Book Review: Debt Free U

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Last week, I mentioned I heard of a book called Debt Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships or Mooching Off My Parents by Zac Bissonnette.  The title alone sparked my interest so I went to the library and checked it out.

It almost sounded too good to be true and I'm not exactly sure what I was expecting.  Maybe a way to cheat the system, stick it to the man, or just get some realistic advice on how to pay for school.  This book was written by a 21 year old college graduate.  He did not come from money, in fact, while writing the book his father's home was in foreclosure and his mom lived in a condo with her parents!  Zac, a financial wonder kid, was still able to go to a well known college without accruing any debt, at one point in the book he mentioned that at graduation he had one million dollars saved in his stock portfolio!  Currently he writes for AOL's Daily Finance blog, and contributor to many national financial newspaper columns.

 I dove right in to this book and read it in two days, but overall, I have to say I was disappointed. At this point in the game, for me, all of his advice was old news.  Here are just a few pieces of advice from the book, and how they relate to my college financial woes:

1.  How much can you afford and where will you get the money? 

Rather than actually answering this question, Zac spends a lot of time talking about how scholarships are few and far between - and really only pay about 1/20 of a student's overall college expenses.  He says student loans are dangerous and advises against them at all costs - citing that within 5 years of graduating 1 in 5 students default on their student loans.  He discusses that tuition & fees rise close to 18% every three years, and gives rough estimate costs of a 5 year education.  He also briefly touches on the downfalls of applying for financial aid and ways parents make mistakes trying to finance their children's education.

• I couldn't agree more about scholarships.  I graduated high school with a 4.17 GPA, I was involved in three Varsity Sports, and a myriad of clubs and other activities.  It did not pay off.  I received one scholarship from Target for $1,000, as well as a small in-state scholarhip that quickly ran out - and that's the only free money I've ever seen. 

• I never qualified for grants, because my dad made "too much money," however FAFSA didn't take into account that my parents had three kids going into college the same year, their own student loan debt, mortgage, car loans, etc.  FAFSA is great, but because it looks soely at income and not debts, it's not always realistic.

• Many parents save early for their kid's college, some borrow money or take loans from their retirement to finance their kid's education.  Bissonnette says this shouldn't be an option, which is good, because for me, it wasn't.  My parent's told us up front they couldn't/wouldn't give us money, but we could live at home while we went to school.

So where does is the money supposed to come from?  Bissonette says that all teens planning on going to college should start working summer jobs as early as possible.  This money should then be invested in high interest accounts and used to pay for college.  It makes sense, and would be a great way to teach kids about money, right?

When I was in high school, getting an education was my job.  My parents were completely against us working during the school year, but during summer break, we were allowed to work to earn some "fun money."  They were getting sick of forking over money so that we could go out with friends, and our allowance wasn't doing the job.  Every summer in high school, I worked as a Swim Teacher and Lifeguard, and I loved it!  I made about $200/week, which to me, at that time, was really good money!  However, with a job comes the need for transportation and therefore car payment, insurance and fuel costs. 

Contrary to Bissonnette's advice, I wasn't saving every penny earned, I was spending most of it on fun summer activities- you know, the whole reason for having the job in the first place.  By the end of my four years in high school, if I had saved all of my summer money, I could have saved close to $9,600!  That's half of my current student loan debt!  If I had invested it, and earned interest on it, I would have been much better off than I am today.  Instead, I started college with no savings and took out loans to pay for my education.

2.  Does It Really Matter Where You Go to College?

I found it amusing that most of the book dealt with the "dilemma" of where to go to college.  Is getting into an Ivy League school really that important?  Bissonnette points out that an education is an education.  What big name schools offer is prestige and networking opportunities and an empty wallet.  Many people think it's just fine to pay up to 40% more for a name!  Let's be honest, networking can be done at any school.  Like every other life experience, college is what you make it.  Success is not determined by a school, but by the person.  Anyone can turn an average Uuniversity into an Ivy League university if they want to.  He also recommends community colleges for general education requirements.  Tuition is often only 1/3 of what universities cost, and all credits are easily transferable.

•  I've never thought big name schools were worth the price, especially since I was the one paying for it.  Growing up, I always knew I'd go a religious private school, but when I didn't get accepted, I "settled" for my state's university.  I wish I would have taken advantage of getting my core requirements at the local Community College because I could have saved myself a fortune.  While Bissonnette stated earlier that every three years, the average costs for a college education raises 18%, my university is averaging 19% increases every school year!

