078R - College Hacking Toolbox

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Time Speaker Text Tags
0 - 11 Jonathan Mendonsa Welcome to the ultimate crowdsourced personal finance show. This is your Friday roundup your listening to. choose FI Radio.
11 - 51 Speaker The blueprint for financial independence lives here. If you're looking to unlock the secrets to financial independence and early retirement you're in the right place stay tuned to join a community of like minded people who are Getting off the hamster wheel. And taking control of their lives in the pursuit of financial independence. Choose FI. Your home. for financial. Independence online
51 - 107 Jonathan Mendonsa Hello and welcome to the Choose FI radio pod cast today on the show we're going to be exploring this past week's episode with Travis Hornsby the student loan planner and what an action packed and value added episode as he dove through not only his own path to early retirement failed early retirement and then entrepreneurship but also as we took the information that he had kind of collated and applied that to specific scenarios and people that in some cases have massive six figures of student loan debt how they should look at that and how to optimize it for their specific situation and use some of these government programs that are in place and are available so it was an incredibly value added episode. You really do. You absolutely do need to listen to that episode if you haven't already. But today we're going to go a little bit deeper and we're going to actually explore a case study that is going to build on that episode and I'm incredibly excited about this and help me with this I have my co host Brad here with me today. How you doing buddy.
college-loans
107 - 148 Brad Barrett Jonathan I'm doing quite well. Yeah this was a really really interesting episode with Travis. I was blown away by the response here and I know by 6:00a.m. that morning I had a message from my brother saying this was the absolute best episode we've done in a while. And he just absolutely loved it. And I know on our Facebook group as well you posted the link to it and we had a bunch of people just chime in saying hey I don't even have student loans but this was a fascinating episode. Those are the kind of reviews you want to just really want to latch onto in here because you know it's just useful information even if it's not personally applicable for each individual. So yeah that was that was very very cool. So anyway Jonathan what's going on with you.
college-loans
148 - 210 Jonathan Mendonsa Well the biggest thing for me personally is that I have become a rockstar at selling stuff on Craigslist. Yeah just out of nowhere. So I just don't know it will. To be honest with you I had taken a stab at selling some stuff a couple of years back and it was just an abject failure. I think part of it was I was trying to get top dollar. And it was just a fiasco that was spread out over like weeks and weeks where people would message me and then they wouldn't show up and then they wouldn't buy it. And I was always trying to I had to be home when they were here. It was exhausting it was infuriating at the end of it. I was like why would anybody do this. But we're cluttering and we're kind of getting rid of a few things that we're not using including a composter and we had this dog kennel this large ten by ten by six foot cage that was out back that just was here when we moved in and we really weren't using it. I thought you know what I didn't do it very well before I didn't go into it with a plan what would it look like if it was done right. So I think this would be a value add and I want to share my strategy with you.
210 - 215 Brad Barrett My ears perk up whenever I hear de cluttering. So yeah. Hear all about it man.
