Student Loans, and the Long Haul

I’m sure you’ve noticed this by now but family finance is a big thing in our lives.  We’re still running on the high of recently becoming debt free. We’re working on building a generous emergency fund so that we can then build our wealth for the future and be able to GIVE LIKE CRAZY. We’ve also been hosting a Total Money Makeover study at our church. Watching the lives of the families participating change drastically is one of the coolest things I’ve ever been a part of.

Something that’s been on my mind a lot lately as we have worked through this program is student debt. My hubby and I were fortunate in that we both managed to get through school with very little debt thanks to the support of my awesome parents and a lot of hard work by my Hubby as he worked his way through after we were married. I know not every one is fortunate enough to have parents that help out, but seriously, education is one of the largest purchases that we make in our lives and at 18 we’re expected to be mature enough to make the decision to acquire a huge amount of debt with very little input from anyone else. What I am seeing more and more from my perspective now is that so many people at 18 traded the present for the future and now in their 30’s it’s costing their families big time.

I doubt that many 18 year old’s think about the long haul when they’re deciding to borrow huge amounts of money to go to school. On top of that student loans are made out to be SO easy, SO normal and everyone paints them like they’re an awesome idea. No one tells them how hard it will be 6 months out of school, with no job or not the dream job when those student loan bills start rolling in forcing them to take the first job that comes along to pay the bills even if it’s part time at Tim Hortons. No one warns them that the minimum payment alone will be enormous because the interest rates are some of the highest on the market. No one tells them that many couples still have their student loans hanging around well into their 30’s and depending on the size often into their 40’s. What I’m saying is that our society doesn’t do young families any favours by pushing student loans on young adults as the primary option for funding post secondary education. We make it so easy to go into debt to go to school that many students don’t even consider that there could be other options for financing their education. Consider the stats for a moment:

  • The average student loan debt in Canada is $27000
  • The average household finances at least 1 vehicle to the tune of about $19000 (also check out this interesting article about car loans)
  • The average College Student has $3700 in Credit Card Debt
  • The average Credit Card debt in a Canadian household is about $3600
  • The average household also holds additional consumer debt of roughly $27000 on lines of credit or bank loans (Student loans and car loans are not typically considered consumer debt)

My point: Joe and Suzie meet in college, fall in love, and get married shortly there after. They were “normal” and each graduated with the “normal” amount of debt. WOW, this newly married couple just found themselves in $54000 worth of student debt, and $7400 in credit cards. Everyone they know tells them this is normal, so they don’t worry about it too much and they decide that they “need” a new car. Add another $19000, and now this young couple has $73000 in debt. They’re very normal so they eat out regularly, go on holidays, buy gifts, gas, groceries, and anything else you can think of on credit cards and within a couple of years they’ve wandered into another $3600 worth of Credit Card debt.  Now if you’ve been doing the math with me here you realize that Joe and Suzie have $84000 in debt and they don’t even own a house yet.  SCARY!

Life goes on, they buy that house, put some furniture in it (this is where that $27000 in consumer debt comes in) and all of a sudden they have extra space to fill so they start having babies. It’s around now that they start to realize they’ve gotten themselves in over their heads financially. They’ve been getting along just fine making minimum payments on everything but the debt seems to grow not shrink. Now they’re faced with a decreased income for a year while Suzie’s on mat leave and they’re not really sure how they’re going to make ends meet.

Suzie goes back to work, her income goes back up but now you’ve added the expense of daycare to their lives. She spends another six months or so at work and then she and Joe decide that baby #2 would be nice.  They ride through maternity leave fairly well, and then realize that not only does Suzie NOT want to go back to work  but it’s also not financially viable to pay for daycare for two kids.  Hmm, what now. Joe and Suzie start crunching the numbers and realize that it is not financially viable for Suzie to stay home because of their debt load – which started at 18 with Student Loans.

This is the situation that I see far too many of our friends struggling with on a daily basis. Young families in their early-mid 30’s paying now for the financial decisions they made at 18. They started down the slippery slope of financing life at 18 when student loans were made out to look like free money that you never have to worry about and it just got worse from there.