3.  Make Money and Save Money

Did you know that most college age students spend 10.5 hours every week consuming alcohol?  How about 12 hours watching TV or playing video games?  There have been all sorts of studies done to show how much time college students waste "gaining a college experience."  Most of that free time could be used constructively in one of two ways: 

1. It could be used towards studying, and therefore getting through school faster.  Bissonnette points out that by channeling most of that wasted time towards school, students could easily graduate in three years, rather than the average of five it's taking most.   
2. The total amount of the average student's wasted time comes to about 35 hours each week - that is almost a full time job!  Bissonnette suggests that all students could successfully work a part time job (20-25) hours each week, have adequate time for study, and socializing.  It's about finding balance.  The money earned from a part time job at say $8.00/hour comes to about $3,200 each semester and would help pay for the next semester's tuition, fees, books, etc. 

Saving money is also relatively easy.  Bissonnette suggests not only working part time during a school semseter, but full time during summer and winter breaks.  Money earned should be applied to school and the rest should be saved or invested.  This is how Bissonette was able to become a millionaire by the time he was 21!  He also advises to stay away from using credit cards, creating a budget and sticking to it, and using wise finance practices- even taking a personal finance class.

Again, this would have been good to know when I first started college.  My parents didn't want me to work while in school, so I lived off of loans for my first two years of college.  Once I started working, I had credit card debt, and other bills that needed to be paid, so saving didn't happen, let alone funding my education.  And so the vicious loan cycle continued.

Is it worth reading?

I would say yes to those who are soon going to start college, or to parents of college age kids.  There is a lot of helpful information about the college planning process, that you may not know.  Most financial information provided by college financial aid departments and counselors is not very helpful, so any other resources are always good.  However, because this is such a large expense, this book should be coupled with other research and study. 

If you're just wanting an answer on how to get a cheap education, this is not the book for you.

Budget = BadCredit Cards = Good?

I finished reading Young Fabulous & Broke in two days!  I loved it!  It spoke to me, it speaks to our generation about financial problems we're facing.  "It most definately is not our parent's finince book."

While reading, I loved not only was this book helpful in teaching me about scary money words I hear used all the time, like Mutual Fund, Retirement, and Savings, but I realized that the financial advice I've heard my whole life is not geared for people my age.  Most [well known] financial advice is geard towards the baby boomer generation.  So imagine my surprise when I read two of my now favorite tips from the book:

Budgeting = Bad

Credit Cards = Good

Wha... what?!?

Budgeting is Bad

Let's be honest.  How many people have taken the time to sit down and create a budget?  How many people have actually stuck to their budget?  I have created numerous budgets, and I have never stuck to one for more than a month.  Operating under constant stress and worry and the constant monitering of receipt to bank account matchups, is more than I can stand.

Suze says that while it, "is a good idea to take a look at where your money is going... there are far faster ways to determine if you have cash flow issues."  To see if you have cash flow issues, check out these examples:

• You are finally makeing more money, but your bank account balance is the same as it always has been
• You hold your breath everytime you use your credit card waiting to see if the charge will be accepted
• Your credit card balance keeps rising
• You consider it a good month if you only bounce one or two checks

 Typically, most finance books would say, Oh you answered yes to one or more of those questions?  Great, here's a budget spreadsheet, now get cracking.  But Suze's answer is different.  She says, "budgets are about as successful fad diets where you lose a ton of weight at first and then gain back even more."  Instead of suggesting a financial crash-diet, she lists ways for you to "find" money to put towards your savings goals- no budgeting, now worrying.

Digging for Dollars

So how does someone who's broke "find extra money?"  It's almost insulting isn't it?  There are a few ways that I've heard before, and a few I've never thought of.

