Revisiting Your Budget
Although most people reading this book probably wouldn’t consider themselves rich, the reality is that a lot of money passes through your hands in your lifetime. Granted, a lot of money that comes into your household goes right back out, but it’s still a lot of money nonetheless.
As I talked about in my book, The Complete Idiot’s Guide to Getting Out of Debt (Alpha Books, 2009), the average American easily earns in excess of $1,000,000 during his working lifetime. Although I have no doubt that much of this goes toward nonnegotiable fixed expenses in many people’s lives, I also know from years of experience that a whole lot of money just evaporates.
This is especially true when you stop to consider the money that comes into your household that you don’t count as income, such as gifts or support from a former spouse or partner. In short, there is a lot you can do to free up a few thousand dollars per year, without having to wear burlap sacks or go Dumpster diving for your next meal.
FLUNK-PROOF FINANCES
I’ve said it before (in my other books), and I’ll say it again: budgets don’t work. For most people, a budget is a great attempt to rein in their spending, but it has no real teeth to it. To really get control of your spending, you need to create a spending plan that sets aside money for your hard-to-control expenses into a separate account each month. That way, you don’t need to keep trying to remember how much you’ve budgeted for different expenses. When that account hits zero, you’re done with those expenses until the next paycheck.
Redefining Necessity
At the heart of freeing up cash in your budget is a semi-painful discussion with yourself about the difference between need and want. In other words, what makes something a necessity versus just a nicety. By reexamining that fine line, you’ll very likely find a substantial chunk of money.
To do this properly, you’re going to need to do an honest analysis of all your household’s expenses. This means that you can’t just guess about what you spend where, but that you actually need to go pull out your credit card and bank statements, get your check register, and do the same for anyone else you share finances with.
When you have these in front of you, flip back to the College Cash Strategy Worksheet you’ve been working on in Appendix B. Under the “Spending and Savings Strategies” section, you’ll notice a table with three columns that looks a bit like a budget. There are three columns: “Actual,” “Compromise,” and “Net Savings.” You’re going to use all your statements and go back and add up the amounts you’re spending in each category under the “Actual” column. Then, you’re going to go take a walk, work out, or do whatever you need to do to clear your mind.
After an hour, come back and look at those expenses and ask yourself, “Do I really need to spend that much on clothes, entertainment, or dining out? Or, do I just spend that much on those things without thinking about it?”
Then, for each item, if possible, write down a number in the “Compromise” column, which represents how much you think you can trim your household expenses for a few years. After that, figure out how much you could save annually by each new “Compromise” amount from the original “Actual” amount. Finally, multiply your savings amount for each line by 12 to see how much money you could truly free up over the course of one year of college and write the results in the “Net Savings” column.
Once you’ve done all of that and come up with an annual savings number, work your way down the worksheet, multiplying your annual savings amount by the number of years you’re going to be paying for college, and subtracting this amount from the amount of money you still had to come up with after the first few sections. The result—what is left over after you subtract this out—tells you how much money you’re going to have to come up with through scholarships, loans, and so on.
CHEAT SHEET
If there has ever been a time to push your ex for the child support or alimony owed you, this is it. If the relationship has not completely soured, put on your friendliest face and invite your ex to participate for the sake of your child. If there are concerns about giving you the money, provide instructions on how to make payments directly to the school. If your ex won’t help out but is obligated, seek legal representation.
Save Thousands with Easy Budget Cuts
The following budget cuts can save you some big bucks, which you can immediately funnel into paying for college. But, they’re only doable if you view them as luxuries (wants) not necessities (needs). In fact, I can almost guarantee you that if I could fast-forward to five years after college and ask you if you’d rather have thousands more in student loans to repay or have gotten rid of these “necessities” (even temporarily), you would choose the latter in a heartbeat.
• Cancel your cable TV ($600 average annual savings)—To this day, I’m utterly amazed by families who tell me they don’t have money to reach their financial goals, yet have $100 to $200 per month in their budget for cable or satellite TV. Even at the low end for the most basic packages, it can run you $50 per month. I’d suggest you ditch the cable TV for the next few years and pocket the savings. Heck, nowadays you can see most of your favorite shows online for free anyway through sites like Hulu.com.