215 - 378 Jonathan Mendonsa Ok first off when you start with this you do want to get a feel for what things are selling for in the case of the dog kennel cage thing. Brand new they sell anywhere from probably right around 300 dollars. This one is probably 10 to 15 years old but looks like it was in pretty decent condition. You go into Craigslist and you find out the people are selling them anywhere from maybe 100 to 200 dollars something in that range. Again I am not trying to get absolute top dollar for anything here I just want to make some money. You know more than if I were just throwing it away or made more than if I were going to try to go for the deductions which as we've talked about based on the way the tax code is structured currently if you're in the middle class very unlikely that you are going to be able to itemize your deductions anyways. So you know donating it is probably not going to be from a monetary perspective going to be super beneficial for you. So anyway coming back to selling on Craigslist. I settled on 100 dollars to sell this dog kennel and then I used this kind of three point strategy so one price competitively to get some good pictures don't just try to take a blurry picture with your iPhone. I mean the difference between something that sells and something that sets for a long period of time is probably whether or not it has a picture and then whether or not that picture is any good. You don't need to be a rock star photography expert but you should have something that's infocussed has some contrast to it that you can clearly see what the product is. That. Absolutely helps and maybe take it from a couple of different angles so that people can see the items. I know it sounds silly on something like a dog kennel but that was the case. And then finally the fourth part of this is writing your ad copy so copywriting is this process of basically building marketing around an item and writing something up so I could have just put on their dog kennel 100 bucks and maybe that would have gotten a response. But what I thought I would do this time is actually go onto something like Amazon and see how are copywriters companies that are selling these for a living where their entire existence is based around whether or not the product actually sells. What sort of marketing are they putting into this. Once I found out how someone was marketing a brand new kennel I basically just copy and pasted that ad copy and then generified it. I'm not totally sure if that's a word but it works for the situation and gets a point across. You basically made it a little bit more vague to cover what this actual item was and then just inserted into my ad on Craigslist. I had eight responses within the first hour and had it sold. You know someone actually came to pick it up on the third day I had backups for my backups. If that first individual didn't show up so it was absolutely incredible. I repeated this process for this composter that I was trying to sell. And same exact thing I listed them on Wednesday and they were sold by Friday. Just absolutely the easiest transaction I've ever had.
tax
378 - 384 Brad Barrett Wow that's really really cool. I may have used the word tweaked instead of making up generified.
384 - 391 Jonathan Mendonsa Haha accepted that I'll make a note when I do the remix. Yeah.
391 - 429 Brad Barrett But the real take away there is leverage. Things that successful people are doing. That's a lesson well beyond just selling on Craigslist here. If you can pick up strategies from how people are doing things successfully like in your case you went to Amazon looked at highly ranked sellers for those particular products or similar products right. And obviously this is not plagiarism and like the negative sense like you're publishing some article or something you're just trying to sell your item on Craigslist and you are taking their smart wording and just tweaking it a little bit further for your. So yeah that's a really really cool takeaway I like that.
430 - 497 Jonathan Mendonsa And I think it's something that can be used in a lot of different situations in fact I can think of other examples of this. And usually when they when they're done extremely well they actually go viral and they catch mainstream attention. But someone selling their you know 1993 Honda Civic or Acura and they create this incredible you know marketing video around this item and how and kind of highlight all the features that essentially are just old car. They turn it into selling points. And in many cases that gets picked up in these cars sell for ridiculously more than they should. And part of that is all of us want to be sold to yes we want something cheap we want something free we want to spend as little as possible. But we also want to think we're getting the greatest thing ever. That's just our nature it's been trained into us from the beginning. And I don't know if as an individual now selling a specific item if you know that's just how our minds are programmed you can play into that just spicing up your items that you're posting on Craigslist a little bit. And this would work for eBay would work for selling on Amazon. But I think it is a really useful strategy especially as you start thinking about cluttering your stuff.
497 - 530 Brad Barrett Yes so Jonathan speaking of de cluttering I actually sold my house last week which is amazing. The transaction finally close. Then everything went really really smoothly. At the end there was a little little more stressful than I would have liked overall just with the inspection and having to fix some things and the appraisal came in just a couple of thousand dollars lower than we had had expected it to. But all in all declaring this is the perfect decluttering for me because having two houses at once was was a little bit stressful needless to say.
530 - 535 Jonathan Mendonsa Yeah I got rid of a dog kennel and a composter you from two houses to one well done.
535 - 537 Brad Barrett You upgraded thank you thank you.
537 - 565 Brad Barrett And also need this is a the big earn analysis that we are talking about now can go forward in earnest here which is nice. So I am going to officially do that rent versus buy calculation that we had talked about on a couple of prior roundups and now that I have the official numbers I can actually move forward with that. And now frankly I've got a big deposit that just went into my bank account and I've got to figure out where to invest this money and see if am I going to.
565 - 570 Jonathan Mendonsa Oh are you going to dollar cost average or what is the plan.
