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These posts are inspired by a comment left by Living Almost Large.
(This is part 1 of a 2 part series)
I’d like to know how to start out life without any debt at all? And no parental help.
Wow, this is a very interesting question. First, a few thoughts about my situation, and then some thoughts about what I plan to do to help my own kids avoid the credit trap.
My parents worked very hard to provide for me and my sister. They purchased automobiles for us when we were in school. As for college and college loans, I never had any and I never needed any. Why? I didn’t GO to college. 🙂 So, that’s ONE way of avoiding student loan debt. (I say this, of course, tongue-in-cheek. Most modern jobs require a college degree (or technical degree) of some kind. I am planning for my children’s education expenses, and I fully expect them to attend college.)
If I were a student, here’s what I’d do to avoid going into debt.
1. I’d work. Simply put, if I were a single guy in college, I’d go to class, do my school work, and then have as many “part-time” jobs as I could find.
2. I’d focus on getting my education, not on the “college experience”.
3. I’d live a spartan, frugal lifestyle.
4. I’d try to find roommates who were just as “focused” as I am.
5. I’d refuse to sign up for a credit card, just to get a silly hat!
6. I’d find successful people in my career field, talk to them, and take notes!
7. I’d prioritize my life, giving myself time for school, work, church, and friends.
8. I’d only pay for college with money that I had earned or with grants or scholarships.
9. I’d realize that I did not “have” to finish school in 4 years. I could take 6. I could take 3. I would work at the pace which allowed me to PAY for my college without taking out school loans.
10. I’d apply for every scholarship, grant, or fellowship known to man.
As for purchasing an automobile, that’s a “tough one”. I have an old truck that, if I were to sell it, might bring me $2000? I am sure that there are working, not-so-awesome-but-gets-me-where-I-need-to-go automobiles out there. (In fact, in our local paper, there are 4 cars listed under $2500!) So, it starts to be about the “choices” that we make.
If you DO decide to borrow money for school or for college (as most people do) then I strongly encourage you to PAY OFF THAT DEBT as soon as possible. I find that, for most people, if they would focus on paying off their debts, they could be debt-free and then begin to plan for future purchases. The people who let their debt “hang around” for years, like I did, are the ones who can get into trouble.
Again, these are just a few “ideas” from the mind of a 32 year old father of two. I realize that my priorities (now) are completely different from the priorities that I had when I was 19 years old. At 19, I had no idea that living “debt-free” was possible, so I borrowed money, over-used my credit cards, and figured that “this was what you had to do”. It took me 10 years to figure out that I could live without borrowing money. Is it more difficult to live without borrowing money? From time to time, YES! But, to quote my man Dave, “I choose to live like no one else, so that, one day, I can live like no one else!”
One more note: What I write here at No Credit Needed is a mixture of what I did (or do) and my general ideas about personal finance. I realize, now more than ever, how blessed I have been in my life. I have never gone to bed hungry, or afraid, or worried that the roof over my head “might not be there when I wake up”. For those of you who are deeply in debt, or struggling with your finances, I encourage you to be strong and to press forward, examining EVERY avenue that might be available to you.
I’ll be back with “Part 2” in a little while…
To read Living Almost Large’s entire comment, please click here and scroll down.
All good thoughts, a couple more from my perspective. My parents paid for college (state school) and room and board for me and limited such payments to 4 years (you’ve got 4 years to get a college degree and after that you are on your own). I didn’t have a car while at college so no car expense. I did work a part-time job during college from my sophmore year until I graduated. I’m glad I did not work my freshman year because I needed every waking moment for school work and for the college experience. I think an important part of college is the experience (gotta disagree with NCN here) and I would budget time and money for that experience. I also signed up for my first credit card during college and while I’m not a fan of credit I’m glad I had a credit card and went through that experience. I think that if I could have changed anything I would have taken a personal finance class during high school (managing a checking account and even an ATM card was beyond my skill level during college).
Sam, Well said! Thanks for the input!
NCN
Good article. Like most people, I funded my education with student loans. To make matters worse, I never had a budget. I graduated from college at the age of 22 with over $19,000 in debt and it took me five years to pay it all back to Sallie Mae. At least I never had the credit card debt. If anyone reading this is considering a student loan: DON’T DO IT!! There are other (better) ways. NCN has listed some great suggestions. I now have a daughter and I will do my best to make sure that she does not repeat my mistakes. To help get her started, I just opened an Education Savings Account for her.
What I really believe from our experiences is that we did do college reasonably, not cheap, but moderate. DH worked and lived at home, I had scholarships and loans, worked 3 jobs, I started at 14 working, college at 16 and done by 20, so I was not out there partying. DH also took 5 years to work one year in a paid internship in his career field to be sure about his future career and make money for his move to the US, which he solely funded himself.
