Month: February 2019

The Dwindling Power of the College Diploma

~ Justin ~ Leave a comment

The student loan crisis. We hear about it almost every day in some way, shape or form. As each month passes, the problem looms larger. There are about $1.5 trillion loaned to around 44 million people in the U.S. right now. Of that, $166 billion of that is delinquent. This is obviously a huge issue with no easy solution, but I did want to weigh in on one trend that helped us get to this terrible financial state we collectively find ourselves in.

When I got ready to go to college, I looked at five or six schools,  half of which were in-state, the rest out of state. What I did not comprehend at the time was the financial burden that moving out of state would lay on my parents in both the short and long term, as well as what it would mean for me long term. I definitely was not considering any consequences in the short term while I was in school.

I chose to go to school in southern California at Azusa Pacific University. I had an incredible time, got a great degree, had the chance to study abroad twice on two different continents, and got the opportunity to make life long friends and connect with professors who truly cared about their students. I have nothing bad to say about APU, I am very proud to be an alumnus of that school. But there have been costs tied to that decision.

For my parents, I’m not even sure of the full impact for them yet. I know it was expensive, the portion they covered was whatever I didn’t take out in loans or received in scholarships. For me, I am still paying off my loans to this day. I graduated in early May of 2014. Fast forward and I am a couple months from the five-year mark of receiving my diploma. By the grace of God, I’ve almost got it all paid now. When I walked off the stage that day, I was ecstatic to have achieved my goal of completing a bachelors degree. But I did not realize at that moment that there were an invisible ball and chain of almost $30,000 (after interest was paid) strapped to my leg that I would take half a decade to free myself from.

So, looking back, here are a few things to consider if you are planning on getting a degree, be it an associate’s, bachelor’s, or master’s (doctorate if you are one of those nerds. Just kidding I’m just jealous of smart people).

Do you REALLY need to study out of state? I thought as an 18-year-old that I needed to “get out” and explore another place, another state, another part of the country. That was probably true. But looking back, the reality is that I probably didn’t need to live in California for four years to experience it. I could have had a great in-state school experience and would have saved a bundle of money, some of which I could have used to do a month long trip to see all of California had I wanted to and had plenty left over.

Do I REALLY need this expensive a$$ degree? This is one to consider that some do not. What is the income potential of whatever field you are planning to study in? If you are wanting to go to some school and dig yourself a $100,000 hole of student loans then you sure as heck better get a degree that is going to get you a job that pays you more than poverty level wages. I don’t want to pick on any field of work. I’m sure you love whatever you do or whatever you plan to do. But going into debt requires that you dig yourself back out. And if you don’t have a very big shovel (your salary), that dig is going to be painful and will take a long time. Consider the ratio of the amount of debt you are taking on and what you will really be able to make to pay it off afterward. Can you pursue what you love without a degree? Could you knock out prerequisites at a community college first before moving to classes at a university? Things to consider.

My parents and grandparents always told me to get a college degree no matter what. It seems that this past wisdom no longer holds as true as it once did. When my parents went to college, the costs were reasonable. Many were able to go to school while working and could pay their way as they attended a university. I’m not saying that isn’t possible now, but the times they are a-changin’. Getting a college degree no longer guarantees anything. It doesn’t necessarily mean you are more hireable than someone else, doesn’t guarantee a certain level of pay, and is not the key that unlocks all professional doors as some from past generations may imply. There are many industries now that look more at experience, skill sets, soft skills, certifications, and whether or not you are good at doing a certain set of tasks. Information Technology is a good example of this. You don’t need more than a high school diploma to get a good job in IT. If you know your way around computer, server, and network hardware and software, and have experience setting up or managing technology, a potential employer will likely not bat an eye if they don’t see a “strong college degree” on your resume. When I interviewed for my current job as an IT Help Desk Engineer, my college degree didn’t come up as far as I remember.

Anymore, having the right skills means more than a degree in many cases. Don’t get hung up on getting a degree. If you can do what you want to do with some less intensive training, or a technical program, or something like that, and get to work sooner, do it!

This is not meant to be a jab at colleges or universities. Rather, a call to use wisdom and discernment in deciding when and where higher education is relevant, useful and economical. Take it from someone that is still digging out right now: student loans are no fun. Getting out from under them is a great goal. But if you could avoid them in the first place or at a discount, explore all of your available options.

Making Progress: Fighting Instant Gratification

~ Justin ~ Leave a comment
IMG_3078
A rough-skinned newt we met on a recent hike near our home.

Instant gratification is a great luxury. With instant microwave food meals, nearly instant drive-through food and coffee options, we are all getting a little bit spoiled.  Hell, Amazon’s speed on shipping items is getting ridiculously fast! Everything around us seems to be speeding up all the time. Wouldn’t it be great if we could apply this wonder of instant gratification to paying off debt or getting rich?

I wish it were that easy. If you do any Google searches related to paying off debt or making money fast, you’ll be swarmed by a host of websites with all kinds of suggestions and “click here now” prompts. It really would be great if these were quick things to accomplish. Unfortunately, the reality is that they are not.

Paying off debt takes time and effort. Not just today, but tomorrow, and the next day, and next week, month, maybe next year even. It takes consistency and hard work, dedication, and focus, sacrifice and courage. If I had my way, I would just ignore our debt as a couple. Wouldn’t it be easier that way? Perhaps in the short term. But the debts that we don’t come to grips with today only grow with each day that we let them slip by unnoticed.

