The Control Your Cash Mailbag, Part I of II

November 9, 2011

Got a question? Submit it to info at Control Your Cash dot com. Today we discuss college education and weddings, two of our favorite topics. Our long-winded answers follow, with more mailbag goodness on Friday.

This pigeon has more financial sense than some of our readers

 

Dear CYC:

I’m a junior at a fairly prestigious (non-Ivy League) school in the northeast. I’m doing a double major in English and philosophy, and maintaining a 2.5 average. My student loan balance currently stands at $29,708.48.

Even though I still have another year to go, the problem is that all the job fairs around campus specify “engineering majors preferred” or “mathematics and business students only need apply” or some such thing. I’m beginning to wonder if there’s going to be a job for me once I graduate. I know that the average college graduate makes $1 million more over the course of his career than someone who never went to college, so I’m not worried. But a little advice would be nice.

Sincerely,
Trenton in Ithaca

Dear Trenton:



Thanks for writing. You’re an imbecile. A college-educated one, but still. That old and misleading axiom about going to college being worth $1 million is an example of paying attention to the mean while ignoring the standard deviation, two relatively simple statistical concepts that they were teaching in the adjacent building while you were busy trying to make sense of William Faulkner. The students who earn marketable degrees each average well over $1 million more in earnings than their counterparts who never attended college. In fact, those students will make so much money that they’ll lift the average up, even though you and your fellow English and philosophy majors are dragging it down.

The hard sciences will always be in demand. There’s a reason they’re called “hard”, by the way. To learn chemistry or zoology, you can’t simply wait until the night before a paper’s due, spew 3000 words on the page, and hope that proper grammar and spelling will at least get you a C. Go into any Starbucks (or Coffee Bean & Tea Leaf, or Seattle’s Best) and you’ll be greeted by college-educated employees who are thin, sallow, well-spoken and impoverished. Most of them are loath to admit the stark reality that they wasted (at least) 4 years of their lives and will never recoup the costs of their education.

Drop out now. Go to a local trade school and study to become an electrician or an HVAC tech. It’ll cost next to nothing compared to what you’ve wasted so far. You’re not going to listen to that, but if you run the numbers you’ll realize that you can still salvage your life and build some positive net worth before it’s too late.

 

Dear CYC:

My boyfriend finally proposed!!!!! I’m so excited!!!!! Sorry I know you hate excalamation points but I couldn’t help myself. Anyhow, we’re planning the wedding for next summer. I found the PERFECT dress and the PERFECT bridesmaid dresses. We’ve decided we’re going to hold the ceremony on Santa Catalina Island and maybe turn it into an all-week affair, invite all our friends and family. I hired a wedding planner (can’t start these things too soon!) and she estimates that it’s going to cost us around $50,000-$55,000. I don’t want to cut corners on what’s going to be the most important day of my life, but my fiance is already a little apprehensive about it. My parents have said they’d help out, and quite frankly I don’t see why “spare no expense” should be a bad philosophy to have for just one day. What do you think?

Sincerely,
Kim in Laguna Beach

Dear Kim:

According to our estimates, 98% of indebted couples started off with ostentatious weddings. Look, the Duchess of Cambridge gets an obscenely expensive wedding. You don’t. You should have married a prince instead of a assistant quality control supervisor, but what’s done is done.

As for what’s not done, there are few financial decisions as dumb as that to spend money on a wedding ceremony. You’re getting married, so presumably you’re an adult now (unless you’re one of those Mohammedan child brides.) That means that you should have advanced past the immature belief that instant gratification is the most important thing in the world. For the opportunity to spend a few hours stroking your ego and being the center of attention among your friends and family, you’re committing to spending months if not years paying for the privilege.

Yes, your wedding planner is a friend of a friend and she’s just trying to make a living. Yes, you’ll look radiant in white taffeta (and more importantly, everyone will know it.) Yes, your bridesmaids will look hideous in that chartreuse ensemble that accentuates their belly fat, all the better to make you seem even more glamorous by comparison. Now let’s look at the other side of the equation:

That $50,000 estimate will get you a down payment on a quarter-million dollar residence. Granted, in Laguna Beach that probably means a condo the size of a matchbook cover, but this isn’t China: you can move wherever you want (except for Mercury, Nevada.)

If you spend the money on the wedding instead, you’ll have to rent, giving all of your residential expenses to someone else and receiving nothing of lasting value in return. Or you’ll have to borrow even more to buy a comparable place to live, which will be exceedingly difficult seeing as mortgage lenders aren’t in the habit of giving 100% loans to people anymore (and haven’t been for a few years now.) When you’re living in a squalid apartment a year after you’ve gotten married, seething with envy at your friends who bought houses and are building wealth right out of the gate, and wondering if you should extend your lease, you can look at the photo album of your wedding day and those memories will make it all better. Assuming you’re in the lucky half of couples who don’t divorce.

