Category Archives: Debt

Stay at home mom starts online petition to get a credit card – despite her lack of income

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I was recently asked to weigh in (on a radio show) on a story that is developing in regards to new credit rules. A stay-at-home mom is angry because Target denied her a credit card. She is making a huge deal of this denial, and has started a petition at Change.org.

If you’ve read this blog before, then you know that I go to great lengths to stick up for stay-at-home moms. I think financial bullying of women continues to be a big problem in this country, whether it’s pay scales or corporate board appointments. However I refuse to give anyone a pass when it comes to violating basic laws of personal finance.

Per the CNNMoney article, the story goes like this:

After nearly five years managing her family’s finances, Holly McCall, a 34-year old stay-at-home mother of two from Vienna, Va., never thought she would have trouble getting a credit card.

She makes the majority of family purchases, has an excellent credit score and has been approved for several cards in the past. But when McCall applied for a Target card last fall, she was denied.

She blames that denial on a recent Card Act rule.

The law was passed in 2009 to protect consumers from unfair and deceptive credit card practices. But some stay-at-home parents argue that a Card Act rule that took effect last October has made it harder for them to get approved for credit cards.

Aiming to protect consumers from racking up too much debt, the Federal Reserve now requires credit card issuers to consider individual income from applicants instead of household income.

As a result, stay-at-home parents who rely mainly on their spouse’s income have a harder time getting approved for credit cards on their own.

“I think it’s demeaning — I don’t want to ask my husband’s permission for a credit card,” McCall said. “Just because I don’t get a direct paycheck for [my work], doesn’t mean it’s not worthwhile work that I’m doing.”

-Courtesy CNNMoney.com

There is so much failed logic in this viewpoint. To be fair, I’ve never spoken with Mrs. McCall. But fortunately her thoughts are pretty clear. However, this is not a gender issue. It’s not a class issue. It’s not a marriage issue. It’s not even the problem of the credit industry. This story is REALLY easy to understand. This story is about a person – without an income. That’s it. End of story. Why should a financial institution lend money to an individual that has no personal means to pay back the debt? There is a very easy solution to her problem, yet she has decided the solution is actually an insult. The solution is to get the credit card with her partner. Yes, the partner that brings home the income for the household. This doesn’t mean that her husband is a better, more valuable person. It simply means that he personally has an income. This isn’t offensive. It’s just fact.

She isn’t conceding her value by filling out a joint application for the credit card. She isn’t setting women back 50 years by asking for the person with income to promise to pay back the debt that they might incur. I’m a HUGE supporter of stay-at-home parents. My wife is currently staying home with our children. My mom stayed at home when I was a kid. But the valuation of the stay-at-home parent isn’t the issue here, yet Mrs. McCall wants you to think that’s the issue. Check out this quote from the article:

“I used to be CEO of a small software consulting business and am now staying at home to take care of a toddler and first grader. If you had to pay someone to do what I do now, it would cost you at least $120,000, which is a lot less than what I used to earn,” one stay-at-home mom wrote on the online petition. “BTW, it’s a 24×7, not a 40 hour per week job. Don’t you think I should be allowed to get a credit card on my own?!”

No, I don’t think that qualifies you to get a credit card. I know this seems hard to believe, but credit used to only be extended to people that personally had the financial means to cover the debt. A person with no income has no means to pay back the debt. This doesn’t mean the person isn’t necessary. It just means that the person doesn’t have income. I applaud the new credit card rules, just as I applaud the efforts of stay-at-home parents all over the world.

We can’t demonize lending institutions for protecting their assets. You can’t sign a petition asking an institution to loan money to people with no income. If someone is offended that an institution won’t lend them money based on a lack of income, then the person doesn’t understand how credit works and probably shouldn’t have a credit card in the first place.

