Thriving on $12K/year

MSN Money provides some inspiration from a true story on surviving and thriving on $12,000 per year. Donna Freedman decided to go back to school to better herself and her future, and in doing so she had to make some radical lifestyle changes. She is now a full-time student with a grant that covers her tuition and books.

In order to make ends meet, Donna:

• Works doing baby-sitting, mystery shopping, freelance writing, paid medical research, and as the manager of her apartment complex.
• Takes a brown bag lunch every day.
• Gives money to those less fortunate than herself.
• Donates regularly to her church.

I found it totally inspiring to see someone who is making their future better and thriving in a difficult situation. She has totally taken responsibility for herself and is making it happen. Donna is going to sacrifice to graduate from school completely debt free, and be able to live like no one else. It isn’t going to be easy, but it isn’t going to be forever either.

The next time you are struggling with making a financial sacrifice, measure yourself against what the Donna Freedmans of the world are doing.

Million Dollar Habits

Michelle Singletary (from the Washingon Post) has some very wise advice having to do with the the true cost of smoking. She looks at the habit from a couple of different perspectives:

• The potential cost of getting sick.
• The daily or weekly cost of tobacco.
• The cost of spending a few dollars a week instead of saving for retirement.

Michelle is counselling Carl, a 38 year old man with a $100/month habit. She figures (with conservative estimates) that channeling this money into a 401K would translate to $100,000 at age 65. When confronted with the numbers, her client has decided to quit smoking and instead focus on saving for his families future. Good for him! I am sure that armed with knowledge and willpower he can improve his life.

Million Dollar Habits

Carl isn’t really different from the rest of us, we all have our million dollar habits. It could be Starbucks, McDonalds, Marlboros, or even iTunes, but a few dollars spent here and there can be the difference between steak and Alpo at retirement.

Michelle gives us a great example of the power of compound interest, and how spending with a purpose can change our lives. Remember, if someone saves $100/month between ages 25 and 65 it will be worth $1,000,000. That is $3/day!

Now, can you change your life like Carl?

College Students and Debt

There is a story on CNN about the debt problems of college students today. While I don’t think the advice is strong enough from the experts, there is some good information, especially for parents of teens.

My favorite part was an example of outstanding parenting …

Ashley Shaw, a freshman broadcast journalism major at Howard University, says she shops with cash, not credit, so she’s aware of how much she can spend. But even without the credit card, she occasionally runs into trouble. She recently overdrew her checking account during a shopping trip.

Right now, Shaw isn’t in any credit or student loan debt. However, she expects to take out student loans in the near future to cover her college expenses.

“As a younger teen, I actually received a credit card and didn’t know my spending limit and that kind of thing, so I maxed out the credit card and was penalized for it, and that’s why I don’t have one now,” Shaw said, explaining her previous troubles with credit.

This is the kind of parenting I want to to for my own children. Ashley sounds like a young woman with an excellent head on her shoulders, who continues to learn the right way to handle money through personal experience. She was lucky to be a teen who had parents who were both engaged and forgiving, and it looks like she is definitely heading in the right direction.

Personally, I hope that she can stay out of the student-loan trap, but it sounds like she has a good enough head on her shoulders to be resonsible and take care of business.

A First Rate Education at a Cut-Rate Price

I found some food for thought about education costs on the PRI show Marketplace. Did you know that an education at a top British university might cost less than a third of its American counterpart?

The Skinny

What a difference a continent makes … A year at Oxford costs about $10K a year while Princeton recently made headlines because it decided not to increase its $33K tuition for the 2007-2008 school year. Not suprisingly, Oxford reported that applications from Americans are up 48% this year. Top students can get the same great education, a lot more individual attention (Oxford uses the tutorial system, which has a 1-1 relationship between students and instructors), plus a global experience at 1/3 the price.

WOW!

The Result

A savvy student can get a top-flight education for less than it might cost for a good public school education! An education is the foundation for a young person to build their life upon. Financially speaking, there is no better way to guarantee a bright future than to start life debt free in your mid-20’s, and having the full power of compound interest working for you instead of against you.

The Real Problem

A lot of students and parents feel resigned to student loans, although I would strongly disagree. This seems especially true for top performers, who qualify for the most elite (and often the most expensive) institutions. There seems to be an implication that a child’s full potential is wasted if they don’t attend the most prestigious schools, regardless of cost. Don’t fall into this trap! This story goes to show that with some ingenuity and creativity you can find an answer that doesn’t involve burying yourself (or your children) in debt!

Links

Marketplace is very internet savvy, and there are a number of different ways to get to them, so I will just include them all:

• Read a transcript of the story.
• Listen to the entire segment.
• Subscribe to a free podcast.

The Definition of Finance

Money is a good servant, but a poor master

— Unknown

25 Rules For Wealth Building

Money Magazine has a nice gallery of helpful hints for building wealth. The advice is wise, thoughtful, and considerate, very close to what Dave says. I would recommend taking a closer look, if you are interested in that sort of thing.