• Use coupons ($600 average annual savings)—If you aren’t already using coupons to do your grocery shopping, you’re missing the boat. I know it feels like you don’t have the time, but guess what? You don’t have the money, either. A family of four using the coupons from their Sunday paper can easily save $100 per month, if not more, while a student living on her own should have no problem saving $50 per month.
I’m addicted to coupon websites, especially TheGroceryGame.com and CouponMom.com. These websites help people strategize which coupons to use, when, and where to maximize their savings. On average, my wife can get $1,000 of groceries for between $500 and $600, saving our family over $5,000 per year!
• Write letters ($250 average annual savings)—One of the biggest financial black holes I find in people’s budgets is gift giving. That’s because most people do not actually include money in their monthly budgets for once-a-year gift-giving events like holidays, birthdays, anniversaries, and so on. Rather, they just spend on top of their already stretched budget. Ironically, speaking from my own experience, I’ve forgotten who gave me 90 percent of the gifts I’ve ever received and half of them don’t even get used anymore. Instead of wasting money on this, consider writing a letter to your loved ones, telling them exactly why they matter to you. Chances are they’ll keep that letter a lot longer than that new sweater.
• Take your lunch($780 average annual savings)—I love eating out; it’s just plain fun. Unfortunately, it can also be expensive. Although I’m not suggesting you and your loved ones don’t occasionally treat yourself to a night at the local greasy spoon, I would suggest that regularly buying your meals at the sandwich shop next to your work or the cafeteria at your college can nickel and dime you to death. Every time you pack your own lunch or dinner, you’re going to save roughly $5. If you do that three times per week, that’s a savings of roughly $780 per year, per person!
• Buy secondhand ($250 average annual savings)—Although you might not want to buy the outfit you wear to your next job interview at your local secondhand store, you’d be surprised how nice much of the stuff is at these stores. I bought one of my favorite jackets almost 10 years ago for $1.50.
Especially if you have little ones who are going to grow (or rip) out of clothes, consider shopping secondhand. I can promise you that no one will ever know.
• Quit smoking($1,800 minimum savings per year)—At an average cost of $5 per pack, you’ll watch nearly $7,500 go up in smoke over a four-year period. That’d pay a lot of tuition. If there’s ever been a time to quit, now is it.
• Ditch your house phone ($250 average annual savings)—In this day and age, a landline telephone can be one of the most redundant expenses in many people’s budgets. The reality is that most people spend 90 percent of their phone time on their cell phones but continue to pay $20 per month for a landline phone. Ditch the landline phone, and pay for a few textbooks.
• Cancel memberships and subscriptions ($250 average annual savings)—Whether it is a newspaper in your driveway every morning or a membership to your local gym, many people have numerous recurring expenses that are automatically drafted from their bank accounts each month. If you are not using these on a frequent basis, get rid of them. Buy just the Sunday paper at your local grocer and go for a run or a hike instead of paying for a gym membership you never use.
• Use your local library ($100 average annual savings)—Whether you love movies, enjoy curling up with a good book, or pay exorbitant Internet fees to check your e-mail a couple times per week, consider using your local library. Aside from the obvious access to books, most libraries have a pretty good assortment of recently released movies and entire seasons of TV shows, all of which can be borrowed for free. Last year, my wife easily saved over $100 borrowing the books she needed for her book club, as opposed to buying them.
• Adjust your thermostat by 3 degrees ($100 average annual savings)—It’s true, dialing your house’s thermostat up or down 3 degrees during the summer or winter can save you roughly 10 percent of your heating and electrical bills. This can easily pencil out to $100 per year, even more if you live in an area with extreme temperatures.
• Stop paying for your bank account ($100 average annual savings)—If you’re still paying a monthly fee for a bank account, you’re missing the boat. Well over 100 FDIC-insured banks around the country offer free checking and savings accounts, on top of paying you interest on your money!
WORLD WIDE WISDOM
Some of the best bank accounts are from credit unions, small town banks, and Internet-based institutions, all of which are insured by the government. My local community bank offers a free checking account, with no minimums, that pays five times the national average interest rate for checking accounts. Check out BankDeals.Blogspot.com and Bankrate.com to find accounts that will minimize your cost and maximize your return.
