Money, Muse Like Me

Donating to Your Alma Mater

Maybe you are familiar with the calls. They start out with a simple friendly hello, then the person asks to update your contact information, starts talking to you, asks how your life is going, then boom, the reason they really called comes out. They want your money. Its your alma mater, asking for donations. Maybe this time you’ll get a cool pair of socks along with your donation or a year subscription to your alma mater’s magazine so you can stay in touch with all the happenings of the school. They try to ensnare you, make you feel nostalgic, and not focus on the money until they need to. Even if you don’t answer the calls, the pleas come in other forms. They mail things to your house, intermingled with the bills and the credit card offers. There’s no escape.

The phone rings. It is another one of the dreaded calls from my college Alma Mater. Asking for donations. Again. I understand the value of education and I believe that overall, I’m better off with my education than I would be without it. I also understand that not everyone can afford college and that many need help with it. But in modern times I do not believe that the values that colleges are supposed to have are being honored. College costs have risen faster than any other sector and a lot of this is due to unnecessary spending and administrative bloat.

A lot of this is because colleges can. The demand has risen for college along with the cost. More and more students are told that they could go to college. That they should go to college. That they deserved to go to college. Many students were told that basically if they didn’t go to college they were throwing their lives away and they would amount to nothing. Then there was the access to student loans. It was easy money that students could get while they were young. Yes, college had a cost, but the bill didn’t come until later, so students adopted a go to college now and pay later attitude. This funneled more money into universities that started the college spending bubble. And this spending isn’t all going into helping students.

Let me share some of my college experiences. I attended a large public state research university. While I was there both the student fees and the price of tuition both DOUBLED. Here are some of the various happenings that have made me lose all faith that they are good stewards of anybody’s money. The gym on campus was renovated 5 times. Like major renovations every single time. There was barely a moment when the gym was not under renovations. And it was a pretty nice gym to begin with. It was housed in a giant building with many twisted hallways that made me feel like I was entering the bowels of some labyrinth when I went to the bottom floor. There were weight rooms, work out rooms, an indoor track, a 2 story rock wall, racquetball rooms, 2 indoor swimming pools, a basketball court, and more! This was before the renovations. Every time there was renovations we were left with pretty much the exact same facilities, but newer looking and shinier. These renovations were not necessary.

And the gym was not the end of it! Here are other happenings that went on:

The library cafeteria atrium was renovated twice
The bookstore had 3 separate locations on campus complete with new buildings each time.
The student center was completely rebuilt during my time there despite students voting against the new student center because they didn’t want student fees to increase. (I didn’t have a student center until my last semester there because of this.)
A brand new library was built on one of the campuses, so each main campus had a library but then they wouldn’t keep the library open past 8pm for “budgetary concerns”
A new cafeteria and new dorms were also constructed
The old chancellors mansion was renovated to become an art museum
A brand new 8,500-square-foot mansion for the chancellor was constructed complete with a stunning view of a lake and walls and gates around the entire property.

Also, while I was there the chancellor and board of directors repeatably gave themselves raises while the student fees and tuition steadily climbed. Meanwhile, they blamed the cuts in state funding for the those rising tuition costs.

I hope that from the list above that what was apparent to me as a student will become apparent to you also. That my school doesn’t need money, it needs a financial makeover. During my time at the school I was never made to feel like anything other than a number. My classes were huge, my professors largely uncaring. I graduated with almost $40,000 dollars in debt despite working while I went to school. So when they call and ask for money, I say “I have paid you. I am still paying you. I pay you every month. Do not ask me for money.”

University fancy building

Why Families Should Live Off Only One Income Even If You Don’t Have To

In our culture, we have a culture of consumerism and spending. Too many people I know spend all or nearly all of their salaries. I find this to be the case regardless of how much money they make. I know people earning $100k a year who have no family obligations that easily spend every cent. This is also the case in many dual earning households as well.

So I’m going to propose something radical: split household spending in approximately half by only living off one person’s yearly salary in dual earning households. How to this is simple. If you are in a household where you have more than one breadwinner, simply pick one of your salaries, and then make your budget as if that’s the only money your household has. Save everything else. Let’s do an example.

Say that we have a couple, Sally and John. Both Sally and John make $50k a year for a household total of $100k gross income. Under this system, we take $50k as one of their salaries. Then shave about 20% off that for taxes (depending where you live) so we’re left with $40k of spending money per year for Sally and John. That leaves them with the other $50k salary to save. Between the 2 of them they can put $18,500 each in their 401(k)s tax free if their employers offer them. Then they can put the remaining $13,000 to building up emergency savings, putting it in their IRA, or some other savings vehicle.

One of the biggest advantages to being married is that you have not only one, but two money making machines in the family! Once you are married you can share everything, so why not share your financial security as well? Both me and my husband work, but my husband makes a little more than me. For that reason we make sure to keep our spending low enough so that everything could be covered by my salary alone. This means that we live far below our means and that we make sacrifices that aren’t typical for young working couples who don’t have children.

We kept this in mind when we applied for a mortgage, making sure to get a house that was smaller so that it was affordable on only one income. We also rarely go out to eat and never drink in bars. These sacrifices are well worth the mental well being and financial security that our lifestyle choices bring us.

