The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

April 27, 2010

Financial issues facing Generation Yers

Filed under: Goals, News Review, Personal Finance — Tags: , , , — thebalancedspreadsheet @ 7:05 pm

While in Tennessee last week I came across a good front page article in USA Today titled “Generation Y’s Steep financial hurdles: Huge Debt, no savings”.  Being a member of the so called “Generation Y” myself the title caught my eye.  The article mainly profiles Frank and Erin Lennon who just got married in October and Kristen Ammerman a senior from Michigan State who is graduating with a degree in journalism.  The article is full of interesting (and also scary) statistics and facts on young people today from the public policy research group Demos.

“Their generation is the first in a century that is unlikely to end up better off financially than their parents, the Demos report said.•Only 58% pay monthly bills on time, a National Foundation for Credit Counseling (NFCC) 2010 survey said.

•Nearly 70% of Gen Y members are not building up a cash cushion, and 43% are amassing too much credit card debt, says a November MetLife poll.

•On average, Gen Yers each have more than three credit cards, and 20% carry a balance of more than $10,000, according to Fidelity Investments.

•Millennials are graduating from college with an average of $23,200 in student debt, according to the most recent data from the Project on Student Debt. That is a 24% increase from 2004.  Even before the recession, nearly half of college students dropped out before earning a degree, the Demos report said.

Add all of that up and the data is kind of depressing.  This really does not come as much of a shock to me.  Talking with friends, family, and coworkers you always wonder how people my age could afford going on nice vacations and buying nice cars.  Well the data suggest they are faking it by going into credit card debt.  Although these quotes below kind of made me chuckle:

  “It was only when [the Lennon’s] were married in October that they became aware of their total credit card and college loan debts.

“The real shock was on our wedding day, when we realized that we were $104,000 in debt,” Frank says.

Surprise!  The thing that shocked me most was not that fact they were $104K in debt, but the fact they just found out about it on their wedding night!  You would think it might have come up some time in the dating or engagement process right?  Ultimately though this quote sums up what most twenty-something’s are feeling today:

  “When you get a little bit of money, what do you do with it?” asks Mikala Shremshock, 27, who works for Veeco Instruments near Philadelphia. 

“Do you pay off your credit cards, put it toward student loans, make an extra payment on your house or car, or put it in your IRA? I don’t have enough to really make a big dent in anything. If you get a bonus, why not just spend it?”

This shows the hopelessness and short-term thinking that so many people have right now which is the “Thank God it is Friday and oh no, it is Monday” mentality of buying stuff whenever you feel like it and paying for it later.  Twenty-something’s have dug themselves a hole, but it is not a hole they can not get out of, nor do I believe that it is absolutely certain they will be worse off than their parents.  What most of us are lacking is clearly defined financial goals and a plan to carry them out.

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February 14, 2010

“My Experience in . . .” Series Part I Paying for College

Filed under: Personal Finance, Real Example, Uncategorized — Tags: , , — thebalancedspreadsheet @ 12:05 pm

Well after the success of the Financial “How to . . . .” series in January, I thought I would start a new series for the month of February titled “My experience in . . .”  Topics will include paying for college, buying a house, and paying for a wedding.  This series is not being done because I am an expert on these topics, but because I have done these events and have made my share of mistakes in each. 🙂  My goal is that you find these posts informative and might learn from one or two of my mistakes .  Today’s topic is my experience in paying for college.

Back when I graduated from high school in 2000 I really had no idea where I wanted to go to college.  Accounting was something I was always interested in because I had taken it for three years in high school, and it came naturally to me and I really enjoyed it.  I eventually enrolled at one of The Ohio State University’s branch campuses close to home and started taking classes during the day while working at night.  I paid for classes and books out of my account and after my sophomore year transferred to the main campus in Columbus.  There I continued to work nights and weekends while paying for tuition and board and two years later I graduated from Ohio State with my degree in accounting not only in four years, but also completely debt free!