570 - 604 Brad Barrett Yeah I mean it's a good bit of equity and that just got dumped from just sitting in this house essentially being completely illiquid too. Now it's in my checking account and I think we're going to do a mix of a bunch of things. So the very first thing that we did actually was we in one fell swoop in one check. We paid off that horrible albatross of a property that I had mentioned previously as my biggest financial mistake. That horrible piece of land that we bought in North Carolina years ago. So that thing is officially paid off. I cut the check yesterday and it's it is done.
hotseat-mistake
604 - 608 Jonathan Mendonsa I bet you that took off like five years of your life.
608 - 692 Brad Barrett Well yeah that thing took off a lot of your stress and maybe I lost Hariz or grey hairs or something. But yeah it just feels nice to be done with it. And also from a Fi perspective this was a real slam dunk. When I look at it from the four percent rule I was paying I think five hundred sixty five dollars a month or something. So it winds up to being almost 68 hundred dollars a year in mostly interest and some principal on this on this loan. Like I've said I consider the value of this property zero. So essentially any amount that I was putting the principal really was in essence interest in my kind of mental framework. So this is almost seven thousand dollars a year that just vanished from my yearly expenses and the lump sum was only 66000 so you could do sixty eight hundred times twenty five and that's 170000 dollars. So in my normal FI calculation I would need 170000 dollars to cover that expense at 4 percent. But like I said it only cost me sixty six thousand to pay it in one fell swoop. So that's well less than half. So again from a real life perspective having to cut a check for sixty six thousand dollars for something that is essentially worthless. Kind of sucks obviously. But from a FI perspective this is as big a slam dunk as you can come up with.
692 - 761 Jonathan Mendonsa Well there's actually something else that comes to my head as you're saying that and that is the retirement smile which we haven't talked about on the show but it's a well documented fact that people after retirement and I'll be honest are talking more about traditional retirement but I think we can take a piece of that and apply it to the early retiree as well that your expenses instead of inflating after retirement and a lot of cases they're going to go down because they're going to they're going to be a lot of things that you were paying for along the way that disappear and so you know you could play this out you had a car payment at one point that goes away. You had a home payment you paid off your home that goes away. You are commuting to work. And the cost for commuting to work that goes way maybe you had three cars for whatever reason and you downsize to two cars or to one car that is going to decrease and so a lot of people are planning you know the 4 percent rule they're actually thinking that this number that they need to come up with is 25 times their current expenses. And that's great. I think you should plan around that. But in many cases that might actually be significantly more than you need because a lot of these kind of fix structural expenses that you've had for a long period of time. At some point they just disappear. And that's kind of cool that's what you're actually taking advantage of from a psychology perspective in this situation right.
commuting
761 - 789 Brad Barrett Yeah I think you're absolutely right. And also just the real world implication of getting rid of a monthly payment. As you inch closer to whatever type of retirement you want to talk about. So I think that's why there is that allure also of paying off our real mortgage and I don't know if if we're going to do that I think we've said many times previously. Laura and I kind of go back and forth on this and we can't figure out precisely what we want to do but I mean the allure of not having to pay a mortgage is pretty significant.
789 - 810 Jonathan Mendonsa I think there is like a tiny part of you that would like to compete with Mr. Money Mustache for a year on lowest annual expenses like the most simple line item budget you could ever possibly imagine. Really hard to do that when you're carrying on the mortgage even if you could afford to pay it off so that competitive edge. That's I think baked into both of us to some degree definitely sees the appeal of that.
810 - 931 Brad Barrett Yeah totally agree. Jonathan just one other kind of interesting thing that's going on in my life. We love to talk about second generation fire. Right. So I think getting my kids involved in financial literacy and just being aware of where their money is what's saving actually means is really important to our family. So I mentioned previously that what we do with their weekly allowance is that they have three buckets and their actual tangible buckets. OK. So one is saving. One is spending and one is charity. I think it's 50 percent goes to saving and then I think it's 25 25 goes to spending and charity. So it really sets the tone that saving is essential. But also charity is really important as well. And of course you need to spend. So I think it's kind of a good structure by the girls over the last. I'm not sure x number of months or a year or whatever. They've they've saved up a decent bit of money and they have this big wad of cash basically in each of their savings targets so it was the day this past Saturday that we decided to actually go down to our local Wells Fargo branch and deposit the money. And it was it was really a fun experience. I mean we went as a family the four of us waltz in on a Saturday and this is odd but I go into that branch somewhat often so the people know know us there and they welcome the girls with open arms. It was just like this fun experience. The girls got to hand over this big wad of cash. And like say specifically it's 151 dollars and 20 cents for for Molly and I think and deposit it like 337. Of course of course she did. She actually she was amazing. She asked us if it would be ok if she took money out of her spending bucket to put into her savings to put into the bank. How long did I have to think about that. Oh about a nanosecond. And yeah that went over perfectly.