Part II Friday.

**This article is featured in the Yakezie Carnival November Edition**

Filed Under: Bad Examples, Estate Planning, Finance, Healthy Living, Making Smart Choices Tagged With: , , ,

Why You Should Read Our Archives

November 2, 2011

"More money, more headaches." Go away.

 

Because most personal finance sites are garbage. One popular one is written by a 32-year old guy who admits to being 40 pounds overweight, yet gives diet and exercise advice.

Another of our favorites (damn, we wish we could link to these) is written by a guy who displays his negative net worth on his site. He lives in a rental house, is busy trying to have additional kids he can’t afford, and loves to tell people where they can cut corners in their own lives.

It’s like the blogs written by mothers who dispense advice on how to raise children, even though their own children are only 5 and 3 years old and the blogs themselves consist largely of pumpkin spice latte recipes and craft projects. (Okay, here’s a link.) If someone’s going to dispense “mom advice”, shouldn’t it be a mother who’s actually performed the fundamental task of motherhood: turning kids into productive and responsible adults?

These other sites have nothing to do with their ostensible topic of concern, be it personal finance or motherhood. They’re about sharing stories, baring souls, and finding love and acceptance among like-minded commenters who use exclamation points injudiciously. (Excellent post!! Great job short-selling your house!!!)

What makes Control Your Cash different is that we’re coming from a position of knowledge. Not necessarily intelligence, just knowledge. We know what works and what doesn’t, through plenty of real-world trial, error, and common sense, and we’re willing to share our findings with anyone who can read. We’ve lived hand-to-mouth, figured out that we didn’t like it, and learned how to build wealth instead. (Hint: it had nothing to do with reducing our energy consumption or renegotiating student loans that we shouldn’t have taken out in the first place.)

If you want to build wealth, buy assets and sell liabilities. Heck, our entire site could be reduced to those 4 words and you’d still learn more here than you would most other places.

If you don’t know what an asset is, it’s something that helps you build wealth. A liability, as we define it, does the opposite. That doesn’t mean to live under a bridge, eat at soup kitchens, and put every penny you earn into Apple stock. It means to live your life dynamically, acknowledging that certain expenditures can’t increase your wealth (although they might increase your non-monetary quality of life), while others can.

We live in a big, wonderful, abundant world, whose potential we as a species have barely tapped. Our planet consists of the same raw materials it had 4000 years ago, when we were living in mud huts, never traveling farther than we could walk, and having all our teeth fall out as a matter of course. Forced personal conservation is the very opposite of the mindset that got us to where we are today. You know, a place where we have exponentially more knowledge at our fingertips than even our parents did – essentially free of charge, no less. Where you can travel across the world for a few days’ wages. Where diarrhea is a mild inconvenience, rather than a childhood death sentence.

Sorry to go Anthony Robbins on you, but hear us out. Living for the express purpose of spending as little money as possible is barely living.

Stop preoccupying yourself with combining multiple errands into one trip and only shopping on double-coupon Wednesdays. Instead, examine what’s in your 401(k). Track its value over the course of a few months and figure out whether you can do better yourself. Take an hour to understand how the whole thing works. Read financial statements of publicly traded companies and buy undervalued stocks instead of complaining. Start your own business, and spend a few hundred now to save tens of thousands down the road. Implement 100% painless changes that will only positively impact your life, and save you real money in the process.

Instead of an emergency fund that isn’t intended to grow, take a calculated risk and put that money in an investment. Leverage it in real estate. Even the cheapest functionally sound home you can find can attract a tenant who’ll make your mortgage payments for you and let you enjoy tax benefits that non-landlords don’t even know about.

There are a million ways to reduce costs. Just ask the sages who think that it’s worth it to encourage you to waste time making your own detergent. Or inconveniencing yourself by turning off the air conditioning and fanning yourself instead. Or our favorite, improving your gas mileage via

pulling out (your) car’s seats (except the driver’s!), ash trays (sic), speakers, radio, sound deadening material, interior trim “and anything else not integral to the vehicle’s driving ability.”

(That can’t be true, right? That has to be a goof. Someone posited that, as ridiculous as it sounds, in the hopes that someone else would post it and a gullible tertiary party, we, would cite it.)

However, as many ways as there are to reduce costs, there are at least as many ways to increase revenue. To concern yourself with the left side of the ledger, rather than preoccupying yourself with the right side.

Are you playing to win, or to avoid defeat?

**This article is featured in the Baby Boomers Blog Carnival One Hundred-seventeenth Edition**

**This article is featured in the Carnival of Financial Camaraderie #7**

Filed Under: Capitalism, Economics, Education, Entrepreneurship, Estate Planning, Finance Tagged With: , , ,

Financial Retard of the Month, Assuming She Exists

October 26, 2011

History’s 2nd-greatest monster (Michael Vick is still #1.)