There were several keys that enabled me to be able to pay for college.  The first was that I picked a school that I could actually afford.  For my budget, public school was the only option.  Now I am not advocating that everyone must to go the Big State University.  But you have to do a cost benefit analysis when considering the price of college.  With private schools costing anywhere between two to four times that of a public school you have to ask yourself, do you think that your starting salary will be double that of someone who has a public school degree? 

The second key was that I lived at home my first two years at the branch campus and simply commuted each day.  Granted that was not always easy at times but I estimated I saved about $12,000 over two years that way.  Most big schools and technical schools have branch campuses now that make it very easy to commute and live at home for the first few years.  In addition to saving money on living costs, the branch campus usually offers cheaper tuition than the main campus.

Finally, the last key was that student loans were never an option.  Therefore I only had one option and that was to work; and work a lot.  My parents gave me a grant: They granted me the right to work. 🙂 And you know what?  Most people do work while in college.  I averaged anywhere between 25-30 hours a week while school was in session and around 40 hours a week while on break.  I still had fun and a social life and I think it even made me appreciate my education even more. 

While the above is what I did to pay for college is certainly not the be all end all when it comes to paying for college as there are plenty of other options to choose.  The first is scholarships.  There are plenty of scholarships out there; you just need to apply for a lot of them instead of just one or two.  You might not land the big $10,000 scholarship, but a few $500 scholarships add up pretty quickly.  Another way is by going to college part-time as a Junior or Senior in High School.  As mentioned in a recent New York Times article this is a growing trend as it allow students to get a head start in their education at a fraction of the cost.  Finally, if you are a parent, you can plan with your child on how to pay for college.  College should not sneak up on anyone, you know when your child is graduating so be ready and start thinking now instead of the summer after they graduate.

I know statistically about 2/3rd of graduating undergrad students have student loans, but I do believe that going to school debt free is possible.  Granted tuition does keep increasing but with a little planning ahead of time plus some hard work either in the classroom or in the work force, you can go throughout school without any loans.  Next time we will talk about My Experience in purchasing a home!

October 22, 2009

The Rising Cost of College Tuition

Filed under: News Review, Personal Finance — Tags: , , , — thebalancedspreadsheet @ 11:14 am

The AP ran an article Tuesday, citing date from the College Board, on the rising cost of college tuition.  As someone who paid for school themselves without incurring any student loans, I am always curious to see how much college cost is running these days. As well as how much student are borrowing to pay for their education. 

Some of the more notable quotes:

“Average tuition at four-year public colleges in the U.S. climbed 6.5 percent, or $429, to $7,020 this fall as schools apologetically passed on much of their own financial problems, according to an annual report from the College Board, released Tuesday. At private colleges, tuition rose 4.4 percent, or $1,096, to $26,273.”

“Still, this year’s increases were bad news for the estimated one-third of students who do not receive grant aid and must pay full price.”

When I graduated in the spring of 2004 my tuition was about $6,000 for my senior year.  So $7,000 a year for public college in 2009-2010 sounds about right.  Also that means private school is about 3.75 times more expensive then public.  Unfortunately with these price increases, more borrowing for college has occurred.

“Meanwhile, students also borrowed more to pay for college — but much more from the government and much less from other lenders such as banks. After years of expansion, private borrowing collapsed from around $24 billion in 2007-08 to less than $12 billion last year, the aid report estimated. “

“On average, about two-thirds of bachelor’s degree recipients borrow money, and their median debt is about $20,000 by graduation.”

Obviously I am not a big fan of student loans or debit in general.  To see 2 out of every 3 undergrads with student loan debt before they land their first professional job is troubling especially since half have $20,000 or more.  That does not seem like much of a blessing, but more like a curse.  Going through undergrad debt free is very possible if you do things the right way. 

As somebody who is hoping to have children that go to college someday this article is kind of scary.  To think how much college is going to cost in 20-25 years is pretty mind numbing.  The key though is planning ahead.  If you are able to start early enough with college funding the financial blow is not as hard as somebody who starts when their child is 16. 

Reading the whole article just makes me glad I went through college when I did without any debt. This allows me to be able to enjoy the fruits of my labor without any payments and no more worrying about increased tuition costs. 🙂

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