What I teach

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I teach personal responsibility.

I teach that you shouldn’t buy things that you can’t objectively afford.

I teach that you should search for alternative funding sources, including ones that you don’t even know about, prior to taking on student loan debt.

I teach that communication will save your marriage. Whether you are beefing over money or something else, structured communication is the key.

I teach that you don’t have to make a ton of money to be a success.

I teach that you can give you and your family an amazing life, if you believe in yourself and your ability to be disciplined.

I teach that borrowing money from your family isn’t cool.

I teach that lending money to your family isn’t cool.

I teach that education can get you a better job, if you get the right education.

I teach that you should buy life insurance.

I teach that you have much more to do with your chances of being a financial success than you think.

This is what I teach.

I will stand by this. These teachings won’t be compromised.

Pete the Planner’s guide to when YOU should pick up the tab

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The business lunch is an institution. Check that. A business lunch, that is handled appropriately, is an institution. I actually hate going to lunch for business unless at least one person benefits, hopefully both. I don’t necessarily need to be the person who benefits. I just don’t want the experience to be a waste of time or money.

All of that being said, the most awkward moment consistently occurs when the check arrives. Who pays? Knowing who pays, could be the key to advancing your career, or remaining in a position that you don’t want.

You’ve been there. “One check or two?” Doh!!!! But with Pete the Planner’s guide to when YOU should pick up the tab, you will never feel awkward again.

When you SHOULD pick up the tab:

  1. You ask a mentor-type to lunch- I owe my career to others. These others are men and women who took the time to go to a lunch with an absolute nobody in the financial world (not that I’m somebody now) just because I asked. Do you want to rise in your industry? Ask your “competitors” to lunch. Call the head of a competing firm, and ask him/her to lunch. Then pay for lunch. You aren’t trying to learn trade secrets. You are trying to learn career secrets. Picking up the check confidently is a good career move. Act quickly, take the check firmly, give the person a firm nod, and say “I got this. Thank you.” If they resist beyond the obligatory “no no no”, then allow them to pick it up. You don’t want to embarrass them.
  2. You dominate the lunch conversation- I believe that lunches should be productive for both people involved. If you clearly get more out of the lunchtime conversation, then pull an awesome move. “Hey Frank, I realize that I dominated the conversation today with my ______ issue. I’ve got the check. I really appreciate your willingness to listen.” Baller.
  3. It’s your turn- Step up and take your turn. If your normal lunch buddy always buys, then take your turn. I’m not talking about random lunches with your co-worker. I mean a real business lunch with a purpose.
  4. You’re with someone that has made you a tremendous amount of money- If you are a vendor, a service provider, or a sales rep, and you are with someone that has referred you a ton of business or who consistently buys things from you or your company, then buy lunch…every time. This isn’t negotiable.
  5. The other person is unemployed- I’m not going to explain this.
  6. You order a lunch beer and they don’t- The lunch beer is one of life’s true pleasures. If you are tipping one back, don’t make the designated diner buy your lunch. Not cool.

When you SHOULD NOT pick up the tab

  1. You want to display your dominance- Believe it or not, I struggled with this for a very long time. Ask my friends. I always picked up the check. Was it an ego thing? Kinda. I’m working on it. Want to help me? I’ll gladly let you buy me lunch. :)
  2. Because you make more money- Surprising, isn’t it? The purpose of the lunch trumps financial status in my eyes.
  3. Based on gender- I can’t think of anything more insulting then picking up a lunch tab based on gender. Chivalry is chivalry, but buying a business lunch because your co-diner is a lady-type, is ridiculous.

How/When to accept lunch from someone else:

  1. Graciously- Don’t make a scene. You will look like a d-bag, especially to the server. The server doesn’t want to stand there while you pound your chest like a weirdo. Make eye contact with the person offering to buy you lunch (nothing weird, don’t lean in for a kiss), and say “Thank you. I really appreciate it.” Your act of true graciousness will be remembered much more than you picking up the tab.
  2. If things get awkward- Have you ever seen two-man luge? Yeah, it’s really awkward. If things get super awkward during the “no, I’ll pay” debate, then retreat. The other person clearly didn’t read Pete the Planner’s guide to when YOU should pick up the tab.