And furthermore, how is a credit card a solution to their situation? Do they not have enough household income to cover their monthly bills? Do they just want to take advantage of discounts at the register? I’ll never know. But I have a hard time thinking that someone who’s fighting for the “right” to get a credit card from a private company, despite her lack of income, might not truly understand proper borrowing strategies. I’m not trying to be rude or mean. This isn’t a personal attack on her. I’m just further concerned about how we’ve been socialized in regards to credit. Being an American citizen doesn’t guarantee you the right to borrow money. Your creditworthiness is what gives you the privilege to borrow money.

We have got to stop borrowing when we don’t need to borrow. Borrowing is not the solution to all of our financial challenges. Yes, borrowing money for a car or house can make sense. But our escalating assertion that our borrowing rights are being violated by student loan interest rates, or the denial of credit to those of us without incomes, is only further separating us from reality. People are wronged everyday by the financial world. Yet many more people claim victimization when it’s just not there. Mrs. McCall is not a victim.

An open letter to new college grads

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Congrats! You have just completed an important stage of your life. It’s over. You aren’t a college kid anymore. I repeat, you aren’t a college kid anymore. Your sensibility must change. That’s what always needs to happen when you complete a stage of your life. When you complete your career and retire, then your sensibility will need to change then too. It’s your ability to shift your thinking and actions quickly, that will allow you to survive, and better yet, thrive.

You will have friends that keep their college kid mentality too long. Just don’t let it be you. You will/should have a finite, repeatable income. In college, you most likely either lived off of student loans, which you will now pay for, or you lived off of your parents’ income. Either way, it’s time to take the training wheels off. The temptation is to delay reality. You may want your parents to continue to support you until you “get on your feet” a little bit. Don’t do that. Cut the cord. The longer you drink from the money teat of your parents, the harder it is to break the addiction.

Base your entire financial life on this pie chart. No matter how much money you make, you will never have more than 100% of your income to live off of. On top of that, if you have student loans to repay, then you will have to reduce spending across the board in order to get rid of these financial anchors. It’s quite possible that your student loans will occupy up to 20% of your take home pay. Don’t try to avoid this by deferring your loans. Deferring your student loans is a really bad idea. Student loans have a way of hanging around for twenty years. Don’t let this happen. Try to pay them off within seven years. This means that you will need to pay more than the minimum payment. Do this.

In addition, here are 10 other quick tips to help you make the right decisions from the jump:

  1. Like your new income? Cool, but It isn’t all yours. Meet your Uncle Sam. You’re right, he is creepy, but you still need to break him off. Pay the man. Taxes suck, but you need to get over that and pay them.
  2. Start your 401k ASAP. Time and money are your best friends. Use them together by allowing time to help you grow your retirement fund. The sooner you invest (appropriately), the more time can help you.
  3. Don’t spend over 25% of your take home pay on housing. Get a roommate if you have to. Don’t make a terrible housing decision. It could crush you for years.
  4. Your friend that appears to be “doing the best” isn’t. Don’t be like him. He’s eventually going to learn from his mistakes. You need to learn from his mistakes right now.
  5. Always save at least 10% of your take-home pay. If you always do this, then you will never be broke. You need a savings account that you don’t touch with at least one month’s expenses. Once you accumulate one month worth of expenses, take a break, and then save three months worth of expenses.
  6. Don’t go out and buy a new car right away. Many people do it. Many people are wrong. Try to keep your transportation budget below 15% of your income.
  7. Don’t cash a paycheck. Never a good idea for a 23 year old (read: anyone) to carry around a few hundred/thousand dollars.
  8. Buy your parents something nice for the first Mother’s Day or Father’s Day while you are employed. It’s the right thing to do.
  9. When the times comes, don’t listen to the guy trying to sell you the engagement ring. He isn’t your accountant, financial planner, or friend. 3 months my ass.
  10. Don’t be in a hurry to accumulate all the things that you have ever wanted. I am guessing that you never have wanted to get kicked out of your apartment because you can’t pay rent. Take your time. The goal isn’t to buy more, it’s to need less.

