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“Keeping up with the Joneses” used to be a popular phrase to describe the act of living up to someone else’s standards. While you don’t hear it uttered so often any more, that doesn’t mean it’s any less prevalent. Our kids in particular can get a case of the “I wants” at the drop of the hat. While it is human nature to want more, it can get out of hand. How to deal with the wants – read on to pick up seven strategies you may not have thought of.

If it’s something fairly costly, your best bet is to make them pay for the item. The old phrase is that they have “skin in the game.” Your child will think twice about their “need” for the item, and if they do buy it then they will take much greater care of it. This lesson also teaches them to save for what they buy; in the end, they just might decide that it isn’t worth having.

Don’t give in to bribes or negotiation. Our children can be master manipulators. They will give you the sweetest little face and promise you the moon if only you’ll get this one little thing for them. Further, be sure that you don’t bribe them to get what you want. Before you know it, you’ll be dealing with the union boss to get them to do anything.

Be on the same page with your spouse. If your child is accustomed to hearing no from you but can get a yes from your spouse, then that’s big trouble. Your authority is undermined, the relationship with your spouse is strained, and you become the “bad cop” to your child. Pretty soon, your child goes only to the parent that says yes all the time and the other parent’s effectiveness is diminished across the board.

Have them give away something in order to get something new. Children who have a lot can become greedy and selfish. Through their intentional act of choosing a toy or something else to give, they learn about charity and they get the message that their happiness is not found in things.

Be a good example in your home and follow these principles in front of your kids. Show discipline and restraint instead of pulling out the credit card. Talk to them about your own wants and how you had to deal with that personally. If you send the message that you can have something anytime you want it, your kids pick up on this and expect the same for themselves.

Send the message that we don’t get something just because their friends might have it. A child who becomes accustomed to getting everything they want runs the risk of a life of discontent. Nothing seems to satisfy them and today’s toy becomes tomorrow’s attic food.

Give in every so often. I struggle with this one, but it’s just as important as the others. If all your child ever hears is no, when they ultimately have the freedom to make those choices on their own then they won’t deny themselves. Saying yes occasionally also just might make you a hero.

Help your child in this area to understand that we can’t have everything just because we want it. If they don’t learn this important lesson, then when they become adults then they’re bound to try and live the lifestyle that they’ve become accustomed to, just because the Joneses do. Impulse spending, buying beyond their means, and excessive credit card debt just might drive them back to your basement – and that’s not good for anyone.

Application Question – Do I keep a strong boundary between needs and wants? Do any of my children seem to have a problem with this? What message do I convey to them by my own actions in this area?

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This morning USA Today reported “Student loans outstanding will exceed $1 trillion this year”.  Let that settle in for a minute.  That is a one followed by twelve zeroes.  It’s also a million million.  By contrast, the amount of credit card debt outstanding in the United States is $793 billion.  According to the article, the amount of student loans taken out in the last year crossed the $100 billion mark for the first time.  This is a staggering number and is a sobering statistic of the state of student loans in this country.  Further, the default rate on these loans reached 8.8% in 2009.  This means that more students than ever are unable to service this debt that they’ve taken on in the name of furthering their education.  The average amount of student loan debt for the class of 2011 was $22,900, according to the Wall Street Journal

What does this mean for future students?  Does this trend have to continue?  Without a plan, direction, and discipline these numbers are sure to skyrocket as new students enter college every year with student loans as their only option.   Federally guaranteed student loans are generally made without regard to the borrower’s ability to repay, largely because the loans are guaranteed by the federal government.  You can’t bankrupt student loans.  The only way you get out from under them is if you pay them off, if you are declared permanently disabled, or if you die.  The last two options seem pretty bleak to me.  And, if you default on these loans, the federal government has the right to garnish your wages to collect on these loans without going through the court system.  In short, if you have a federally backed student loan, you will pay it back.