If you’ve got $10 to donate, and had to give it to an individual rather than a formal charity with a fundraising department and a celebrity spokesperson, whom would you choose?

  1. A 7-year-old pediatric AIDS victim?
  2. The disfigured victim of a hit-and-run accident?
  3. Kelli Space, an able-bodied, perfectly healthy, 20-something college educated woman who rang up $200,000 in student loan debts?

If you answered anything other than A or B, you’re part of the problem. Believe it or not, Kelli Space[1] borrowed this obscene amount of money to educate herself at Northeastern University. Even more incredibly, she begged for money and found enough idiots to contribute $12,000. Including at least one person who donated $1000.

Ms. Space buries it in on her website, but guess what her degree is in?

Civil engineering. She’s the only engineer on the planet who can’t find work. Can you believe that?

Of course you can’t. We lied. Her degree is in sociology, a word derived from the Greek for “unemployable leech who refuses to be productive.” And which embarrasses those who major in it to the point where they go out of their way to hide it.

Ms. Space is secretive about where she works, where she lives, how much money she makes, and what she looks like. (The only photos we can find of her appear to be straight out of a Corbis gallery.) Also, we can’t find her on LinkedIn, which is odd for a college-educated 23-year old who needs to make connections and is savvy enough to have been featured on major websites.

Nor could we find her on Facebook. And of the four Kelli Spaces who show up on US Search, the youngest is 35 years old. In at least one interview she claims to have been asked to write about education for The Washington Post, but the next article we see from her there will be the first.

Alright, the more we research this the more we’re convinced she isn’t real. But “Kelli” entered the public arena over a year ago, being featured on Gawker as an example of someone whom the education-industrial complex has abused by lending her money she couldn’t afford to pay back. If you go to her website (which WhoIs.net shows is owned by EduLender, a company that streamlines college aid forms and which “Ms. Space” has partnered with), there’s a donation form that takes you to PayPal. It wasn’t worth the minimum $5 donation for us to see if PayPal will indeed process the transaction.

If the purpose of the Kelli Space story is to rile people up on both sides of an issue, fomenting antagonism between the “she made an innocent mistake” crowd vs. the “she needs to be an adult” contingent, it worked. And if the purpose is to get the inflammatory curmudgeons at Control Your Cash to devote a blog post to questioning the value of post-secondary education, it worked in spades.

We’ve already demonstrated how incurring student loans is a path to anything but riches. Even a huge percentage of lawyers are still paying off their student loans well into their 30s. Not that the practice of law contributes to overall human happiness any more than whatever a liberal arts degree qualifies its recipient for, but at least lawyers (unfortunately) make decent salaries.

Is a college degree really worth it?
That’s like asking “Should I invest my money in a stock?” “It depends” is the only satisfactory answer.

The aggregation of human knowledge throughout history has two major components – discovery, and debunking. Don’t underestimate the latter. In centuries past, at different times, the smartest people on the planet were convinced that

  • the Sun is stationary;
  • light travels through something called ether;
  • you can turn lead into gold with enough heat;
  • your body has 4 major fluids that need to be kept in balance – blood, phlegm, black bile and yellow bile. (By the way, this belief predominated for 2000 years.)

Or more recently,

  • an economy is too complex to be entrusted to anyone but the intellectual elite, and;
  • an education is the most important thing in the world, to be achieved at all costs.

It isn’t. For plenty of hardworking, earnest, ambitious high school graduates, the worst thing they can do is pile on more years of book-larnin’ that come with a crippling price tag. There are trade schools whose tuition is barely 1% of the cost of a 4-year degree at Northeastern, and that’s not even factoring in the inevitable interest payments that come with financing a university education. At some point, an economically independent person blessed with even the least common sense learns to strike a balance between potential (that college degree that we’ve decided is more important than health or well-being), and actual (getting out in the marketplace and doing something that earns money.) If it takes The Legend of Kelli Space to bring that truth to light, then maybe “she” has found her purpose after all.


[1] Anagrams include “peace kills” and “please lick”. Are we sure her name isn’t a pseudonym? Heck, maybe her entire story is false. There’s no video evidence of her, merely audio evidence on some radio show that no one listens to. She’s the Osama bin Laden of upside-down college graduates. In the event that it turns out this entire thing was a hoax, consider us de-pantsed. Until then we’ll assume her story is true, especially since we’ve already documented similar ones.

**This article was featured as a Top Personal Finance Post of the Week-November 4, 2011 Edition**

Filed Under: Bad Examples, Consumer Debt, Finance, Financial Retard of the Month, Newsflash Tagged With: , , , , ,
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