31 Days to Financial Independence (Day 16): Trimming Your Spending – Education and Miscellany

“31 Days to Financial Independence” is an ongoing series that appears every Thursday on The Simple Dollar. You might want to start this series from the beginning!

Last time, we continued looking at the average American family budget, going through each category and examining how one could trim the cost of typical expenses in that category. Here’s the “average American family budget” that we’re looking at, along with links back to the earlier entries on those specific areas:

Housing – $10,080
Transportation – $9,004
Taxes – $7,432
Utilities – $7,068
Food – $6,602
Insurance (including things like pensions) – $5,528
Debt Payments – $5,252
Healthcare – $3,631
Entertainment – $2,564
Cash Contributions – $1,834
Apparel and Services – $1,604
Education – $1,138
Vices – $775
Miscellaneous – $664
Personal Care – $608
TOTAL – $63,784

Today, we’re going to take a look at the remaining categories on the list, particular education and vices. As you can see from the budget above, the average American family spends $1,138 per year on education, which averages out to about $100 a month, plus another $775 on vices, which adds up to about $60 per month. Remember, however, that this “average American family” includes single adults, married couples without children, and families with children, too, so not every family is going to be exactly the same.

Exercise #16 – Trim Your Education and Vice Spending

The rest of this article consists of a long list of specific tactics that you can use to trim your educational costs and your vice costs. As with the other savings articles in this series, it’s important to remember that everyone lives a somewhat different life and thus some of these tactics are going to seem useful and sensible to you, while others will seem like a stretch to you, and still others won’t apply at all. That’s okay. Ignore the ones that don’t apply. Make an effort to adopt the most sensible ones. Then, give the others a trial run and see if it’s something that can work for you. Commit to some of the challenging ones for thirty days and see if they work, or apply them during the relatively rare situations when those costs come up.

Remember, your overall goal is to cut back hard on the areas of life that are less important to you – the shallows – so that you can afford the “deep” areas of your life both today and tomorrow. Keep that in mind as you read each tip. Is this tip cutting back on something that’s really important to me, that amounts to a core life value? If not, why not cut it so that I can afford those things that really matter?

Let’s dig in.

Don’t use vices when you’re alone. I’m not going to stand here and talk about completely abstaining from vices. It’s going to take more than a personal finance blog to convince someone that smoking or drinking or drug use are something that is a net negative in their life. Given the up front cost and the long term health costs of such vices, the financial case against them is pretty easy to make.

However, I will say this: if you’re alone, try to find other ways to manage your emotions that don’t involve shelling out money or damaging your health. Try vigorous exercise, for one, or listening to upbeat music. Do anything you can to break a habit of consuming alcohol, tobacco, or drugs when you’re alone, because when you’re alone they don’t even provide a social conduit. (Of course, dropping vices entirely is the best route.)

Buy equipment used rather than renting a new version. This holds very true for things like musical instruments. Quite often, you’ll find that the cost of renting an instrument is fairly high, but actually purchasing a used version of that instrument is surprisingly low, sometimes only a few months’ worth of rent for that instrument. This exact scenario recently happened in our household, where a flute was offered for rent at a rate that would have paid for the used flute we outright purchased in just five months of rent payments.

You’re far better off buying a used instrument from a reputable manufacturer than buying a new instrument from some outfit with no reputation, too, when the prices are comparable. A used instrument from a reputable manufacturer is often perfect for learning and will last a long time, while new instruments from cut-rate manufacturers often end up breaking or have other design flaws (new instruments from good manufacturers are overly pricy for a new learner). The savings are tremendous from going this route.

If you plan on paying for an education in the future, start saving for it now. This is true for yourself and for anyone who is dependent on you. If you see educational costs coming in the future for anyone you might have to pay for, start saving for that expense now.

There are two big reasons for doing this. First, if you have money in the bank, the financial burden of that educational expense becomes a lot smaller. It’s not going to crush your day-to-day finances nearly as hard. Second, if you save money now, it will earn an investment return for you, meaning that you’ll have more dollars when you withdraw it than you’re putting into savings right now. In other words, saving for that future educational expense is a much smaller burden on your life if you start saving now rather than figuring it all out later.