2ndgenfi, families, savings
931 - 935 Jonathan Mendonsa So I'm seeing your face lighting up.
935 - 959 Brad Barrett Yeah it was amazing. And they just had so much fun and Molly so Molly handed over 151 dollars when she counted when the teller candidate she came up with 152 and Malia's like no no no it's 151. Then she went back and put the money through one of those made accounting machines and lo and behold there was 151. So of course six year old Mouly was correct with her precision counting. It was hilarious. Very nice.
959 - 966 Jonathan Mendonsa Congratulations to the family excited that Wells Fargo was able to participate with you in the second generation FI story.
2ndgenfi, families
966 - 1016 Brad Barrett Yeah yeah. No it's cool. And then one last little thing that sorry is that we did it from inception all the way to the finish. So we deposited that money and they actually had a buildup of a little bit in their wells fargo accounts. Then we went on the computer transferred it over to Vanguard and then bought more of the total stock market index fund. So it was really neat for them to see how much their money has grown being in Vanguard the last year in change and also to actually purchase more mutual funds so it was this cool thing from actual cash to going to the bank to deposit to transferring to Vanguard to buying as I described to them a little piece of these thousands of companies and it was like it was just this cool cool lesson and it's neat and is inching very close to the 10000 dollar mark for VTSAX.
indexfunds, stocks
1016 - 1020 Jonathan Mendonsa Are you serious. That's insane.
1020 - 1038 Brad Barrett Yeah it's crazy. I mean like these girls are I guess in some weird way like wealthier than than many adults in America which is kind of crazy just because we've been very intentional about every dollar they've ever gotten for gifts or birthdays or anything is just going directly into their savings. So yes it's pretty neat.
savings
1038 - 1041 Jonathan Mendonsa And it started with two tangible buckets.
1041 - 1043 Brad Barrett Yeah. Got to love it.
1043 - 1057 Jonathan Mendonsa awesome and congratulations I know how exciting that is. I can't wait. Like continue to follow this. I mean imagine what this looks like five years now for both of them. You know the compounding returns on this. This is going to be an absolutely incredible just to follow their journey.
1057 - 1070 Brad Barrett Yeah and we definitely will. We'll keep everyone updated here. And I really think that Anna's interested in writing that second generation fire blog that you that you talked about I think it's something that that's getting her excited. So yeah we got to make that happen in the near future.
2ndgenfi
1070 - 1118 Jonathan Mendonsa I am 100 percent supportive of that idea. OK Brad well let's go and hop into this past week's episode with Travis. And you know this is one of those that it's going to take a while to sift through all of those actionable points and kind of talk about our take on that. And this is one that's going to take awhile just because there were so many actual points buried in this particular episode. I was impressed with his ownership as a high school or even his ownership of what college was going to look like for him and all the little things that he did along the way to grab a full merit scholarship and really how that propelled him into all of the steps he made post college I mean you can kind of see how it was this linear process and it started with knowing that his parents couldn't afford to send him to college this desperation drove everything.
