleges.
For undergraduate, think: Where would you go to get the best experience, if you had all the money in the world? Then try your best to get there. Funding is easier to come by if you're an undergrad.
For grad: Best experience, then cost. Grad schools don't give out a whole lot of money.

College: I went to a prestigious school. I loved the social justice and idealistic aspects of the school I chose, but yes, the prestige was also a factor. It cost around $40,000 a year. But I was able to afford it because as I've said, my family mishandles what little money they have. I got lots of grants and some scholarships only came out with $8K in debt. I went to that school and I loved, loved, loved it. The commitment of the school to its values plus the money the school had to back it up, I think, allowed me to have wonderful teachers as well as many opportunities to do what I wanted. I am convinced that it this was one the best possible experience for me. Of course, I don't really know what it would have been liked somewhere else, but I definitely was very satisfied with my choice. I definitely would not eliminate any schools right away because of the price. Big name schools often have a lot of money to give away for undergraduates, and you can get scholarships, too. It may be worth it to get the type of school so heavily aligned with your values.

This time: I just applied to graduate school. I was accepted to another prestigious school and another state school as well. The state school had more flexibility and an interesting program and was cheap. The prestigious school had an uninspiring curriculum, a hefty price tag, but a great name, and a place I was already familiar with. Even when it seemed like such an obvious choice--interesting and cheap--I almost could not let go of this prestige thing... I was thinking that I must be doubly stupid to pass up an Ivy again. But then I thought about it. I ended up realizing that it would be most stupid thing would be to go to a school with a sub-optimal experience just because of a name. And like Erin said, no one would really care where I graduated from, especially for a Masters in Education. So I chose the state school and am very happy with my decision. I could not go to a place that my heart wasn't with. So I let go of prestige and embraced my core values and a cheap cost.

So yeah, to sum up: Values, then cost.