Ten Sources of Extra Income
Although it might not be a pace that you want to keep the rest of your life, investing a few extra hours each week can lead to a few thousand dollars more that you can put toward college costs. Unlike cutting costs, I wouldn’t try to embrace all of these strategies. But I’d pick at least one and run with it:
• Rent out a room—There are few things that can put more money in your pocket with less effort than renting out a room in your house or apartment. Whether you are a student with some space to spare or a parent whose student is off at school, an extra $200 to $600 per month will go a long way. Heck, in college we rented out our gardening shed to a guy for $200 per month!
• Pick up an extra shift—Become that guy or gal at work who is always hitting up people to take their extra shifts. Just taking one extra 8-hour shift per month at $10 per hour can put nearly $1,000 extra in your pocket each year.
• Use your brain—There’s a lot of extra money to be made for people who have a gift for teaching. Substitute teaching at your local K-12 school can pay $50 to $120 per day, depending on where you live, while teaching a few hours per week at your local community college if you have a Master’s degree can easily net you $1,000 per month. Even tutoring teenagers in the same area as your major can earn you $10 to $20 per hour part time. The great thing is that all these roles have very flexible hours, making them easy to fit around your existing job.
• Become Santa’s helper—Your local shopping mall needs a lot of help starting around Thanksgiving of every year, with stores recruiting everything from seasonal gift-wrappers to nighttime shelf stockers. One stroll through the mall could help you or your student earn $500 to $1,000 in a short window of time.
• Become a recycling pro—I mentioned this in a previous book and have heard great feedback from families who’ve tried it. By simply being the person who rounds up all the cans and bottles at your kid’s local Little League game or in your dorm, you can easily net $10 to $20 per week. To this day, I keep a few trash bags in my car in case I run across the mother lode of cans at some event.
• Become a mystery shopper—Although you should ignore all the cheesy classifieds and obvious e-mail spam you get, there are legitimate “secret shopper” jobs out there. The pay is not glamorous, but you often get to keep the items you buy, especially if it is food. I’m signed up with a service that literally begs me to eat at local restaurants and fill out a questionnaire. Check out National Shopping Service; Intellishop; and Service Intelligence, Inc.
• Dust off your writing skills—You know how I got my start as a full-time writer? I was trying to make some extra money by writing online over my holiday vacation. There are a number of great online writing communities out there, like Helium.com, where anyone can write and you’re paid based on how many people read your articles.
• Turn your hobby into gold—Back when I used to do full-time youth work, my wife began making our Christmas gifts to help save some money. It didn’t take long before she was selling her handmade jewelry to friends and family and earning a nice little side income. Check out The Complete Idiot’s Guide to Selling Your Crafts by Chris Franchetti Michaels (Alpha Books, 2010) for more pointers on turning your hobbies into dollars.
• Open a home daycare—I’ve known a number of parents who have put their own adult children through school by watching other people’s kids during the day. Home daycare providers are experiencing a steady demand for their services, especially with more and more parents having to go back to work in this rocky economy. Even a home daycare that only watches children on the weekends can easily net $1,000 to $2,000 per month.
• Have an annual garage sale—It’s amazing how much junk you can accumulate in just one year. Consider timing your spring cleaning with an annual garage sale to help raise enough money to pay for your textbooks or other costs. Even better, send an e-mail to your friends and family telling them you’re having a garage sale to raise tuition and see if they have any stuff they want to get rid of as well!
FLUNK-PROOF FINANCES
Although you should definitely be looking for opportunities to increase your income, steer clear of work-at-home “opportunities” or anything that requires you to make an upfront investment or buy inventory. Now, even though you need every dime for college, this is not the time to be sinking money into something that usually doesn’t pan out for most people.
Say No to Gifts, Yes to Tuition
Before Grandma sticks you with another 12-pack of socks, let your closest friends and family know that you’d prefer tuition instead. Heck, they’re probably agonizing over what to get you anyway, so you’ll save them the trouble of driving around town by simply telling them that helping to fund an education would be the best gift they could give.
To make it easier for those wishing to contribute, as well as give them some level of comfort that their gift is going to be used for your child’s education, consider opening a Section 529 account that others can contribute to. As the parent and the person who opened the account, you retain control of how the funds are invested and when they’re paid out, but it helps (and may even encourage) people to feel like they’re truly “setting money aside” for someone.
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