1118 - 1197 Brad Barrett Yeah Jonathan he described the sense of desperation where he absolutely needed and that was the word he needed to do this to make it easier on his family and to help his brothers go to college. That is a theme that we'll see again certainly when he talks about his wife who at that point his future wife. And it's amazing that that theme runs throughout his life that he finds these points where he just absolutely needs to do something. And he makes it happen. That takes a very special person. So again like I said in the episode I was impressed that at 17 years old he had the fortitude and the awareness to do that and to turn down what it sounds like every single college in the country except he got oh poor him got waitlisted at Harvard right. Other than that he got into essentially any college in the United States and he wound up going on a full merit scholarship to his state university and then it was also pretty amazing that he got those four international trips through our college and then came out with a net worth of 40 to 50 thousand dollars. I mean that just sets you up for life well beyond anything that Yale or Princeton or Brown could ever do for you. Right. You coming out with no student loans obviously and a net worth of fifty thousand dollars.
college, scholarship
1197 - 1305 Jonathan Mendonsa Yeah and he made this great point about a study that was done in the statistic that was drawn from that basically saying that when you looked at success from college grads and there being another study that basically said people that went to these really prestigious colleges were going to make more earn more. This study that he was highlighting basically pointed out that that may have been a false positive. Basically what it was is are you the type of person that would apply to those types of colleges. Not you don't even need to get in. You don't even need to go there. But just by being willing to apply said something about your earning potential and so obviously you know there are people that have those same qualities that don't apply. And I have to think to myself well what are those. And I think it is it is that initiative. It's that desperation. It's a forward thinking it's that taking ownership of your life strategy not just letting life happen to you but believing that you can have an impact on the result. And I don't know. I think it comes through. I think there's a common theme when I'm talking to these really highly motivated high powered individuals that just crushed the college game. How passive I was at it and even now in my 30s looking back you know 12 years ago 13 14 years ago how I still don't feel totally confident in my ability to totally crush the game and I'm kind of still looking for that roadmap. So if I were going to give advice to my child or I'm in a random conversation with a neighbor and they're talking about what they're trying to do for their kids I could actually give them good information that would help them you know kind of move this ship forward and get better results. What's up pareto's principle that 80 20. When it comes to winning at this college game I think it's very daunting because there's so much you can do. But what do you need to do.
college, college-loans, families, networth, scholarship
1305 - 1400 Brad Barrett Yeah it's a tough question. It really ends and I mean we've taken it basically as a societal construct that a four year college degree is important or essential right. That's to this point. What what people believe. So until that changes dramatically I think unfortunately I know like in my case my kids are in all likelihood and probably ninety five to ninety nine percent going to go to a four year college. So the question is how do you do that intelligently. And like you say kind of crushed the game or winning the game whatever you want to call it. I have started planting the seed. I know just like with my daughter Anna about talking about college and how she could potentially get a scholarship and go for zero dollars and like that of course to her that lights her up you know because she as we've discussed many many times she loves saving money and and loves the idea of becoming wealthy and to her. When I told her that a regular college a private university is going to cost 250000 dollars or if she's really smart and works really really hard that she could potentially get a full scholarship. Zero dollars to many other schools in the country that are probably just as good. And you're going to get as good an education when you again when you work hard. And that's something that we always try to really really address. Is that working hard. That's something that right now at ten years old is something that interests her and you just never know where the next eight years are going to take us. But I'm definitely trying right now to make her see that this is something that's doable.
college, savings, scholarship
1400 - 1426 Jonathan Mendonsa Before we even get into the PSLF and the repay strategies and all of the programs that are out there. I thought that maybe we could spend a little bit of time talking about college strategies like what are the tools that we have right now if you are going to give advice to someone that in the next two years is applying to college. Of all the episodes that we've done up to this point what should we be talking about and cementing as really solid firm strategies. Do you want to go and tackle this now.
college
1426 - 1488 Brad Barrett Yeah that sounds good. I mean the one that jumps out to me is two years at a community college and then two years to finish your degree at a full four year university as how we'd call it. So that is one that is not like societally normal if you will. And I hate to use that word but if you can say hey this is a strategy to basically get my first two years for almost free right cause community colleges cost a tiny tiny tiny little fraction of even a regular state university. Then you can cut your college costs in half. Just right there without doing anything else. This is not even going for scholarships or anything of the sort. It's just. All right. Can I get all my basically my prerequisites out of the way the first two years and then transfer in a four year university and get my degree and nobody will know any different right. And Jonathan you kind of sprung it on us that you did this and I had no idea. I just assumed you went to Virginia Tech for four years.