When I first started looking for a second source of income I dove deep into web searches to see if there was an easy way to become debt free. I wanted to put in minimal effort and receive maximum results. But once I spent more and more time pouring through these websites and suggestions, I got discouraged by the reality that almost all of these options were scams or uncommon windfalls that were not easy to repeat or duplicate in my own life.

Before I got too frustrated and gave up altogether on adding extra income to our bottom line each month to help pay off debt, I returned to an idea that Dave Ramsey often throws around as an example when he talks about listeners getting extra jobs: delivering pizzas. I think he kind of uses it as a placeholder for entry-level jobs, but it got me thinking.  It is not glamorous, it does not make you money hand over fist, and it is not a “get out of debt easy” plan. But it is having results for us.

After a long day of solving IT issues for our clients at my primary job, I throw on a Pizza Hut shirt and baseball cap and hop in our Prius and scoot around town from about 5:30PM until 11 or 11:30PM serving up hot cheesy goodness. These are long days, no doubt, and it is difficult to stay the course. Some days are great, with a handful of tips, and others are very slow and uneventful. But with each shift that I work, each hour that I make that rather low wage, each time a generous customer hands me an extra few dollars as a tip, I am thankful because we are a few dollars closer to reaching our goal of becoming debt free.

I am not saying that everyone should go out and deliver pizzas, it is most certainly not for everyone. But instead of trying to find your next big break, the next big get rich or pay off debt quick scheme, consider doing something that is predictable, consistent, and may require some good old fashioned hard work. We are blessed right now in our country to have a very low unemployment rate. One benefit of this is there are generally more jobs available than there are capable workers to fill those positions. When I walked into Pizza Hut and told them I had a reliable car and would always show up on time, I was hired almost without a second thought. It won’t be a dream job, and you probably won’t want to do it for very long, and that’s okay! You don’t have to do it forever. The important thing is that you are making that extra effort to help free yourself or your household from that icky debt that keeps hanging around. Every dollar does count. The day when we make our last debt payment, I already know that I will be able to look back on all the little odd jobs that Jos and I have done and will be proud to say that we put forth our best effort in order to be a better steward of the money and talents that we have been given, both today and in the future.

Don’t think about it too much, my friend. There may be awesome, ordinary opportunities waiting at your door today.

Is it good to have a large tax return?

~ Justin ~ Leave a comment

Every changing of the calendar to a new year brings the end to the personal fiscal year, and introduces one of the least exciting, and often most dreaded times of the year: tax season. Even in 1789, Benjamin Franklin was well aware that “…in this world, nothing can be said to be certain, except death and taxes.” The tax man always comes around, and you do have to pay him what you owe. But you do have some control over what you pay him and when.

While tax season may not be smiled upon by most, a tax return is certain to make most grin from ear to ear, especially if the refund is a large one. But is a large tax refund really something to be excited about? Let’s take a closer look.

The rate at which taxes are withheld from your paycheck is calculated using the number of allowances you claim on your W-4 form. This form is filled out for the first time when you begin working for a new employer. But you are usually able to change or re-submit your W-4 if you need to make adjustments. Let’s take a personal example.

For 2017, I claimed two (2) allowances on my W-4 form with my employer. I had a higher amount of taxes withheld for that year since I chose a lower number of allowances (fewer allowances = more taxes paid upfront), and because of that, we got back a pretty big chunk of change in the form of state and federal tax refunds. Here is the issue with a big payout, however.

When you are paying more than you owe in taxes, and you get a big refund, you are overpaying. Basically, you are giving an interest-free loan to your state and/or federal government. When you get a tax refund, they don’t pay you any interest on the money they’ve essentially borrowed from you. This is a bad investment for your money! An adjustment needs to be made here.

If you do get a tax refund that is relatively large, you may want to revisit your W-4 allowances. After we got our rather sizeable tax refund in 2017, I resubmitted a W-4 to my company’s accountant, upping my allowances to five (5). Doing so lowered the amount of taxes that were withheld, or set aside for taxes, each paycheck. Doing this is going to result in a much smaller tax refund, which may seem like a bad thing at first glance. But let’s remember, if we are paying less in taxes on each paycheck throughout the year, then that is more money in your pocket with each paycheck. If you are getting out of debt, this extra could be applied using your handy dandy zero-balance budget.

In order to be tax efficient, you will want to pay attention to your tax refund this year. If it is a decent percentage of your take-home pay, you will likely want to make an adjustment. Back to our example, our tax refund in 2017 was around 6-7% of our gross take-home pay. This was WAY too large an amount. This year, we are looking at our refund being closer to 1-1.5% of our gross income instead. There is a balance to be struck here, as you don’t want to OWE a lot of extra taxes when tax time rolls around, so be smart. I used to do our taxes, but since marrying into a wonderful family full of talented individuals, I now have an uncle-in-law who is a CPA and is WAY better at this tax stuff than I could ever be.

My last point I would like to make ties into that. A good CPA (accountant) is worth their weight in gold. They will always be able to maximize your refund and find tax breaks for your situation that you likely would not be aware of if you just used TurboTax or some other tax software. Unless you are an accountant yourself, handing over the task of taxes to a true professional is the right move. Any cost associated with having them handle your tax filing will not only pay for itself, but it will also often give you back more than you pay them for filing your taxes in the first place. An excellent investment indeed!