Use a 529 College Savings Plan to save for the education of anyone in your family (including yourself). A 529 College Savings Plan is a brilliant tool for anyone facing educational expenses in their future. In a nutshell, a 529 plan enables you to easily put money away for future educational expenses, and the bonus is that when you withdraw money from that account for education, you don’t have to pay any taxes on the earnings. So, if you put in $10,000 over the years and the account has a $15,000 balance thanks to investment growth, that $5,000 in growth is tax free, likely saving you at least $1,000 in taxes. If you use the plan in your own state, you’ll probably get some additional state income tax benefits, too.

Each state runs its own 529 plan, so look at the one in your own state first (particularly if you live in a state with state income taxes). Most plans are pretty comparable, with comparison sites digging rather deep to find significant differences between plans. I’ve been happy with Iowa’s plan for years.

Get electives and basic courses out of the way at a community college that transfers credits to your school of choice. The reason for this is very simple: community college credits are far less expensive than credits at a typical university, so if you can get credits at the community college level that transfer to the university you want to graduate from, you’re going to save literally thousands of dollars. Plus, it’s very likely that you can take those community college courses locally, whereas a university might not be easily available to you.

Many students follow a path of working while taking night time and weekend community college courses, then transferring to a university a few years later to finish up their studies and earn a degree from a much more prestigious school in just a year or two. This drastically cuts into their educational expenses because many of the credits were earned at the much less expensive community college.

Strongly consider a public university over a private one. When you’re considering which school to go to, don’t worry about going to the best school that you can get into. Instead, focus on the school that offers the best “bang for the buck,” and that’s often going to be a public university in your state.

Public universities are large, which can intimidate people, but they also offer tons of opportunity. You can often find classes there that you can’t find at smaller schools, plus there are often extracurricular opportunities that you just can’t find at smaller schools. Not only that, the tuition is almost always drastically lower, particularly if you’re an in-state student.

Strongly consider an in-state school instead of an out-of-state school. If you’ve made the decision to attend a public university, you’ll quickly realize that most public universities are far cheaper if you attend as an in-state student rather than as an out-of-state student. In other words, if you are a citizen of that particular state (and the exact qualifications of citizen vary, but they generally involve being a resident for more than a year), your tuition costs drop drastically.

It is almost always worth it, then, to either attend a public university in the state where you currently live or spend a year establishing residence in the state where you want to attend school before attending. In both cases, the cost of tuition will drop through the floor.

Strongly consider a school close enough to home that you can live there. If you happen to live within a reasonable radius of a public university, give strong consideration to attending there. This enables you to live at home for a few years, which eliminates your housing cost and likely a significant portion of your food cost.

You can simply “commute” to school each morning, stay as late as you need to for classes, projects, and extracurriculars, and then go home each evening. There’s no housing cost. There’s very little transportation cost if you live in an area with good mass transit. Your food is probably covered if you live at home. Basically, your only expenses are education-related.

Apply for every scholarship you can find that you’re eligible for. Yes, this can mean that you spend a ton of free time filling out scholarship applications, writing essays, and searching for new scholarships, but it’s surprisingly worth it. Many scholarships get fewer applications than you might expect (I’ve served on the review board for a few and you’d be surprised how few people spend fifteen minutes filling out an application for a shot at $500), which basically means if you fill out a bunch of applications and sell yourself well, you’re likely to catch a few worms.

I recommend starting this process as early as possible. One big reason is that many scholarships ask for your total amount of other awarded scholarships, so if you start early, you can keep that number at “$0” on as many applications as possible. Another reason is that the earlier you take care of it, the more time you have later for even more applications. You can pay for a very large part of your education through piecemeal scholarships.

Plan your courses carefully to minimize your semester count. At most colleges and universities, you pay for tuition by the semester or term, so if you want to reduce your total expenses, you need to reduce your total count of semesters or terms. It’s just that simple.

The best way to do that is to plan for it. Schedule a meeting with your academic advisor outside of the “crunch times” and come up with a plan that can get you to your degree in the minimum number of semesters. Make that plan with a little bit of flexibility because there will be times when you don’t get into every class that you need, but strive for the minimum semester count.

Fill out the FAFSA, no matter your financial situation. There’s almost nothing but upside from filling out the FAFSA, even if you think you won’t receive any aid. The truth is that you’ll likely receive more than you think, particularly if you have lots of family members.

Fill it out, even if it feels like a hassle and even if you doubt that it will help. It can do nothing but help.

Get the smallest student loans you possibly can. Many people are tempted to get student loans that help them to finance some lifestyle “extras.” I’m guilty of this myself; I got a larger student loan than necessary to help pay for a larger apartment than what I really needed, cable service, a new computer, and so on. I didn’t really need any of those things.