Of course I realize that not everyone is married. To those single people, I encourage you to just concentrate on saving as much as you can. And for families that aren’t quite ready to live off just one salary, just saving more is a step in the right direction.

Advantages to Living Off One Salary Even If You Have Two Incomes

1. If One of You Loses a Job, You have a Built-in Safety Net

If you are in a two income earning household and one of you loses your job, it shouldn’t be a problem because you already are living off only one income. The only thing it should affect is your savings. For so many families, one breadwinner losing their jobs is enough to send the family into spiraling disaster and debt. Last year I lost my job and was out of work for several months. But we didn’t have to adjust our spending, because we were already accustomed to living off one income. We barely noticed the dip into our savings and before long I was back at work. Our lifestyle choices prevented my loss of job from being an emergency.

2. It prevents You From Working a Job You Hate

If we had not been able to live off one income, when I lost my job last year I would have been desperate to get back to work. Because when you have bills that need paying, finding a job becomes more urgent. Instead, I was able to leisurely look for another job and accept the right job when it came up instead of accepting the first thing I could get. I was able to hold out for job that was good fit the next step I was hoping to take in my career and in my life.

3. Enables You To Save More

By living off of only one income, we are able to save an amount equal to my husband’s salary in the last year. That’s significant savings!

4. Mental Well-being

By living off of only one salary, you have the mental well being of not ever having to worry about money really. You never have to live paycheck-to-paycheck because you always have one earners salary as savings. This gives you plenty of leeway if ever need more money.

How I’m Paying Off My Student Loans

So I’m a pretty typical Millennial. The average student who graduated in 2016, graduates with $37,712 in debt. I’d say I’m a pretty typical student in this regard. I graduated with a grand total of $35,800 in student loan debt. This was with paying off what I could while I was still in school and working. But the end had come and it was time to start repayment.

To pay off my student loans I had to go through several steps.

Choosing a Repayment Plan

First of all I had to choose a repayment plan. When I looked at my choices I saw that I had to choose between a Standard plan and a Graduated repayment plan.

The Standard plan is a plan where you pay the same steady amount every month for 10 years (or however many years your repayment plan goes for) . This is the most popular plan and the federal government’s student aid site says that this payment plan will result in paying less over time (in interest).

With the graduated plan, you still pay over 10 years but the payments start out low and then increase in the amount every 2 years. This is sold as a good option if you graduate and then have lower income but you expect to make more money over time. This plan will end up with you paying more over time because you’ll accumulate more interest.

Those repayment plans assume that you will pay the amount listed each month and no more though. I have more radical plans for repayment myself. I would rather pay them off a little bit quicker than 10 years.

Paying them Down the Snowy Way: Snowball vs. Avalanche

For paying off loans quicker there’s 2 accepted approaches: the Snowball and the Avalanche. Both are named after snow related things.

The Snowball method says that you should look at all your student loan groups and then concentrate on paying more towards the loan that has the smallest amount so you can get rid of them faster while paying the minimum towards all your other loans. This method is commonly recommended because once you pay off one loan you feel immense satisfaction and you can then take the money you were going to pay towards that one and then you have it to pay towards the other loans. The disadvantage is that this will probably result in you paying more interest on your loans over time.

The Avalanche method says that you should look at your student loan groups and then concentrate on paying more towards the loan that has the highest interest rate. This one is good because the way loans screw you over is with interest accumulation. The loans with the highest interest rates are growing the fastest even as you pay them. So you want to pay down the highest interest loans so that they grow less. This plan will generally amount in you paying less in interest over time (pay less!) but also it can be hard for some people because it’s possible that your loan with the highest interest rate may be big and it may be difficult mentally to stick with the plan over time since it takes longer to pay off a single debt at first.

What did I decide to do? I Choose All the Methods!

Well when it came time for me to pay off I took a look at my own finances and loans. I had a bunch of different loans (9 different loans!) with interest rates all over the place (highest was 7%, lowest was 3.4%). I considered what I should do….

I chose to go with a combination of avalanche and snowball with a combination of standard and graduated plans. Well I have tendency to over complicate everything so I chose to go with what I calculated would get rid of my student loans the fastest. This is a very hands on approach.

So I looked at the monthly amount that I would need to pay per month on the standard plan and it was just under $400 a month. Then I looked at what I would pay with the graduated plan in the first 2 years ($170).

I’m going to take the avalanche method by paying off the groups that are higher interest first. But when I have several loans that have the same interest rate I will pay off the smaller ones first in that group. With that in mind I will pay off my 7% interest loans first. But with what money? I figured that I would budget to pay the standard amount of $400 a month each month but I want to pay the minimum towards the lower interest rate loans.

I formally signed up for the graduated plan starting at $170 a month. I will pay the minimum payment of a combined $170 a month to all of my loans. But remember I budgeted $400. So then I have $400-$170 = $230 total dollars each month to go towards my highest interest loan. Over time, I will pay off the highest interest loan and I will put the money difference towards my next highest loan.

https://studentaid.ed.gov/sa/repay-loans/understand/plans

A Look at the Shocking Student Loan Debt Statistics for 2018