• Stop getting a tax refund.  Everyone with a job pays income tax, but most young people are paying too much.  We get so excited about our big fat refund check, and yet struggle to make it month to month.  Suze's suggestion is to change your withholding so that less money is subtracted from your paycheck.  Change your W-4 to change the number of exemptions you claim; the more exemptions you claim, the less money that is withheld, and the more money you have to pay your bills every month. 
• Loose the Life Insurance policy.  Because most of my peers are young and don't have anyone depending on them, there is no need to pay for a life insurance policy.  It's money down the toilet.  Most companies offer a free policy that is usually around $15,000; enough to cover your funural should something happen to you (Heaven forbid). 
• Raise your insurance deductable.  If you are accident prone, or have a bad driving record, this may not be an idea for you.  However, the majority of us don't need to worry about low-to-the-flo' deductables.  The lower the deductable, the more the monthly payment is.  If you need cash, raise your deductable and save yourself a ton in wasted monthly installments.
• Cell It.  Do you really need the internet on your phone, iPod, etc?  Did you know that canceling it could reduce your phone bill by 50%?  Wait until you're at home to check your Facebook.
• Look at your bank statements.  I never did this!  EVER!  Until one day I did, and noticed that there was a charge made to a surf shop in Utah for $60.00!  I called my bank to complain about fraud, and they denied my claim, because the charge had been occuring monthly for 4 months!  Money down the drain, all because I couldn't take 5 minutes to check over a piece of paper.
• Check your credit card statements.  Again, look at it, really look at.  It takes two minutes to check for inaccurate information or mistakes.  New fees, and charges magically appear on credit card statements all the time, and people pay them because they don't even know they should be there.
• Wait an extra week to get your hair done.  Instead of every 6 weeks, go every 8 weeks.  The extra growth won't be to drastic, and at years end you will have saved the cost of two trips to the salon.
• Dry clean less.  Use the washing machine, or laundromat.  The dry cleaner is convienient, but it adds up.
• Brown bag it.  Even lunch from a fast food restaurant costs just under $10.00/day.  If you brought your lunch to work you'd save a fortune on groceries and up to $2,600.00 a year!
• Stay home for the movies.  You could spend up to $40.00 for a movie date.  Wait a month until it comes out in the Redbox and pay just $1.00, or wait until its on TV.
• Get a roomate.   Living alone is the ultimate in "I'm an adult," status, but if you're trying to find extra money, a roomate is the best way to free up some dough.  Have them pay half your rent, and you'll be saving big in no time.

Even those of us who are "broke" are able to scrounge up a little extra money every month.  Take a minute to look over where your money is actually going, and then start making cuts.

Credit Cards are Good

For the 20-30 year olds out there, we have so much potential.  Our lives and our careers are just getting started, and this is the time of our lives to stop making mistakes start planning for our future.  Suze thinks the most important thing for us to do is get a jump on our careers.  If you find yourself in a job you hate, it's time to go, no excuses!  In this market, it is unlikely that someone with a decent paying job has the luxury of leaving and finding something pays more, or even the same!

This is where Suze says it is OK to use your credit cards.  If taking an entry-level position in a field you love is your only option, go for it.  "Many of you YB&Fers feel so much financial pressure that you're loosing sight on the long term.  You give up on your dream careers that may offer great long term opportunities because you can't afford to live on the starting salary." 

"This is where credit cards come to the rescue!"

Stay focused on your career goals, and don't worry about the paycut.  Obviously you need money to live on, so the credit cards are to be to supplement your income.  They will pay the difference between what your bills cost, and what you earn.  Notice I said what your bills cost, not what dinners out cost, or a new wardrobe costs.

However, this game is tricky, and requires you to be extremely responsible.  Saying credit cards are good is not a free pass to pile on extra debt by taking vacations, shopping, or going out with friends.  The credit card strategy is soely for the purpose of paying expenses that you need to live on.  If you are conciously doing everything you can to get by but are still coming up short, then this strategy is for you.

If you have to lean on your credit card for monthly expenses, keep it under 1% of your annual income.  For example, if you start your dream job making only $30,000 a year, use your credit cards, but for no more than $300.00 a month.  In the mean time, don't ask for a raise, and work your butt of so that your company realizes you are an asset, and they depend on you, not the other way around.  After doing this for two years, you should have proved yourself at work, and if they haven't offered, you can now ask for a raise.  By this time, your credit card balance will be around $7,200.  Stop using the cards and begin paying them down.  Don't freak out about the numbers.  Instead commit to a plan of paying $50-$100 on time every month and you'll have them paid off in no time.

Are you broke?

At work on Friday, I told a few people about my plans to do the spending fast.  In the past I've heard that telling people you're working on something, like loosing weight, can be hazardous.  The more people who know what you're doing, the more people will be disappointed when you fail.