When in doubt, go dutch. Pay for your own lunch. Sometimes requesting two checks is the best move. It’s quite clear when this is the case. My default move used to be to buy lunch. I discovered that I bought lunch when I shouldn’t have. The better move is to go dutch. That’s my new move when the rules don’t apply.

Have any rules to share? I’d love to hear them. Leave a comment. Happy dining!!!

The financial impact of war ending

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Photo courtesy of Wash. Post

I like articles that are supported by facts and statistics (although 65% of statistics are made up and the other 50% are inaccurate). This post isn’t supported by facts or statistics. It’s just my receding harebrained theory on what will happen when the soldiers come home. BTW, can this be a post about money and culture without crossing over to politics? I hope so. That’s my aim. I don’t want this to be political, but I fear it will be interpreted that way.

Competition is good for an economy. But is competition good for the individual? This is the question facing hundreds of thousands of soldiers as they return home from war. When war is in season, as it often is, those members of our military that fight so bravely to serve this country, are employed. They are compensated for their service. Albeit a disservice to say that monetary rewards are appropriate for risking one’s own life. What happens when there is no one left to fight? What happens when there is no foreign land to stand on? Those which were once charged to protect the country, now find themselves in a different fight: The fight to make a living in civilian life.

Whereas war is hell, unemployment in the civilian world is purgatory. Combine this with geographic realities of troops landing back on US soil, and the problems begin. Close your eyes for a moment and imagine this. Wait, don’t do that. Then you can’t read what I’m saying. Dammit high school speech class, you have failed me yet again. How do people join the military? Men and women come from all over the country to fill the ranks of our military. They leave their homes upon sign up, and make their way to centralized locations, bases. This is where major problems begin. Base quickly becomes home. And soldiers with families set down even deeper roots. These roots often include inappropriate home ownership, which is a different story altogether. Let’s jump ahead.

The best part of war ending is that soldiers come home. To base. Kids are in school, spouses have support networks, and mortgages are established. War is over. Soldier, welcome home. Get a job. I don’t say this callously. I’m expressing reality. The soldiers know this. They want jobs. And this is exactly where economic disaster begins. When thousands of soldiers come home, from war, without any more wars to fight, they enter the civilian workforce. The dying on the vine civilian workforce.

My original visualization of soliders coming home to enter the workforce was misinformed at best, and ridiculous at worst. I had an image of a dried dandelion being blown into the wind. Its pieces scattering. I had an image of soldiers coming home and scattering all over our great country to find jobs. This isn’t what happens. They have roots, deep roots, on the base. There is no scattering. There is a plop. That plop is the sound of financial struggle.

Roots are vitally important to our soldiers. They provide networks and comfort. They provide peace of mind and stability. They provide a mental respite on a hardened battlefield. When war ends, these roots become an anchor. Thousands of men and women are now competing for the same jobs, in the same towns, armed with the same skill sets.

Ask any soldier, that has made the transition into civilian life, how hard it was to get a non-military employer to understand his impressive military skills. It’s one of the biggest challenges a solider faces. How can a person, that has given up his civilian life to learn the art of being a soldier, convince a civilian that this art translates into the civilian world? The skills do transfer. Now multiply this individual struggle by thousands. The troops aren’t going to trickle home. They will come home in droves. Droves of soldiers with under-appreciated skills will return home to compete with each other for jobs that don’t exactly exist. This is what I fear. I fear that military towns will suffer great depressions, economic and otherwise. Much has been written on PTSD (Post Traumatic Stress Disorder), and one of the main issues is the assimilation back into civilian culture, especially the workforce.