You don’t need money to be great. And being great doesn’t mean that you will have money. Just be smart, be patient, and work hard. The rest kinda takes care of itself.

Good luck. Don’t mess this up.

Grandma died. I got money. Now what?

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Below you will find an email exchange between a woman who just got an inheritance and me. After reading it, would you have suggested the same thing I did?

Dear Pete,

I have been subscribing to your blog posts since December 2011 in an effort to better understand and control my spending and debt situation. We both contribute to the issues equally and have our own defense that we feel trumps the other’s, but that is another email altogether!

My grandmother recently left me about $25,000 (before the government takes a chunk) and I’m not sure the best course of action.

Do we pay off debt, start college funds for our 2 children (ages 8 and 8 months), invest or a blend of these things?

Debbie

Hey Debbie

Sorry to hear about your grandmother. Inheritances are always more bitter than bittersweet. 
The answer will be a blend. Answer the following questions, and I will send you the perfect answer.
1. Amount of emergency reserves
2. Amount of debt and types (car, mortgage, credit cards, student loans, etc) be specific
3. Your ages
That is all. Thanks for your email
Pete

1.       Emergency fund: $6000

2.       Debt

a.       Credit cards: approx. $25k (payments =approx. $850 per month )

b.      Mortgage: $278k (payment=$2135 per month)

c.       Student loan: approx. $8k (min payment=$214 per month)

d.      Auto loan: $625 per month (not sure of loan total)

3.       Ages

a.       Me: 37

b.      Him: 35

Ok, I lied. I have 1 more question now.

1. Were your credit cards a result of “an event’ or “uncontrolled spending”
Kind of both.  

 Event #1(April 2010)=wedding (plans were to pay off the $8000 in less than 1 year. However, Event #2 came along 6 months later)

 Event #2 (Oct 2010)=relocated to Memphis, TN . As a trailing spouse, I had no income. We bought too much house (my argument) and had to rely on credit cards for expenses like gas, groceries.

Uncontrolled spending: My husband is rather impulsive when it comes to things he thinks our house “needs.” These are usually big ticket items like buying hardwood floors ($400) for a fitness room that has no fitness equipment (and we can’t afford the fitness equipment anyway) or lawn equipment. My uncontrolled spending is groceries and clothes for the kids. Not to say they don’t need food and clothes, I just buy more than what is probably needed. I average $150 a week at the local Giant Eagle (I use my discount card, food perks and coupons, too)

**Do you offer therapy with your financial advice? 

 Event #3 (July 2011): Jason, age 8 months. We didn’t change our medical insurance to have more coverage for labor and delivery. As a result, another $3k went on the card.

 Event #4 (December 2011): New tires, brakes and struts on the mom-mobile. Another $2500 on the freakin’ card!

 Now that I’m working again, my $60k complements Phil’s $80k and I want to get this debt under control! I would love my only debt to include just a house and car payment at some point!

 FYI: We do both contribute to our 401k and take advantage of a dependent care account.

After holding money back for taxes, I would pay off credit card debt. 
Here’s EXACTLY what I would do:
1. Pay off debt with about $22k of inheritance.
2. Use the next 3-4 months to finish the job
3. Save $850/month (former card payment) from July-December into your emergency reserves. That would equal a total emergency fund of $10,250 by the end of 2012.
4. This would make your grandmother proud.

 

The scary face that prevents spending

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I just received this email from a client/reader. It is hilarious!!!!

Hey Pete, you will remember that when we met during Christmas break, I pledged to go on a financial diet.  In spite of two January trips to Ft. Wayne which has a shopping experience that is similar to Keystone at the Crossing only with the best Italian in Indiana, Biaggi’s, I was in control.  I think the purchase of a pair of socks and only one glass of wine at Biaggi’s is testament to my strength of will.