I know nice story but what am I getting at?  Education is important. I will never tell you otherwise but let’s get creative in funding it ourselves rather than borrowing away our futures. At 18, 20, 22 and even 25 I would have told you that I would never even consider staying home with my family. Things change when you have a baby and you find things that you never would have gravitated towards before becoming more appealing. Not having financial barriers in the way make it much easier to make the right decision for your family. For some that may include working but for a lot of others it may not.

I don’t have the answers to this problem but I do know a few things and because this is my space I’m going to share them with you. As someone that had a say in hiring at more than one of my former jobs I LIKED hiring people that worked while in school. It proves that you know how to manage your time well if you can get a degree and work at the same time. Truthfully I would rather see that you worked your way through school then that you got a bunch of academic awards. Furthermore about 1/3 of students that have worked through school have higher GPA’s (just sayn’ it’s worth thinking about). The typical degree is laid out as a 4 year plan but there is NOTHING wrong with taking a little longer than that (like 5 or 6 years) to complete your degree and be able to pay for it in cash. In the grand scheme of things delaying graduation from 22 to 24 or 26 is really nothing. From an employers point of view you are more mature, self disciplined, and have shown some tenacity in funding your education without debt. Oh and for the record my Hubby’s BA took about 8 years (including a few off in the middle) the last 3 of which he worked full time and went to school almost full time and graduated with a 3.6 GPA – considering that he had about 2.2 his first year this is AMAZING.

Another thing to consider is scholarships. There are tons of scholarships out there if you are willing to put a little effort into it. While you may look down your nose at the $50 scholarship from the rotary club, your church, or girl guides group if you can collect a BUNCH of those scholarships it does eventually add up. It is worth taking the time chasing down free money to fund your education. If you can get some larger dollar amount scholarships great. If not collect as many of the small scholarships as possible. Scholarships aren’t always based on academic achievements, sometimes it’s athletics, music, socioeconomic status, or any number of other non-academic things. So while good grades are important don’t discount scholarships because you aren’t an honor roll student, there are still lots of things available to you if you look for them.

So what am I getting at here. Well, through recent experience and watching friends struggle with these decisions my point is that our culture, the high school guidance counselor, and the university finance department, are not doing young adults any favours by portraying students loans as free easy money for school. This applies to any student as when you get married your finances are joined so it doesn’t matter whose student loans they were they are now your joint responsibility. You may not think that staying home with your kids is appealing to you, it wasn’t to me. Little people change things and those student loans that seemed like a good idea when you were starting out in school could the barrier that stands between you and your family later. So please if you’re planning on going to school take the time to find a way to fund it without debt. Your future family will thank you for it.

2013 Goal Update – The Total Money Makeover

Hadn't even made a payment on it when this picture was taken

Hadn’t even made a payment on it when this picture was taken

Well, I thought you’d like to know that how my goals are progressing for the year so far. We hit a MAJOR milestone in our our Total Money Makeover last week, we PAID OFF OUR CAR! Yup, that’s right, three weeks a head of when we wanted to. I made the last payment on Wednesday February 6 2013 and that is the LAST car payment I will ever make.

I need to tell you a little bit about the journey that we’ve been on in our financial lives because it really has been amazing. In the fall of 2011 I went back to work after my maternity leave, and as many of you know working full time and having kids puts one big fat expense on the family budget – Daycare. Daycare is our single largest expense in a month, in fact it’s more than our mortgage payment every month (yeah we live in a cheap house thank God!). Pay day would come and go and after all the bills were paid there was very little money left for anything extra. We have always tried to pay cash for the luxuries of life that we enjoy from time to time and haven’t carried a credit card balance for years. Our debt had not grown for a long time but we had some as we were young, broke, and naive when we got married. Apparently it’s hard to live on $9000/year in Canada. In fact at this time last year I would say we were probably pretty financially normal in comparison to everyone else out there. What we were learning though was that SUCKS!

100% ours

Yup this is the McHale Mobile 100% ours

One day last January I was googling potty training and I came across a blog that included a host of potty training information but also a post about the family having paid off almost $60,000 in a three year period by following Dave Ramsey’s plan. I finished reading the post, found the book on Amazon and told the Hubby we were doing this. After listening to my (poor) explanation he quickly got on board. When the book arrived I read it in a weekend, and here we are a year later DEBT FREE! The next step, save up 3-6 months expenses in an emergency fund.