I don’t know if it’s really feasible to finish college by one’s self without help. I also don’t know if it’s wise, certainly not in our fields of science/engineering to take 6 years to finish while working menial jobs instead of getting out faster to a career paying better.
I guess it depends. Would I change things? Nah, the student loans were tough but paid back in about 10 month after graduation. But we’re back in student loan hell again, but if we don’t invest in ourselves no one else will. FWIW, nearly 10 years after college DH works full time and goes to school nights for another graduate degree and where we live we couldn’t go to a public university or else we would have (undergrads both were public). We’ve made it our goal to pay it off in a year if not with the signing bonus he’ll get with finishing his degree.
I’ve pondered college for my kids and decided if they choose to go I’m making it loan based. I’ll pay for all grades above a B, but anything less they need to pay for it. Sure not ideal, and yes I’m dragging them into debt, but I worry that if I pay for everything they could party and flunk out. This way yes it’s debt based but it’s also tied to performance like a job. So they don’t have to work, we’ll pay for everything but only if they work hard and really appreciate it.
I took out a few loans (I had some grants and scholarships) and went the 3 3/4 year plan–I didn’t want to pay all the annual expenses of college any longer than I had to. I went to a college in a very small town, so jobs were nearly impossible to get. I didn’t enjoy the high life in college–no new clothes unless absolutely necessary, no parties, etc., so I didn’t have any credit card debt. I did pay off my loans within a year or so of graduating by moving back in with my parents after college. Fun? No. But I didn’t want to start out my life worrying about how I was going to pay all my bills.
My older brother graduated in five years, but ended up with no student loans at the end (he worked more or less full time at an internship that hired him after he graduated).
If you take out loans, you need to live like you’re poor and avoid spending more than you have to, in order to reduce the debt you need to incur. And have a plan in place to how you’re going to pay it back. Moving back with my parents (thus cheaply) was an option I knew was available.
While it may be possible to get a college degree without going into debt, it is very difficult to get a top-quality college education without either student loans or wealthy parents. The top schools in the country don’t give “scholarships,” only need-based financial aid, which will include some loans. For instance, the school I went to, being one of said top schools, did not give any scholarships for anything. Not for top students, not for athletes. Financial aid was based solely on your parents’ income. First they determine what your parents “can” pay, then they give you $4,000 in loans per year on top of that, and whatever is left, they give you a grant. So I graduated with $16,000 of debt ($4,000 for each of four years). I also had part-time jobs during the school year and full-time jobs during the summer. There was no way around that either. Sure, I probably could have gotten a scholarship at a lesser institution, but I wanted that top-quality education. And it paid off in a big way when I applied to grad school: I got a full ride for a Ph.D. program, PLUS $30,000 each year to live on. Granted, I’m still repaying my undergrad loans, but I think it was worthwhile.
Your words sound good. But not too many 18 year old will follow it. Because of their peers might influence them.
Sometimes it’s good to let them make mistakes to learn on their own.
I agree with all of this to a point. I went to a private 4-year college and graduated with about $30,000 in student loan debt. The rest was taken care of by parental help, good planning and tuition payments. I think it’s the best investment I ever made. Yes, I make payments every month but I didn’t sell my education to the lowest bidder and was able to have experiences that I NEVER could’ve had at a huge state university or starting at a community college.
I now work for a small, private college and I talk with students every day who are terrified of taking out student loans. And I really don’t get what the big deal is. They’re so scared to take out loans that they’d rather work Full Time at McDonald’s for the next five years of their lives? That’s just insane to me.
I had some less than glamorous jobs after graduation just to pay my loans, but I’d rather have them than no degree. Or, even worse, taking 10 years to earn my bachelor’s because I can only take one class at a time.
Thanks for all of the comments! As someone who never had to “worry about paying for college” because “I did not go to college”… It’s not my “place” to make definitive statements about what OTHERS should do… I’m just stating what I would have done, at age 19, if I had the mindset that I have now, at age 32, and I wanted to go to college. Does that make any sense? In a bit (maybe tonight or tomorrow) I’ll write a post about what I plan to do so that my kids don’t have to “worry” so much about this dilemma…
Two more quick points…
There are some jobs that can be done w/ or w/out a degree, and I think that people should consider their actual “goal in life’ before spending thousands of dollars on an unnecessary (or unused) education…
Emily, I think that their are plenty of parents who are not “wealthy” (in terms of the salaries that they earn), who plan and are able to send their kids to school… that’s what my wife and I are planning to do!
I honestly believe it’s easy to teach avoiding CC debt, it’s much harder to teach to avoid student loan debt. Especially if you don’t plan or can’t help with college, which I think takes a back seat to retirement savings.