 

The $3000 debt on my credit card is gone.  I put household expenses on it and pay everything off bi-weekly when I am paid.  I am now staring the $9600 mortgage square in the face, and plan to put $1000 on that debt within the next week.

 

How am I able to do this, you ask, knowing my weakness for those shopping trips and high-priced restaurants???  Well, anyone who successfully diets has a personal weapon – something that takes the joy out of that bad habit, whether it’s overeating or overspending – and redirects one’s energy into more positive and satisfying habits, be it physical wellness or financial control.  I have the best weapon anyone could ever hope to have, and it’s laminated right next to the credit card in my wallet (shown above).  Feel free to share my strategy with any of your clients who may share my weakness; it works!!!

 

Thanks, Pete,

 

Suzanne

Why your credit score doesn’t matter

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How do you measure your health? Do you measure it solely by your weight? Metrics, such as your body weight, are an important way for us to measure something. But what are we really measuring? Measuring weight tells us that we have gained or lost weight, but it doesn’t measure health. The best measures of your health are the metrics associated with proper nutrition (calories) and exercise (reps, time, or distance). How do I know this? Because about 10 years ago I lost 13 pounds on the Atkins diet. I had never been less healthy while losing weight in my life. Bacon, cheese, red meat, cheese, and more bacon were my method of losing weight. I just didn’t eat carbs (per the Atkins Diet). It was quite obvious that what I was doing was unhealthy, but the metrics said otherwise.

You can achieve a wonderful credit score despite awful financial behavior. And you can also have wonderful financial habits, yet have a terrible credit score. A good credit score is an indication of nothing more than your success at borrowing and repaying money. That’s not exactly something worth celebrating. According to the credit scoring system, someone that has $1 million in the bank and has never borrowed will have a lower credit score than someone $100k in credit card debt. In fact, if the debt is current and the balances aren’t “too high” in comparison with available credit, then the $100k-in-debt guy may have a nearly perfect credit score.

But Pete, if I don’t have a good credit score then I can’t borrow money. Not true. If you have good financial habits, and you have put yourself in a position to borrow, then you will be able to borrow. People who are “repairing” credit and are scrambling to improve their credit score often ignore the fact that their habits got them in trouble. Change your habits and the score will follow. Fix the score alone, and you will find your bad habits dragging you back down.

The best measure of your credit is not your credit score. The best measure of your credit is your credit report. Huh? Your credit report is the detailed listing of your debts over your entire life. The information on this report is all you need to evaluate your credit worthiness. Your score, in my opinion, is completely irrelevant compared to the report, itself. Do you have a ton of late payments on your credit report? Then start paying your bills on time. Who cares how that affects your score? If your report shows you that you have maxed out a credit card, then pay it down. Who cares how that affects your score?

Don’t be a monkey to your credit score. (Wo)man up and manage your habits. Metrics are great, but the credit score isn’t a metric for you. It’s a metric for the lending institutions. Your metrics are your budget and your savings/investing statements. Your metrics are your student loan balances and your credit card balances.

I want to help you with your habits, not your score. My friends at ELFCU will buy you my book, 60 Days to Change. By signing up for the book, you will be entered to win one of three $1000 prizes. Check out their program, and let’s change your habits together. Forget your score. Credit scores are for chumps.

****The best site for checking your credit report is AnnualCreditReport.com. It’s free and you can check your report every year. Do it. Oh, and you can’t re-access your report once you pull it up for the first time. So make sure to print it off…at work. It’s cheaper :)

 

Get your FREE copy of 60 Days to Change

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Your financial successes are my lifeblood. Every success story that I hear from you makes me ridiculously excited. Your ability to take control of your financial life is incredibly powerful. I have had the great fortune to assist thousands of people over the last 12 years of my career, but today I want to change hundreds of lives at once…together.

You know about The Molly Project. It’s the yearlong web series in which I plan on helping one woman change her financial life forever. She is climbing out of a financial hole. It’s quite the story. But what’s your story? How can you change your life along with Molly?