Yes, I really think this will happen. The military “employs” so many people. This country is in a very strange place militarily right now. Not good or bad, just strange. We have had several wars/military actions that have required troops on the ground, but we will have increasingly fewer…hopefully. This reality is nigh. There has to be solutions to this, right? I can think of two remedies for our soldiers. One, pre-deployment. And one for when the fighting is done.

  1. Pre-deployment- Don’t set down roots that are too deep for their own good. Entire neighborhoods and towns are in foreclosure in military towns throughout the United States. Had the soldiers not laid down such significant roots, this never would have happened. The more soldiers that “stick around” base towns, the worse it is for everyone involved. There aren’t enough job opportunities to absorb the ex-military.
  2. Welcome home- I am not an expert on transitioning into civilian life, however I think the best solution for a soldier is to go to college (this is assuming that they haven’t been to college yet). Jobs are scarce. Employers are still a bit shy to hire the skills of our soldiers. Wait it out…for free…while getting an education…on the GI Bill. This will combine military skill with specialized education. This will increase the marketability of the soldier to the jobs market. And it more importantly it will help the job market come back around.
I have several military client all over this globe. I have some in Afghanistan right now. I’ve had these types of discussions with them. Their stories of housing issues (foreclosures and short-sales) have saddened me to no end. I always have had an uneasy guilt about not serving my country. My only hope for contributing to our armed forces is through financial education and general support. I have spoken to the US Army and the National Guard in the past. And I try to make self available to them whenever possible. I have faith that the soldiers are being given the proper financial resources. The best resource for soldiers in the midst of transition is the Transition Assistance Program. It is a structured program designed by the military.
I hope this blog post gets passed around the military. I hope soldiers read it, email me, and ask for help. We have asked for their help for years.

 

This post is for Beck, Teach, Amber, Fox, Jonathan, and countless others. Get home safe and welcome home.

Building or repairing credit to buy a house or car

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Yesterday’s emailer, C.E., wanted to know how to rebuild/repair credit in order to afford a house. I loved his original email. He was trying to formulate a plan to help get his family into a better situation. He had admitted a history of poor financial decision-making. He was contrite. He was honest. He was ready to learn. Today we will wrap up my answer to him.

As you read yesterday, C.E. had some technical and philosophical questions that he had to deal with. His goal was to buy a house in April 2013. My contention was that he shouldn’t buy a house in 2013. Am I holding him back from achieving a dream? Yes. If my dream were to fist fight a polar bear, would you stop me? I hope so. I believe that if C.E. were to buy the house in April of 2013, he would be in real financial trouble within five years. His financial situation is not solid. You can buy a house, lease a car, go to college, and several other things on a shaky financial base, but that doesn’t mean you should. Instead, C.E. should strengthen his base, and revisit the home ownership conversation a few years later.

He also asked how he should go about repairing his credit. That’s a great question. Unfortunately, there is a tremendous amount of bad advice out there on this topic.

Here are the best tips for repairing credit.

  • Get current- If you are behind on your bills, then make sure that you make payments on time. Believe it or not, paying your bills on time really helps your credit score.
  • Address your collections- If your debts have gone to a collection agency, then your credit will get beat up until you address the problem. The quickest way to fix your credit? Payoff your collection debt. Make sure that the collection agency provides you a promise to clear your debt from your credit report in writing.
  • Time- Time heals credit damage. But this is the last thing people want to hear. If you have a bankruptcy or some other bad credit moment, it will eventually exit your credit report. But most people want it to go away faster than it will.

Short list, huh? There are more ways to improve your credit, but I think they are really bad ideas. Do you remember the Atkins diet? It was the diet that had you eat primarily fatty foods and protein, all the while avoiding carbs. It worked. Kinda. Somewhere between my 2nd and 3rd pound of bacon my fourth week in, I decided that the diet just didn’t make any sense. Many Americans came to the same conclusion, and the diet died a slow fatty death. Many of the credit repair and credit building techniques that you commonly read about are very similar to the Atkins diet. In other words, you are cheating the system for a temporary result that won’t last.