college, scholarship
1488 - 1630 Jonathan Mendonsa Yeah this is really valuable. Do you feel strongly about this just because as soon as you have that first job it just doesn't matter anymore in fact in fact it wasn't even that I was hiding it. I just forgot that it just this was so long ago now that it's just why doesn't everybody do this. You know my my identity is more than the place that I spent the last four years. This was a check the box for me to go to the next thing. I just don't place any sort of societal weight on where I did the first two years of school so. And you're talking about doing it for 10 percent of the cost of a four year college doing all four years there so it's a great great strategy. I do have a couple of tips. If you are going to do that one is that not every class at your community college is weighted evenly. You cannot just go take anything and expect it to transfer in fact if you're going to take this more mercenary approach to the four year plan you're going to do the first two years at community college. You need to go speak to the guidance counselor at the community college and you also need to look very specifically at the program that you want to transfer into at the four year school and you need to make sure that all the classes that you take at the Community College will transfer over in my case again following this kind of falling into the right path but not really being super intentional about it. I think I had about 15 to 17 credits. I just took because maybe they just seemed easy. They fit the time schedule that I wanted and they did not transfer and that was devastating you know every single class you take at community college you need to be taken with the intention that it's going to transfer to the four year school if that's your plan you need to be thinking about that ahead of time. Two other options they're kind of tied to this is Kleppe testing an AP placement classes at your high school. So AP classes and dual enrollment classes while you're in high school you could potentially get some of those community college credits done. So you're actually even moving the timeline up even further or potentially getting a semester or two of work done which normally you would be doing after high school. Now you can actually do them during your senior year of high school and get credit for both. That is incredible. Another one is CLEP test. I tested out of a couple classes again by accident without really knowing that that was a strategy. There are people that are testing out of essentially one two or three years of college just by focusing on Kleppe testing as a strategy. That's something that we haven't talked about on the show. That again is incredible and it's a tool in your toolbox you don't necessarily need to do all of these but if you're going to want to college you're going to have to do something right. Right. That's a common theme.
clep, college, dual-enrollment
1630 - 1674 Brad Barrett Yeah. Get up off the couch and take action right. Do something that's a theme of being a member of the Choose FI community. Being a fire Walker as we call ourselves. And I think in line with that is looking for small scholarships. Right we've had multiple people describe how they just took a couple hours and it was the best return on investment they've ever had in their entire lives. I mean potentially thousands of dollars per hour invested and look for these little small community scholarships that exist in your own community metro area or even the country and just apply for them. I know I was loosely aware of these when I was a 17 year old kid. But I think I applied for zero precisely zero of these scholarships.
scholarship
1674 - 1675 Jonathan Mendonsa You were so ambitious.
1675 - 1768 Brad Barrett I was such a moron. I wish I could go back and just slap myself across the face and like say just wake up and figure something out like I thought I was doing well by not going to the super expensive Ivy League school and going to the University of Richmond where I wound up getting a partial scholarship. It was still it was almost like how Travis described Vanderbilt gave him a 20000 dollar a year scholarship. But lo and behold there was still 25000 a year. Right so that wasn't as big a win as he would have imagined and it certainly wasn't as big a win as I imagined in my mind's eye. And that I did. So yeah I mean I was not ambitious at all. But I think for people out there who are willing to get off the couch and take action those little scholarships just make a huge difference. And then obviously we can talk about larger scholarships right and finding little programs like Travis said the University of Alabama I think he was if you were a National Merit Scholarship semifinalist which basically is I said earlier said was when I was back in the day it was the PSAT is what determine national merit semi finalists and finalists. So if you basically did well on that one particular test you could get a full ride scholarship to the University of Alabama and assuredly they are not the only university in the country that has some weird little program about that. Right. If you scored x on the ACT or theS.A.T. or you were an AP Scholar of some distinction I'm sure you can get a full ride somewhere just for that and it doesn't stop there. Right.