Your best option is to never take out student loans.  You may start school with the best intentions of finishing, only to have life reach up and slap you in the face.  Think it can’t happen?  How many friends do you know who had to drop out of school because they or their significant other winds up pregnant?  How many of you know someone who failed out of school?  Parents can get sick and you might have to care for your younger siblings.  Maybe you get sick and have to drop out for awhile.  One bad decision leads to an arrest, which leads to you getting kicked out of college.  Or, you simply get bored with school, or find out that you don’t fit in, or that your major is wrong, or that you can’t deal with your roommate, or that you’re just homesick.  Adult students, maybe your spouse loses their job and you have to go back to work to support the family.  As you can see, any number of things can happen but you still have the loan.  The student loan folks don’t care why you had to drop out, they just want their money.  Even if you plan to go back someday, once you have been out of school for six months you must begin to repay your loans.

Students and parents, take note.  Many good-intentioned folks will tell you that student loan debt is “good debt”.  I believe that there is no such thing.  Post-secondary education is still a luxury in this country, and we should either save up and pay cash or earn enough money to cash flow our luxuries.  Put the other practices for the Affluent Student into play and you should have more than enough to pay for college – without student loans.

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I’m currently in graduate school.  I love what I’m taking; it’s what has inspired me to do more with this blog.  I hope that it positions me for additional opportunities and responsibilities within my current industry.  Graduate school can be very rewarding and can lead to a very lucrative career.  However, I believe that there is a right way to approach graduate school and a not-so-right way.  We’ll touch on these in this blog post.

One of the excuses that many folks make who are struggling with their career is that they need new skills, particularly those who have been in the job market for  some time and have been laid off by their company.  If you’ve been with a company for many years, you’ve probably risen to a level where you have a comfortable salary and are shocked by the pay for jobs that are available in your field.  Consequently, you may decide that to get a good salary then you have to go to school.  New college graduates who aren’t able to find a job may also fall victim to this thinking.  The rationale they use is that their degree is now a commodity and to separate themselves from the pack then they have to get an advanced degree.

In each case, the prospective student is approaching graduate school at exactly the wrong time – when they have no money.  The laid-off adult may have been provided a severance package which only lasts for so long and likely has a family to support.  Unemployment and other benefits they may receive run out after a period of time.  The last thing this person needs is to go to school.  For one, they will either take out student loans to pay for school or use their severance and savings to pay for school.  Either way, they’ve placed a huge financial burden on themselves.  Two, in all likelihood their family needs them making income.  Because the benefits run out at some point, health insurance, grocery money, and mortgage or rent will go unpaid.  For those who have families that are dependent on their income, this can be disastrous.

The newly graduated twenty-something may not yet have a family to support, but they probably have major student loans which need to be paid off.  Prolonging their entrance into the workplace only delays the start of their working years and the associated income.  Even if they don’t have to make loan payments while they are in school, student loans continue to rack up interest.  Immediately going back to school robs them of a chance to use what they learned in the marketplace.  Worse, if the new graduate chooses to go back to graduate school immediately, what if they find out that their chosen field of study isn’t the profession that they want as a career?  It is very important to experience the workplace and your vocation before graduate school to ensure that your educational pursuits align with your career goals.

In some cases, graduate school is required.  Prospective lawyers, doctors, and such have extensive graduate school requirements.  But in all cases, these should have been planned for well in advance.  For the working professional, the opportunity to go back to school which they can pay for outright is almost always a good idea.  The best single investment that you can make is an investment in yourself in the form of education.  But, you should make this investment in a planned, scripted manner that does not require loans or hardship.  This form of investment isn’t an investment at all because it wasn’t your money to begin with – it’s leverage.  With leverage, there is always risk.  When you have the pressures associated with unplanned education, you are more likely to drop out leaving yourself with huge debt and no education to get the “big job” to pay it back.  Graduate (or undergraduate) school in reaction to unemployment is almost never a good idea.  If you’re going to graduate school, make it part of an overall life plan.  Education is a luxury, not a necessity, and we should only buy luxuries when we can pay for them outright.