Your credit score is a measure of how good you are at borrowing money. If you have proven over a period of time that you suck at it, then take a break. Just get out of the game for a little while. I SUCK at golf. I have taken a break. I will take it back up someday when I have the patience. People that are told that they “can’t” borrow, get in such a hurry to borrow again. And those that can borrow freely, don’t really care that much about borrowing. It’s like The Gift of the Magi….kinda.

There are going to be people who read this that say “Peter, you are being unrealistic.” In fact, that was a major kerfuffle that I found myself in yesterday. If you know what I’m talking about, I’m sorry it happened. We’re better than that. To the people that are reading this and saying “Peter, you are being unrealistic,” I promise you that I’m not. If you aren’t pleased with your current debt/housing/money reality, then change your reality. If you have made poor decisions and find yourself in a pinch, then it’s going to require different thinking to get yourself out of the bind you’re in. Get angry. Don’t angry with me. Get angry and change.

To me, you shouldn’t even consider buying a house until you are out of the Survivin’ stage of the Four Stages of Your Financial Life. By God, you are SURVIVING. This means you are struggling. Firm up your foothold, collect yourself, and then put together a plan.

 

Why you need to avoid student loans

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How to Avoid Student Loans: wishtv.com

This video caused quite the ruckus today. It inspired an angry email. My point is very very simple: avoid student loans. Get your education, but avoid student loans. I give a few examples of how to do this within the above video. There are many defenders of the importance of an education. I am stepping up to defend your financial future, in relation to your education. Learn what I’m saying, and then decrease the cost of your education. There really isn’t anything to disagree with. Read the book and decide for yourself.

Emailer wants to repair credit to buy a house again

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Last week was a HUGE week at PeteThePlanner.com. Cision ranked me as the fourth most influential personal finance expert in the nation. I get a tremendous amount of email from people all over the country. It’s one of my favorite parts of my job. The emails are always VERY REAL questions. They are specific, heartfelt, and quite vulnerable. And I always think there’s something to be learned from everyone of them. We may not have the same problem (as the emailer), but many of us have the same spirit. We’ve made mistakes, we want a do over, and we want to to stop stressing out over money. We just want our lives back. The email below is the perfect example.

Hi Pete

I’ll start by saying my wife and I have made some pretty terrible financial choices and need to do a much, much better job. We were not taught financial responsibility and while we tried (not with the best effort or result) to fake it we’ve fallen into some of the cliché traps you’d expect. We used credit irresponsibly in our 20′s resulting in a bankruptcy in 2002. We tried to right the ship but my wife lost her job and we had late payments, a few collections and even a judgment or two over the last several years. We’ve ignored debts/collections and I’m tired of living with my head in the sand. We’ve entered into a lease-to-own contract for a home we would very much like to purchase, we have until April 2013 to obtain financing and I know we are going to need to build credit to be able to obtain the loan.

Pete – I guess what I’m saying is, I need help. I’ve dug myself a hole and I need help getting out of it. I’m willing to put in the effort and make sacrifices as necessary but I need that experience and additional push that a professional can provide. We need advice on how to build credit and do credit repair. We currently lease-to-own our home and outside of what I’d call our day-to-day living expenses, we have roughly $7000.00 in debt. The debt is a 2 personal loans and 1 collection account. We have no credit cards or auto loans at this time. I’m certain we need to do better with our monthly spending. We do eat out vs. grocery shop far too often, but for the most part I think a look at our lifestyle costs (internet, cell phones, etc.) need to be looked at and maybe slimmed down

Where do I start? Can you recommend a legit credit counseling service? You hear about so many of these places causing more harm than good. I just don’t know what to do to break the cycle and escape from this terrible financial position. I want to be secure; I want to be able to know I can obtain a mortgage and provide for my family. This is no one’s fault but my own, I know this, and I’m ready to change.

I am sorry my email is all over the place. It appears this email has become part confession and part plea for help.