scholarship
1768 - 1929 Jonathan Mendonsa Yeah absolutely. In fact there is major scholarship programs especially in a lot of the states that use that have the lottery available to them sit down in Florida. They have the bright future scholarship in Georgia and Tennessee I believe it's called the HOPE scholarship. It's all essentially a very similar program that reallocates some of the lottery money from those states and we'll give them to students. And I believe it's in the form of a full ride scholarship if you have a three point five GPA or higher. And again actually this goes to Traviss point. What are you bringing to the school. Are you raising the average GPA of the school that's essentially what these are. If you're at that 3 5 or over then probably you're going to lift the average GPA of that school which is actually adding value to the school. And there are programs in place to actually support that. So if you're in one of these states that I just mentioned those are the names of them. If you're not I'm sure that there is something similar and many states that you could very easily google and find out about. If that's not available you know one of these major overarching lottery type programs. Now you want to go and you want to find out about the more niche scholarships that maybe you haven't heard about up to this point and that actually could be to your advantage as well because a lot of people are like me they're just not looking for. They're like Brad they have no ambition to to pursue scholarships so there is apparently billions of scholarship dollars that go unclaimed every single year just because people don't know about that. We want to hopefully give you the information so you can find it more quickly. We've got to comment on this episode Episode 78 that we were referencing from Gretchen. She says I'm listening to Monday's podcast right now. And you asked if there was a place where a college scholarship information is aggregated. I'm a mom of two recent college grads and the most accurate up to date info I found on everything college related is College Confidential dot. They cover everything from scholarships to admissions to financial aid to dorm life. When I was starting to think about colleges in the late 90s and graduated in the early 2000s it was a book you would buy a book of scholarships. It was a meaty fifty pound book and you would open it up. I did. I think I bought it Hughes and it was probably two years out of date. I opened it and then I promptly ignored it because it was just ridiculous. There is no way that I was going to be the one that was going to get these scholarships and figure it out it was just it was just too much. So I would not send you to go buy this one perfect book that's going to give you access to it. Obviously the way to do this to get the most live information would be to have some sort of crowdsourced website where people are sharing these ideas and then talking about impractically practically. I would at least right now based on the information I have available say go check out College Confidential dotcom.
college, scholarship
1929 - 1959 Brad Barrett Yeah that sounds good and you also talked about crowdsourcing right. So this is another thing that could be really useful for local groups. There's so much institutional knowledge just in a local group of hundreds of people. So I think that is probably a useful thing to just start as a thread in a local group and make it a document. So of course as we've said many many times we have over 150 choose FI local groups throughout the world and you can find your closest one choose fi dot com forward slash local.
localgroups
1959 - 2074 Jonathan Mendonsa And we can all think as we think about the last 60 70 episodes we've done we can think of people that highlighted different paths a few ones that come to mind. We had Noah talk about the Caddy scholarship that was amazingly awesome. We had another Noah from Georgia and Noah's are really good at the scholarship game. He highlighted this firefighter scholarship program that was really incredible and then Gwynn highlighted doing the rotci and basically joining the armed forces and using that path as a way to get college for free. And I know that there are so many more and we don't want to stop this conversation even though you can find them online even though you can google them. There is a benefit to us making this public knowledge on this show so that people can share these ideas with someone that can benefit from these alternate paths. Let's think a little bit differently together. Brad let's go ahead and move into actually a little bit more on Travis's story and let's go. I mean honestly at this point we should probably go ahead and pivot and talk about the program so we have spent the first half of the show talking about avoiding it. I think it is very obvious if you listen to our show long enough that's where our heart is on this how can we help you avoid the student loan fiasco altogether and do it by just being willing to look at things a little bit differently. That is where I would want to put all my emphasis. But you know what you found us now you didn't find us 10 years ago and there are many people in this audience that have six figures of student loan debt. And in fact in the month of March I think we mentioned this earlier. Our community as a whole paid off over two hundred thousand dollars in student loan debt and recorded it on Robert the college investors challenge. The Student Loan Debt movement and that was incredibly empowering but it really that is just that is just an indicator of how much student loan debt is actually out there and honestly wasn't represented by this. There are probably hundreds of thousands if not millions of dollars of student loan debt in our community. This episode spoke directly to that.