Thanks to my friends at ELFCU, you can join the change with a FREE copy of my book, 60 Days to Change: A Daily How-To Guide With Actionable Tips To Change Your Financial Life. ELFCU is a credit union that is offering the 60 Days to Change curriculum to its members, starting today. As part of the partnership, I asked that they help you too. And they said yes! ELFCU’s ongoing commitment to help its members reach their financial goals is now extended to YOU. I encourage you to view this as a sign, a gentle nudge, and an opportunity for you to improve your financial life.

This program can take you from bad to good, and then good to great. You don’t have to be struggling badly to benefit from this 60 day program, but if you are, we can help you. The program will have some lovely structure to it. ELFCU will be buying your book (quantities limited), and I will give you your marching orders every week during the 60 days. This means exclusive emails, videos, and online chat sessions. And there’s one more thing. You can win $1000.

There are three $1000 prizes to be awarded at the end of the program. One award for most debt paid down, one award for most money saved, and one award for most expenses eliminated. Holy moly.

There are some guidelines that you need to follow. Go to ELFCU.org/60days to sign up. Follow the directions. I don’t want you to miss out on this because you don’t follow the directions.

This going to be great. I’m very excited, and I hope you take this opportunity to create some change.

 

The Molly Project: Episode 2

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Last week, on The Molly Project…

Now you know the facts. Let’s start tackling the problems.

When I meet with someone to help them solve financial problems, I get inside their head and swim around in it for a while. The numbers NEVER tell the whole story. Every word they speak matters. Every nervous laugh they laugh matters. Every personality trait that I can pickup on matters. Once I “read them”, then I make a series of notes about their persona. I’m not making this up. This is what I do. I need to know how to motivate an individual. The numbers would never tell you this. It kinda explains why I snapped on that emailer yesterday. There was no way that another method would have worked with him.

Anyway, here are my professional notes and observations for Molly:

1. Molly had no debt upon graduating from college. The debt came when she decided to switch careers, kicked off by going to grad school. She then decided that she didn’t want to pursue a career in the field of her advanced (expensive) degree. There’s a major underlying problem here. Debt was so foreign to Molly, that she had no idea how to deal with it. She chose to do what she always did; she strapped on her genuinely positive attitude and proceeded the way she had for the previous 27 years. She proceeded as though she didn’t have debt.

2. There is hope in every financial situation. And Molly’s situation, believe it or not, is laden with lights at the end of the proverbial tunnel. She has a tax refund check on the horizon (amount to be determined). She has nearly $500 per month to put towards debt. And she has various bonus opportunities sprinkled throughout the year.

3. We have over $450 per month to work with for Molly’s financial priorities. One of the major challenges that people face when trying to fix financial problems is they don’t know what to focus on. We only have so much focus and energy to put towards something that is currently stressing us out. All that Molly should focus on is $450. If she focuses on allocating this amount every month to the right debt, then she will succeed.

4. Molly’s positive attitude got her into trouble, but it will get her out. She can see the silver lining in a tornado cloud. The world needs more people like her. She didn’t panic as things were getting bad. She should have. I need to get her a bit panicky.

The budget haps

Here are Molly’s expenses:

  • Rent: $550 (includes utilities)
  • Car payment: $225.84
  • Cell phone: $79.99
  • Car & Renter’s Insurance: $83.99
  • Groceries:$200
  • Gas: $150
  • Personal care items: $100
  • Medical: $50
  • Personal care services: $50
Total living expenses: $1,489/monthly
Minimum debt payment: $1,392/monthly
Total expenses: $2,881/monthly
Take-home pay: $3,333/monthly
MY MONEY: $452
Molly’s first task: Pay off Gap and Loft credit cards. And then put $200 into savings. That’s it. You are done until the tax refund check comes in. That was painless, wasn’t it?
Getting out of a major financial jam is difficult, but the solution is simple. You cannot convolute the situation by just firing all sorts of financial shots at your financial problems. The only thing that Molly can do, other than reducing spending (which she already did), is focus on the $450 she has to pay down debt. This is where people get themselves in trouble. They start flailing for a solution. Don’t flail, just proceed calmly.
Be sure to listen to my radio interview with Molly. It’s the February 17th episode (part 2). Courtesy of 93 WIBC FM.