C.E

Do you sense the stress? Its palpable, isn’t it? There’s so much here to address: technical issues, philosophical issues, and behavioral issues. I’m not saying this guy is screwed. I’m just saying that most financial problems stem from both technical and philosophical shortcomings. We’ll address these issues separately. I needed more info to answer the questions so I emailed this person and learned the following: $60,000 household income, he has a 401k at work but no other savings, his current rent payment is $925 per month.

This is a very involved question. I will deal with parts of his question today, and then the credit building stuff tomorrow. Deal?

Technical Issues

C.E. is currently in no position to buy a house. He is not a homeownership candidate. Unfortunately for him, someone might actually loan him money next year. The absolute worst conclusion to his story would be for him to buy the house next April. Based on the income numbers he provided me, C.E.’s take-home pay is about $3500 per month. That means that his rent payment is 26% of his take-home pay. All other things being equal, 26% of income going towards housing would be acceptable per Pete the Planner’s Ideal Household Budget. However, the rest of his financial profile suggests struggle. He’s struggling.

A prospective homeowner should have 10% of the value of the home they are purchasing as a down payment AND an emergency fund on top of that. C.E. currently has zero dollars saved, has debts in collections, and owes personal loans. All of these characteristics are the opposite of a prospective homeowner. This doesn’t make him stupid or dumb. It just makes him mislead. He is mislead that homeownership will solve his financial problems.

Philosophical Issues

Peer-pressure is a mamma jamma. It can cause some weird decisions. The overriding social philosophy of Americans that homeownership is the best way to go, is quite strange. I kinda get it, I’ve personally felt that way in the past, but given what’s happened in the last five years in the housing market, I can’t understand why anyone would be in a hurry to jump back in.

C.E. mentioned two personal loans that also need to be repaid. I can’t, under any circumstance, given the information above, recommend that C.E. pursuit homeownership in April 2013. He mentioned that he and his wife have made several bad decisions. I believe that this is primarily due to philosophical issues.

Tomorrow we will continue this conversation by giving credit rebuilding tips and I’ll give you my perspective on credi counseling.

Pete the Planner named 4th most influential personal finance expert in the nation

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Cision broadcast services released their rankings of the nation’s most influential personal finance experts, and Pete the Planner was ranked fourth. The top four influencers were Jim Cramer, Dave Ramsey, Suze Orman, and Pete the Planner. Checkout the rankings. As always, thank you for your support and interest. You made this possible.

Keep the questions coming. I can help. Email me at pete at petetheplanner dot com or find me on Twitter.

The thrifty wine lover’s guide

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Am I a stick in the mud? To some, yes. Am I grumpy? Yep, sometimes. Do I think you shouldn’t enjoy life? Absolutely not. Do I actually spend money on anything fun and frivolous? Yep.

Today, I want to share one of my interests with you…..but there’s a catch. You have to listen to one of my favorite stories ever. Deal? Cool.

Tammi Ramsey was a very successful corporate recruiter. She was the best of the best. She liked her job, but it wasn’t her passion. Her passion? Wine. She had taken to amateur winemaking in 1996 when she received a wine-making kit from her best friend. Just five years later, she spent her entire life savings on a vineyard in Sonoma County, California. I met Tammi through a mutual friend a few years back, and her story honestly brings me close to tears every time that I hear or read it (here’s the entire version). To me, she is the epitome of awesome. I get great joy when people work hard and pursuit their true passions.

Tammi has been so successful in her new venture that she was featured on the reality show Winemakers Season 2 on PBS. She knows EVERYTHING about wine. EVERYTHING. I asked her to help me share one of my little pleasures with you. I love wine too, but as you can imagine, I like to find really good cheap wine. Here is Tammi’s list of the best wines…for the thrifty.

I received an email from Pete the Planner asking me to guest blog about wines on a budget. I said YES! I have felt like I have been living with a secret for quite some time when it comes to finding awesome wines that will not break the bank.