I'm looking at a it a little differently.  The more people I tell that I'm doing this, the more people I am responsible for being accountable to!  It's like, I said I'm going to do it, and now I have to, or that makes me a liar.  I was surprised at how supportive my co-workers were!  Two of them even wanted more information, and have both expressed interest in doing the Spending Fast as well!

{Image Source}

Anyway, back to the point of this post.  I have been reading Suze Orman's Young Fabulous & Broke, and I have to say I'm in love with it!  I expected it to be a boring financial book that would speak a language I don't understand.  To my surprise, I read half the book in one night!  It's an easy read, and every part relates to me, to my generation.  It really is not "your parent's finance book."  I plan on blogging about some of the parts I find to be most interesting (and go completely against everything I've ever been taught about money).

Now, I dont' have any consumer debt, but I do have student loans, so I didn't really consider myself "broke."  To start the Spending Fast off on the right foot, this morning I decided to check the balance of my student loans.  Yikes!  That is a scary number, but the scarier part is that until I looked it up, I thought I only had about $20,000!  The actual number is actually $25,000 *facepalm* and then I saw that I have accrued almost $2,000 in interest!  I forgot about interest!  I nearly peed my pants!  I AM BROKE!

Anyway, in the introduction of the book Suze lists her 7 definitions of broke for people my age.  If you read these and find yourself nodding your head and saying, "Yup" to any of these definitions, YOU ARE BROKE and I would suggest doing something about it.

1. Do you rely on cash advances on your credit card to pay the rent or mortgage, and pray that you have enough on your line of credit to do so?
2. Do you have a ton of student loans that make you nauseated when you think about how long it is going to take you to pay them off? YES
3. Do you not open your credit card bills because you're terrified to see what you owe and have no way of paying.  So instead, you get hit with late fees and finance charges?
4. Do you want to buy a home but have no clue where you can come up with the down payment? YES
5. Do you count every coin in your change jar as well as scrounge under the sofa cushions in desperate attempt to find the dough to cover a bounced check and the $25 fee your bank is going to charge?
6. Do you want to save for your kids' college education but not know how to swing it because you are already strapped paying a mortgage and you haven't even started saving for retirement?
7. Do you not have one penny saved, even though you have a good job?  Or if your car breaks down, will you break down too because you don't have the money for repairs? YES

If you are in your twenties or thirties, you can relate to this book.  If you can manage to spend $9.00, you can buy the book at Barnes & Nobel, if not, you could try doing Anna's Spending Fast... it's free.

P.S.  Do you have any idea how embarrassing it is to publicly announce how much debt I have?  But, like I said if the FAQ, I'm going to be 100% honest about it or else I'm only hurting myself.

Young Fabulous & Broke

I've seen Suze Orman on TV for years, but I've never watched her show.  As I sit on the couch channel surfing, I'll occasionally stumble across CNBC.  Whenever I see her yelling and screaming at some poor dope who wants to know if he can afford $200,00 on a fishing boat, I quickly press the button to skip over her show.  She's a scary lady and from what I've gathered, she denies EVERYONE of their hopes and dreams…

Of course it's easy for her to deny everyone, she is financially sound, makes a great living, she has a TV show and probably a boat and a beach house/cabin.  I imagine her mental dialogue as she denies people trips to Disneyland, and home renovations, "Peasants, all peasants."  This has been my problem with her in the past.  I get very defensive and shout at my TV, "Not everyone can be rich, what about the average Joes?  What about the working man?"  And then I hold my fist up in the air, powerful, as if my word and fist gesture alone represents the working man as a whole.

However, while doing my Saturday cleaning, I had on Nancy Grace for background noise.  Afterwards, the Suze Orman show came on.  Too busy to change the channel, I left it, figuring maybe her yelling at poor people would somehow have the same effect on me as a drill sergeant and my cleaning would get done faster.

After overhearing a little bit, I decided to sit down and watch, and you know what?  This lady knows her stuff!  Because the language of money is practically foreign to me, I was lost through most of the program, but I picked up a few words, and was egger to learn more.  So I got online and decided to purchase one of her books.

The Money Book for the Young Fabulous & Broke and Women & Money came in the mail today.  I bought the chepest ones I could find on sale (under $10), with a 30% off coupon code, I got free shipping, and purchased through Ebates.com for an extra 4% back!  (Do you know about Ebates?  if not, get there!  You get 2%-6% of your money back for shopping online!) I'm so excited to read these books, and maybe pick up a few extra tips before the Spending Fast begins!