So how much have we paid off this year? Well the car alone was $11,781.00 and we also paid an additional roughly $10,000 on various “emergencies” (like the washing machine upstairs flooding the bathroom downstairs) in cash, and took a 2 week trip that turned into a 3 week trip home to Ontario for E’s birthday this fall. So yes, do the math, we paid cash for roughly $22,000 in necessary expenses including the debt plus went on holidays. Our annual income you ask? Well for 2012 it’s in the $55,000-70,000 range. Pretty average for a family with two incomes in the area we live in.

The even more amazing thing about this whole journey is the impact that it has had on our personal lives. The growth in our marriage has been phenomenal. It’s amazing how much better everything else runs when there is good communication about the money in the house and where it’s all going. We’ve struggled, and we’ve still disagreed from time to time about what the priorities are, but we’ve also communicated much more clearly about what we want (financially and otherwise) and set plans in action to achieve it while supporting each other. We have both set ourselves personally and relationally on paths of personal growth for 2013 that I don’t think we would have even considered if not for the Total Money Makeover that has happened in our lives, SO check it out it will change your life.

2013 Goals

The McHale Family ready to embark on new adventures in 2013

The McHale Family ready to embark on new adventures in 2013

I’ve always been a very goal oriented person – really anything I can check off a list is highly motivating for me. I regularly set goals/create to do lists for the short term, but until recently have never considered setting long term goals to give structure to my whole year. I’ve been working on some personal growth over the last 6 months and a recurring theme amongst all of the books and podcasts is goal setting, giving you something to strive for. So I figured sure, why not! I’ve tried to set my goals in a number of areas of life to allow me to round out my life and hopefully keep things in balance, so I’ve got everything from career, to fitness, to personal goals. The Hubby and I even set some joint goals that we are going to work on as a couple. He has also set his own goals which he posted on one of his blogs late last month (sorry I couldn’t tell you where to find them I have no idea).

I hadn’t really planned on making my goals public, but publicity also creates accountability. I may or may not also have a few other “private” goals up my sleeve ;).

Here we go these are my goals for the year:

  1. Double my income in the year 2013 by starting a side business. (More on that in a later post I hope)
  2. Pay off the car by March 1/13. – Last February we started our “Total Money Makeover” after reading Dave Ramsey’s book of the same title, and it has been life-changing for us in more than just the financial realm of life. If you have ANY debt at all seriously check it out, read it. It’s been an amazing journey for us and is really what has started my journey to self improvement.
  3. Run a 10K race – I know I can do this, but it’s fun to participate in the event!
  4. Run a 1/2 Marathon – got up to the distance last year but then was unable to participate in an event.
  5. Run a full Marathon – this will be the true physical stretch for me, farther than I’ve ever run before!
  6. List & sell our current home
  7. Buy a larger home hopefully with a smaller mortgage
  8. Read all the books on my reading list. (See reading list below)

While some of these may seem like lofty goals I think “Go big or Go home” is a good principle by which to set your goals. If they are easily attainable then you aren’t going to find it challenging enough to keep you interested (at least I’m not). And hey, if I only make it 3/4 of the way then I’ve still made it farther than last year and ultimately while I am always going to strive to meet and even surpass a goal that I’ve set – that’s just the way I am – making it even 1/2 way there on most of them is still pretty good.

Reading List:

  1. The Total Money Makeover – Dave Ramsey – finished Jan 4/13
  2. The Millionaire Next Door – Dr’s Thomas J. Stanley & William D. Danko – Finished Feb 11/13
  3. Wisdom Meets Passion – Dan Miller
  4. Guerrilla Marketing – Jay Conrad Levinson
  5. Entreleadership – Dave Ramsey
  6. See You at the Top – Zig Ziglar
  7. $100 Start-Up – Chris Gilibeau – in progress
  8. No More Monday’s – Dan Miller
  9. Tribes – Seth Godin
  10. Love & Respect – Dr Emerson Eggerichs – started & abandoned 3/4 of the way through – good content, just not my style.
  11. Thou Shall Prosper – Daniel Lapin
  12. Becoming a Person of Influence – John C. Maxwell
  13. How to Win Friends & Influence People – Dale Carnegie

If any of these books look interesting to you and you’d like to support the site then check out here and pick them up!