I am going to give you names, brands, prices, I will even give you some possible food pairings and my tasting notes on several wines. I gottcha back when it comes to “flavor profiles” a super fancy wine snob terms like dry, bold, light, sweet etc. There is only one real rule in wine, that is: trust your palate! If you like a bone dry white wine or if you like something sweet akin to pancake syrup…it’s your mouth and it’s your money, let yourself relax, that’s what wine is all about anyway!

There is no need to drop $30-50 bucks a bottle. Don’t get me wrong, those wines are delicious, but if you are like me and want to have friends over and sit on the deck and grill burgers, there are $10-15 dollar bottles that will be perfect. (insider tip, this way you could use the extra cash for more wine or steaks….just sayin’).

Main white wines to stay on the lookout for:

Chardonnay- Kendall Jackson Vinter’s Reserve Chardonnay, You can find this wine anywhere in the USA and it is going to cost you about $10-13 dollars. My love for this wine started years ago and it was because I found many Chardonnay’s too buttery and oaky, or as I call it liquid toothpicks. This wine is easy on the wallet and it’s a lighter and “happier” chardonnay, it’s not such a serious wine. It has a pineapple and crisp apple flavor and a pear/citrus nose. Pairs well with fish, chicken (roasted for me). Alcohol is about 13.5%

Sauvignon Blanc- Casa Lapostolle Sauvignon Blanc, This wine is pretty easy to find and if you do not know anything about me, I did my wine making apprenticeship in Chile with the Lapostolle wineries (in my opinion, best winery in the world). This crisp and pure wine will excite your senses. This wine is perfect with cheviche, fish, chicken, sitting by the pool, reading a book or having friends over. It will not disappoint! Price per bottle is $10-12 dollars. Alcohol is around 13.2% and this is truly an amazing Chilean wine!

Riesling- Some folks think, they can only have Riesling if they like sweet wine. WRONG! Riesling can be dry or sweet, but the Riesling made by Chateau Ste. Michelle from the Columbia Valley, can be easily found at Trader Joe’s for $7.99 per bottle. Order some spicy take out or I like it just as well with popcorn. Friends have told me that a grilled steak rocks with this wine as well. Alcohol is 12% and the floral aroma is lovely and this chilled Riesling will raise your spirits on most occasions!

Vinho Verde- This wine is a newcomer to the states, gaining massive popularity. This is my “veggie” wine. I could ever find a wine I could enjoy with a salad and this white wine from Portugal changed my mind. Gazela Vinho Verde is found in my local grocery store for $7.49. This wine is for people who don’t like wine and this is also for people who LOVE their wine. Pick up some manchego cheese and you have an evening of fun instantly, with 9% alcohol, you can drink more than you think with out the punch of the alcohol.

Red wines to look for:

Cabernet Sauvignon- My personal go to Cab is J. Lohr Estates Seven Oaks from Paso Robles is $9-12 per bottle and I personally think this is a taste of deep red silk. I love the deep raspberry and blackberry fruit on the nose and the texture is fantastic. With 13.5 % alcohol, this will warm your soul with hearty foods, I love this with grilled meats and big pots of stew. You can find this wine in most grocery stores, wine shops and the big box stores too. Enjoy!

Merlot- Dynamite is my all time favorite Merlot on a budget (their Cab is quite good as well). This wine is grown in the central coast of California and has a big fat black cherry profile and the mouthfeel is very smooth. You can find this wine for about $8-11 dollars a bottle and I always keep this wine handy. I have lots of folks who rave about it and we love to grill and smoke Tri-Tip here and it’s a perfect pairing!

Pinot Noir- I am a Pinot Noir NUT! I will spend a huge amount of my monthly wine budget on Pinot. My personal cellar is packed with Pinots from Russian River area of California and Williamette Valley in Oregon. But when I want to watch my pennies, I am on the hunt for Bogle Pinot Noir for $11-12 per bottle. Pinot is a tricky grape to grow well and it takes some love and attention, so Pinot’s can get very expensive. The thing most people love about Pinot’s are they are softer “feeling” in the mouth and they normally are not at brash with the alcohol so they taste more elegant than other big red wines.
This wine to me says luxury and relax. It has about 13.4% alcohol.