The best strategy to follow when you’re getting student loans is to live as absolutely cheaply as you possibly can. Live in a tiny apartment with a roommate – it’s not like you will spend a lot of time there. Have a minimal wardrobe and don’t update it unless clothes are falling apart. Eat as inexpensively as you can. Spend nothing on entertainment; let Youtube and other free online sources be your entertainment.

Go minimal when buying stuff before your first semester. Many people tend to overbuy on items that they “need” before their first semester in college. Don’t. Go absolutely minimal instead.

I took way too much stuff to college my first year. Most of it sat around completely unused. It was a waste of money, to be honest. The only things I actually used with any frequency were about a third of my clothes, my toiletries, my school supplies, and my computer. Everything else was unnecessary.

If I were to start college over again, everything I would take with me would fit in a duffel bag and I’m not even remotely exaggerating. I’d take about five changes of clothes with one extra “nice” change of clothes, a laptop computer, a Kindle, bedsheets and a pillow, some notebooks and pens… and, honestly, that would be about it. If I were moving into an apartment, I would get a few basic dishes and a pot and some silverware from Goodwill. Nothing else is really necessary or will even be used.

If you have a meal plan, squeeze every ounce of value out of it. Different colleges and universities have different value propositions when it comes to their meal plans. Whatever it is, spend the time to figure out where the best “bang for the buck” is in terms of your meal plan and then extract every dime of value out of it.

For example, I had a friend in college who had a “one meal a day” plan in the campus food service. He ate exactly once a day in there … but he got every ounce of value out of it, going through the cafeteria line several times and getting incredibly full. Aside from that, he would eat a granola bar occasionally in the early part of the day to “provide fuel.” He was a Dean’s List student and seemed to thrive on it.

You won’t starve without a three-meal-a-day plan. Trust me. Just take maximum advantage of whatever plan you do have.

Take advantage of student discounts. You’ll find that many businesses and services around your university or college offer a great discount if you show your student ID. Take advantage of that, not to buy extra stuff, but to get discounts on the stuff you’d already buy.

If you decide you need a haircut, for instance, choose a place that has a good reputation and a student discount. If you need dental work, see if any dentists offer good arrangements for students. If you need a new hat, are there any clothiers that have a student discount? Milk that discount for every dime you can get from it.

Utilize on-campus resources to help manage your basic needs. When you’re in college, you’ll often find that many of your needs are handled perfectly well by on-campus services and programs that are freely available to all students. Universities often have a fitness center or two, so there’s no need to pay for a gym. They often have free health care services. They have free internet, so you don’t need to pay for it at your apartment.

My favorite benefit is the piles of free food. When I was a student, the student organizations were always having meetings where they provided pizza or some other food that was just free for the taking for anyone who showed up. I would constantly dabble in various student organizations, going to their meetings, eating the free food, hanging out with people for a while, hearing about what the club was up to or maybe listening to an interesting speaker, and then heading out. Free dinner, free social time, perhaps a free interesting presentation – it was a good deal, and it kept my food costs really low.

Get maximum value out of every educational experience. If you’re paying for an education, wring every dime of value out of that education. Don’t just take a class – do all of the homework, participate in the online discussion forums for that class (if they exist), and go to office hours. Ask tons of questions – everything that you can’t resolve yourself – and don’t be afraid of “dumb” questions.

Take advantage of the out-of-class educational opportunties that your tuition affords you as well. Go to on-campus talks that seem even remotely interesting – and mingle afterwards. Go to any and all meetings related to your department where you might have a chance to learn something and mingle with the professors. What you’re going to find is not only do you learn a bunch of useful additional things, but that you start building some really valuable relationships with people that can help springboard you into a career opportunity.

Buy your textbooks used and then re-sell them. Unless there is literally no other option, you should avoid buying a new textbook for a class. Buy used ones instead and then re-sell them at the end of the term to recoup some of your money and invest it in the next round of textbooks for the next semester (or pocket it when you’re done).

The best way to buy and resell used books is to watch bulletin boards in the buildings that you frequent on campus as well as Craigslist and any specific messageboards for your university. I highly recommend posting your books for sale as early as possible before the start of the next semester and indicating which classes they might be used for. You’ll often find that the sale of one semester’s books basically pays for the next semester’s books.

Tune in next time for the next entry in this series, which will take things in a new direction…

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