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At the Affluent Student, we take a hybrid approach to the intimidating goal of funding college for your children.  In this blog, I will outline the parts of our plan, which you’ll see differs at various points from the conventional wisdom.  One thing you will not see is loans or some other form of credit.  When you look at today’s cost of college, and the fact that tuition hikes nationwide average 8% annually (according to the FinAid website), it is a daunting number to come up with for one child.  Here are some of our recommendations to get as close to this goal as possible, whether you choose to pay for your child’s college education or not.

  1. Begin saving.  No matter where you are in the process or how old your children are, begin saving.  You can use a 529 plan or an educational savings account (ESA) to get tax-favored treatment of your college savings, but that locks in any savings to be used for qualified educational expenses only.  You might instead choose to invest in a non-educational account to retain flexibility with how the money is used.
  2. For children younger than high school age, we recommend that you use a mutual fund or other investment vehicle to get some solid growth.  Once they reach high school age, any future savings should be routed into a money-market or other savings vehicle.  For each year leading up to their freshman year in college, 25% of any investment savings should be moved into the same savings vehicle.  This strategy protects any investment savings without possibly pulling out all of the investment at a low point in the market.
  3. Read to your kids.  Do homework with them.  Let them play learning games on the computer.  Solve problems with them.  Your involvement with them at this point will help you identify their learning style.  Continue to do this in preschool and all the way through high school.
  4. Work to identify your child’s skills and abilities, passions, visions, dreams, and personality traits and tendencies.  Use this to help them in their college choice and educational major.  Continue to refine and develop that throughout their teenage years.
  5. Teach your children about money and how it works.  In elementary school they can grasp the basic concepts of working to create money, giving, and saving for a goal.  In middle school begin to expose them to some of life’s realities like how much it costs to live and how to put together a working budget.  In high school, give them more freedoms with their money and help them open a checking account with a debit card.  Show them how to handle a check register and how to balance their checkbook.  Talk to them about credit, loans, and the real-world impact of using such tools.
  6. Get to know your child’s teachers.  Regular feedback and dialogue with your teachers will help you identify areas of strength and opportunities for improvements.
  7. Address your child’s weaknesses head-on.  Identify their learning style to help them in areas where they may be struggling.  If necessary, get them help early on with tutoring, counseling, or even medical help. 
  8. Setup a proper reward/consequence system to reinforce the right behaviors based on what works for your child.
  9. Use middle school as a training ground for high school.  Help your children develop the skills and behaviors that they need to be successful in high school and college.  Allow them the opportunities to make non-fatal errors and learn from their mistakes.
  10. Together, plan your child’s high school curriculum in such a way as to meet all of the requirements to get into college and to maximize their potential for success.  Generally you have leeway to choose some electives and to choose whether Advanced Placement (AP) or college-prep courses are best for them.
  11. Set the expectations for your children as to how much you’re willing to pay and what is expected of them.  That will help them greatly in terms of college choice.
  12. Encourage your children to work.  As they should be learning whenever you teach them about money, work is a sure-fire way to get the money to do the things that you want.
  13. Investigate the in-state schools that offer your child’s major or something very close to their major.  Put together a budget for each of your top three schools on that list and compare that to what you’re willing to pay for and establish how much gap your children have to cover at each school.
  14. Identify the merit scholarship opportunities available at these schools.  As mentioned in an earlier post, these are automatic scholarships that are awarded based on grade point average and entrance exam scores. 
  15. Take your chosen entrance exam at least twice, preferably three times, using the study plan and schedule outlined in my earlier post, Entrance Exams.
  16. Apply to at least the top three schools on your list at the beginning of your senior year of high school.  Be sure to send your test scores to each and complete any scholarship applications for the school prior to December 1 of your senior year.
  17. Search for scholarships outside of your chosen schools and apply for as many as you qualify for.  (Hint – all of those 2-inch thick scholarship books that they print each year are finally useful at this point in the search).

There are a lot of steps here, but they aren’t all to be taken at one time.  Some may not even seem like financial strategies, but these behaviors lead to a better student, which positions them more favorable for scholarship dollars.  Some are natural acts of parenting, but as with any goal you hope to achieve you have to be intentional in order to be successful.  Putting these strategies together will help your child to be in the best position to leave college debt-free.

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