Here is another tip, taste more wines. Every grocery store and wine shop and most Costco’s have samples on the weekends. The folks working there will not judge you if you take a taste and say “yum” or “yuck”.

I hope my thoughts on wine help you to feel brave when standing in front of the display at the grocery store or wine shop.

If Pete the Planner asks me to write another blog, I would love to discuss Sparkling wines and Champagnes on a budget!

I’d love to field any wine questions or just chat about wine anytime, catch me over at www.tjrselect.com.

Thanks so much, Tammi! Whether you know it or not, I’m one of your biggest fans.

So there you have it. Great wine, and great inspiration from a woman that followed her passion.

An open letter to parents of high school students

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Greetings. I’m Pete. You may or may not be a regular reader of my work. Either way, welcome to my little spot on the internet. My role in the financial world is pretty simple: protect people from themselves. Your job, as a parent of a high school student, is to help that student make the best decisions during some of the most vital years of their lives.

There is no bigger decision than trying to decide what to do after high school. I hope that you have highlighted the importance of higher education to your student. A post-secondary degree CAN open doors for them. The operative word here is CAN. And this is where our conversation needs to begin. An education does not guarantee employment. An education does not guarantee ambition. An education, the cost of an education to be exact, can actually ruin your young adult’s financial life.

If our relationship just started (if you are a new reader), then chances are I just angered you within minutes of you learning of my existence. For this, I’m not sorry. If you let your student blindly buy an expensive college education, then shame on you. No seriously, shame on you. I’m not suggesting that you should pay for their education. Nor am I suggesting that you have failed in any way, shape, or form if you have failed to save for their education. In fact, you may actually feel guilty if you have not pre-funded their education. I can’t make those feelings go away. It is what it is. But DO NOT, under any circumstance, dig a deeper hole by allowing your student to mortgage their financial future via student loans. And for that matter, you should not take out loans for their education either.

The solution IS NOT to forego post-secondary education. The solution IS to lessen the cost of said education. The $75,000 question is: how in the heck do you do this? Very strategically. More on this in a moment. But first, let’s chat a bit more about student loans.

There is a popular sentiment circulating that suggests a student should never take out more total student loans than what their first year salary will pay them upon graduation. As an example, let’s say their first year salary upon graduation is $40,000. If they were to follow this popular suggestion, then they would feel comfortable taking student loans up to $40,000. Based on a 5% interest rate and a ten year payback period, upon graduation their student loan payment would be $424.26 per month. That is 17% of their take-home pay in their first year. That is completely unacceptable. They don’t have to put themselves through this. Yet, according to the statistics, over 70% of private school graduates may be faced with this very situation. Say no to all of this garbage. Help your student AVOID STUDENT LOANS altogether. There’s a better a way. There’s a smarter way. And you are about to learn it. Don’t let them ruin the first 10 years of their lives after graduation paying for something that they didn’t need to borrow money for in the first place. It’s ridiculous.

There are several ways to decrease the cost of a college education while avoiding student loans. One of the most significant cost-cutting measures is to secure college credits while your student is still in high school. In some instances, acquiring college credits while in high school, from the high school, will result in over a 90% discount on tuition. You read that right. With early and proper planning, you can eliminate thousands of dollars worth of potential student loans. Check out these tuition fee schedule pages from Indiana University (Schedule 1 —- Schedule 2). The first is the credit hour fee schedule for IU Bloomington. It shows that the cost of a credit hour, for a college student, is $263.45 per credit hour. The second is the credit hour fee schedule for Indiana University’s ACP (Advance College Project). This is a program that allows high school students to take high school courses – for college credit. According to the schedule, your student can gain college credit for just $25 per credit hour. Um, yeah. Many high schools and universities all across the country have programs similar to this. It’s about time that you take a serious look at them.