 

Should you lease a car?

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Should you hire someone to mow your lawn? This seems like an innocuous question, right? But the answer to this question can teach you a great deal about personal finance. Here are the classic answers to the “should I hire someone to mow my yard” question:
  1. Of course, your time is worth more than what you can pay someone else to mow it for you.
  2. No, it’s an absolute waste of money, and you can do it yourself.
Neither of these classic answers are actually the best answer. In my opinion, you earn the right to make this decision. If you are broke and/or are in debt, then you haven’t earned the right to make this decision. So therefore the answer is do it yourself. If you have earned the right to make the decision, then I still don’t think it’s a money decision. I think it’s a lifestyle decision. You don’t want to mow your lawn? Cool with me. Pay someone to do it. I don’t think it’s a poor financial decision at all, as long as you’ve earned the right to make the financial decision. I feel the same way about leasing a car.
I received this email the other day. Check it out:
Soooo…. I was having a vehicle discussion with my brother yesterday and I mentioned to him that I might look into leasing my next vehicle and my mom chimed in to say that was a terrible idea because in the end, you don’t own anything.  I’m not that concerned about having something of “my own.”  Should I be?
I’m 30 yrs old, not married, and the thought of a newer vehicle (aka maintenance-free vehicle) sounds pretty good to me!  Others I know lease and the idea of having something newer every couple of years for that reason of having less maintenance with a newer vehicle would be nice (I probably have to have something “major” done every year, if not every other, i.e. new brakes, electrical issues, steering column something or other, new tie rods, etc.).  I don’t necessarily need a brand new vehicle for looks or anything — I’m not concerned about that.
My current vehicle is nearly 10 years old (I’ve had it for about 5), has 137K miles on it, and I will have it paid off this year.  I plan to drive it as long as I can but want to have something in mind for when/if I have to look at a “new” vehicle (rather than be in a fire-drill situation where I have to make a fast decision if something happens to my current vehicle and in the end not knowing if I made the best financial decision for myself or not).
Can you identify some pros & cons to leasing vs buying for me please?  I’m trying to educate myself on this topic so I know what to do in my situation when the time comes.
Thanks for your help in advance!
Lauren
There is a not blanket answer for the question “Should I lease a car?” Whereas some financial experts will tell you that it’s a waste of money to rent a car, I completely disagree. That being said, I personally will never lease a car. I hate having a car payment. I don’t care whether the car I’m driving is “under warranty” or not. And I don’t care about having the latest, greatest car. I’ve earned the right to feel this way.
If you constantly want a new car, want it under warranty, and don’t mind having a car payment, then consider leasing…if of course you have earned the right to choose. If you have a ton of debt, several other monthly payment obligations, and you don’t know what the level of your financial stability will be in the near future, then you gotta stick with the car you have.
The reality is that, in a vacuum, you shouldn’t lease. The down payment plus the renting plus the constant payments equals generally not a good idea. But we don’t live in a vacuum. I don’t think that leasing makes financial sense. But having helped thousands of people over the last 14 years, I know that “it doesn’t make financial sense” isn’t always the divine directive that it should be. I can tell you that it doesn’t make financial sense, but if you value a low monthly payment, a relatively new car, and a car that’s consistently under warranty, do you really think that I’m going to convince you to not lease with a simple “it doesn’t make financial sense?”
I don’t think you should eat red meat. I don’t think you should smoke. I don’t think that you should use recreational narcotics. So what am I supposed to do, say screw you and wish you luck? No. I need to help you operate your financial life within the constraints of your lifestyle preferences. It’s the financial abstinence conversation. I’m never going to convince you that not driving a new car is better than driving a new car. It’s not going to happen. Therefore my solution is simple: earn the right to make the decision. If you don’t earn the right, via sound financial principles, then you don’t get to indulge your preferences.
So it looks like this. If I got to choose your car acquisition method, then I would choose the following in order:
1. Pay cash for a used car.
2. Pay cash for a new car.
3. Buy a used car with a loan.
4. Buy a new car with a loan.
5. Lease a new car.
6. Don’t ever lease a used car.
This list is based on what I value in a vehicle. It also happens to make the most financial sense. But if you value different things in a vehicle, then just be smart. Earn the right to indulge your preferences. Otherwise, you will be forced to drive what you are driving for much longer than you want to drive it.

