Myths On Money

Dale Carnegie – “Success is getting what you want. Happiness is wanting what you get.”

Good News!

If you follow the blog regularly, you know that posts have been a little scarce lately. There are two reasons for that: first is because the blog was getting a facelift (which is hopefully now completed [sorry Chrome users, you might want to use IE or Firefox to view the blog]), second is because I have been devoting considerable time and effort to creating a few new tools for you to use in your quest for financial empowerment.

Rent vs. Buy

Probably the most useful (and by far the most difficult to create!) is the “rent vs buy scenario analyzer”. As past posts have indicated, this is a difficult question to answer broadly for everyone. Well, if you struggle to make this very-important decision, then go to the
downloads page and download the “rent vs buy scenario analyzer”. I have tried to construct this calculator is such a way that it can incorporate nearly all of the variables that enter into a buy vs rent scenario analysis, without complicating it beyond the point of useability. So go ahead and give it a try. All the instructions are included in the spreadsheet.

Debt Snowball

Finally, my debt snowball calculator is complete! I am actually very proud of this particular spreadsheet. I spent MANY hours honing and polishing and perfecting it. You can choose from one of several methods for determining which debt to pay off first. Just enter your debts, then select the method that works the best for you. It will tell you how many months each debt will take to pay off, the total time it will take to get out of debt, and what your savings account will look like if you continue to invest what you used to pay towards your debts. Instructions included.

Retirement Accounts

The next new tool is designed to help you determine if it would be more profitable to invest in a Roth-type of retirement account, or in a non-Roth account. Enter your monthly deposit, current tax rate, and other info and it will estimate your total balance at retirement age. Don’t worry, I even did the research to help you find the tax rates for you! As always, all the instructions for this spreadsheet are included in the spreadsheet.

Free Cars

I updated the spreadsheet for the “free car” savings plan Mostly just polish and additional information to make it more user-friendly to improve it’s ease of use. Check it out.

On special request, and in tandem with our post on opportunity costs, this posts takes a looks at the full cost of a college education.

The Direct Costs

The direct costs of attending college are generally fairly simple to calculate. Tuition, books, fees, etc are all examples of the direct costs. Just sum up your tuition for each semester, the amount you spend on books, your school fees, and any other cost directly associated with going to school and you know the direct costs of a college education. Anyone who’s been to college understands that these direct costs can be quite substantial.

The Opportunity Costs

Surprisingly, as costly as the direct costs can be, the opportunity costs of going to college almost always outweigh them; in fact, opportunity costs usually dwarf the direct costs by a huge margin.

How is that possible?

Think again about what opportunity costs are; they are the gain that you could have had. In the case of college, the largest cost is the lost opportunity to work full-time for several years. Suppose a young woman could get a job paying $13/hour working full-time. In 4 years, she could have earned $108,000 (before taxes). If she had gone to college, she would not have been able to work full-time, and would probably have had to settle on a very part-time job with poor pay. So, in this case, the opportunity cost of college is $108,000 minus the wages she could earn working part-time. So if you are going to college, or thinking about it, remember the opportunity costs. Don’t just try to avoid the direct costs; try to avoid the opportunity costs as well. Work full-time through the summer, or go to school through the summer to reduce the time you are out of work, etc. You will save yourself more in opportunity losses than you will in tuition.

The cost of NOT getting an education

Okay, so now that everyone is convinced that hey cannot afford to go to college, let’s look at the costs of not getting a college education. Basically, not going to school doesn’t really have any direct costs. No one charges tuition to people who are not enrolled in their school. However, there is an opportunity cost to not going to college. According to recent U.S. census findings, the average American who graduated high school but did not go to college earned approximately $25,000 a year less than the average college graduate. Over a typical working lifetime of about 45 years, that comes to about $1,125,000 in lost wages for the non-college worker (and that’s WITHOUT and interest!) So, you can see how it is far more expensive to not go to college than it is to go to college, in the long run.