There’s more. And that’s why I wrote a book about it. Avoid Student Loans: A guide for maximizing scholarship earnings and making smart financial decisions during college. I wrote the book along with Aaron Martin. He was able to practice exactly what this book preaches, and SIGNIFICANTLY reduce the cost of his education. The book is written for your student, but you obviously would benefit from reading it too.

How’s our relationship now? I angered you, then taught you one small way to lessen the cost of your student’s education. Want to continue the relationship? Feel free to come back to this site every day. Want to take it to the next level? Buy the book.

Your (new) buddy,

Pete

Inheriting poor financial skills is a real problem

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Our parents and grandparents didn’t face all the problems we do today as we try establish a financial foundation. The funny thing is that we brought these problems on ourselves by trying to simplify our lives. Our predecessors didn’t have debit cards, lengthy credit terms, and interest-only loans. Rather, most of our grandparents (when they were our age) cashed their paychecks and put the household cash into different envelopes representing different budget categories. They’d pay bills out of those envelopes and always have enough money to cover the expense. It was hard for them to go backwards financially because they relied on cash. They couldn’t, for example, buy fifty dollars of groceries with thirty dollars in cash.

What do we do now? We log onto our online banking accounts to see if we have enough money to cover the purchase we made earlier in the day. We spend first and worry about the consequences second. With this mentality, it doesn’t matter if you are in the 1950s or 2050s, you’re going to go broke.

Yes, managing your financial life is harder nowadays. Yes, peer pressure is worse than ever. And yes, some people make a lot more money than you. But if you are truly focused on bettering your life, you will ignore what’s irrelevant. More money doesn’t solve maladies caused by meager money management; more money only magnifies these money maladies. Mm-hmm!

Despite these money differences among generations, most of the skills that you need to function financially were instilled in you by your parents. And sadly enough, this is the root of several problems . If your parents didn’t know what they were doing, then your chances of innately knowing what you are doing are slim. And the problem gets worse when you factor in your parents’ level of financial confidence. Your parents’ financial aptitude can be classified into a few categories:

  1. They knew what they were doing and passed it on. This is the best-case scenario. They had solid financial habits, they led by example, and they educated you along the way. In addition, they cut you off when they should have. They also saved money for you, taught you how to save money, and showed you exactly what to do with it.
  2. They knew what they were doing but didn’t bother or didn’t have the time (for whatever reason) to teach you any of it. This is a pretty rare scenario, but definitely one worth mentioning.
  3. They had no clue about how to manage money properly, and they set a bad financial example for you. You still love them. They still love you. We aren’t voting them off the island. We’re just agreeing that they didn’t teach you many good financial habits.
  4. They had no clue what they were doing, but they thought they did. This is a flat-out dangerous situation for everyone. If you inherited a get-rich-quick mentality, a blame-other-people-for-your-financial-problems mentality, or a game-the-bankruptcy-laws mentality, then we have some serious work to do.

Not only do you need to learn how to budget, but how, in some cases, to reverse years of financial socialization. It’s time to face the facts of your financial upbringing. Bluntly, it may have sucked. That’s okay. But that doesn’t mean that you have to perpetuate the suckiness of the past. Standup for your present. Standup for your future.

And even more is at stake. If you are a parent, your children may already be picking up some of these bad habits. Your problem may have become multi-generational. Therefore, as you sharpen your skills as an adult, realize that your own children are watching you now—and they’re making mental notes.

If you have a bad relationship with money, then your children will have a bad relationship with money. If you give your kids all the luxuries in life—but don’t show them that luxuries come through hard work and wise investing—then they won’t understand the value of a dollar.

Tomorrow I plan on making a gigantic announcement here at PeteThePlanner.com. I encourage you to come back tomorrow at 8am to see what has me so excited. Here’s your hint: There’s been something bothering me for a very long time, and tomorrow I am  going to scream about it very loud, for a very long time, to as many people that will listen. Tomorrow is the true beginning of an insane 2012 for me. I hope you can be part of it.

This post is an excerpt from What Your Dad Never Taught You About Budgeting (due to be released March 6th 2012).