Did you accomplish anything in January?

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January is over. Gone. Done.

How’d it go for you? Did you accomplish anything financially? Did you go backwards? You need to evaluate your progress towards your financial goals today. Take time to access your progress. If you failed to set goals, then you failed. If you failed to reach your January goal, then you failed. If you fail to set a goal for February, then you fail. Stop failing, and starting progressing. You start by setting a goal for February, and then you start trying to win weeks. By win weeks, I mean make wise financial decisions for an entire week. These decisions should lead you towards your February goal.

This is how I think: you need to win three weeks to win a month. You need to win two months to win a quarter. And you need to win three quarters to win the year.

What are your goals for February? Do you want to have saved another $500? Do you want to pay off $1000 more debt? Do you want to ask your boss for a raise? Whatever it is that you decide, write it down and get to work.

I’ve got a really cool partnership that I’m going to announce in February. The good news is that this announcement will help you set and achieve your goals for March. Just make sure that you take care of February, so that we can work together in March.

The CLASSIC student loan story

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When I wrote a book about student loans, I never expected the sort of backlash that has occurred. How can so many people misinterpret my message? Or worse yet, how could so many people judge a book by its cover, literally? For someone who HATES drama, I found myself in several heated debates over the last couple of weeks. My favorite was a debate with a man that chose to debate the author of a book that he hadn’t read. He accused the content of being fraudulent and undoable. Huh? Sigh.

Anyway. The book isn’t about avoiding college. It’s about avoiding student loans. I encourage you to pickup a copy for your favorite high school student. No seriously, buy the book. Why? Well, I’ll let Sally tell you. Thanks to my Google Alerts (which tells me when people mention my name in cyberspace), I found this post by a blogger named Sally. Go to her blog to read the whole thing, but here is a crucial excerpt. The post is titled A Student Loan Story: In Defense of Pete The Planner’s Stance on Student Loans.

I changed my major 4 times while in college, and it took me 5 years to finish school. Most of my peers were the same way. I worked a part-time job all through college and that money was used to supplement what student loans and credit cards didn’t cover. I graduated, and despite my best efforts, I was unable to find a job in my field. Knowing I had student loan payments coming up in 6 months, I took a job with Verizon Wireless as a customer service representative. I made $12.00 and hour and received benefits. I was in heaven with my $25,000 a year job.

I was clearing about $1600 a month after taxes. I set myself up with a nice little apartment and started assimilating into the adult world. I wasn’t making much money, but I was doing well enough to provide for myself. I thought I had it made.
“Bring on the student loan payments!”, I thought. “I can afford loan payments!”
I got my first student loan bill in the mail December 2007. I opened it expecting an affordable bill. The reality was much different…
Amount due by January 2008: $600.12

Then came the bill from SallieMae.

Amount due by January 2008: $200.34

This is why you must avoid student loans. You don’t have to put yourself in a terrible financial situation upon graduation. Read the rest of Sally’s post to get the whole story. Oh, and buy the book.