college, college-loans, debt, firefighter, scholarship
2074 - 2120 Brad Barrett Yeah. And obviously you are a perfect case in point. I'm someone who had student loan debt. If you had found this message this message and choose FI. 10 years ago 15 years ago maybe you would be in a different position. So everyone makes life choices makes quote mistakes. If you even want to call it that I'm not sure you would necessarily. But yeah. It's just finding where you are today and making the right decisions going forward. That's where we like to highlight. Of course if it's a situation like second generation fire where you can help your children or their friends kids or whoever make better decisions before they get into that situation then all the better. But you have to deal with the situation as you see it today. And yeah let's talk about the different options.
2ndgenfi, college-loans, debt
2120 - 2307 Jonathan Mendonsa Let's go and take a look at my own situation because I think that will add some context to how to sort through this because I don't think that I.B.R the income based repayment programs are right for everybody. This is a strategic play and it's one that could save you an incredible amount of money but it won't save everybody an incredible amount of money and it does come with its own risk. So I want to walk you through my decision tree on why I'm incredibly happy that I just went in guns blazing to pay it off absolutely as quickly as possible to start with let's say that I came out with all public loans and I have a hundred sixty eight thousand dollars in student loan debt. I have the ability to pay them off. So at this point the path really in some degree is going to be shaped by where you work. There's a couple of different types of IBR if you work in a non-profit. There are many nonprofits that will allow you to do one of these income based repayment programs. You work for 10 years and then at the end of the 10 years you are your loan balances forgiven and you don't owe the tax bill on that. That has an incredible incredible offer I have a friend that's doing this. He had more debt than I did. This is a no brainer for him. He's incredibly happy in this job. There's no shakeups coming in his near future likely if these programs were to go away at some point based on what Travis said he's going to be grandfathered through and he's paying a fraction of what he would've paid to try to pay them off more aggressively. His total loan. I mean he's basically when you look at this 10 year stint what he's going to pay. The fact that he's not going to owe a tax bill and the difference he's going to pay incredibly low interest. You know once you look back on the situation so I think that is an obvious play for him. But look at this for my situation Brad. That is a 10 year plan. If you're tied to this debt in 10 years and then maybe you lose your job you know forget about the government program going away you lose your job. The program goes away or you have to transfer out after eight years or maybe you think you're working towards this for three or four years and then you find out that for whatever reason the time that you had didn't qualify. I know individuals that thought that they were going to qualify for these programs. They took it as a granted and by the time they went in looked into it three or four years later they found out that those three to four years because they weren't getting enough hours that didn't count towards it. I mean that's kind of a risky play if you're basing where you're working around this type of strategy. Let's say that you decide to take kind of the lifestyle design approach that I took personally so I could I could not have made the choice to pursue this startup growing this business if I had six figures of student loan debt hanging around my neck. Even if I thought that down the road that was going to be forgiven because it's only forgiven if you're still there for 10 years you're trapped for that period of time. So for the early retiree the person that's thinking about potentially you know leaving the workforce or changing it changing what they're doing something that they're more passionate about and maybe a fixed point in time this kind of locks you in for this 10 to 20 years that you're on this particular path. Nothing wrong with that. But when you're figuring out how what strategy is going to be best for you. You certainly need to weigh in the freedom and flexibility that paying your student loans off aggressively gets you into that equation.
college-loans, debt, tax
2307 - 2357 Brad Barrett And that's a very good point. There's a lot of uncertainty here and it cuts down on options just like you would not have been able to leave your job as a full time pharmacist if you still had. Say 162 thousand dollars left of student loan debt if you were just paying the absolute minimum for those couple of years. Right. So I think there's definitely value in life on controlling what you can control. And I know just knowing my own mental framework that I would have a tough time basically relying for 10 years of my life on some program or like you said you're job existing or you staying in it etc for 10 years. So there are definitely considerations beyond just hey does this make sense financially. Right. Does it make sense. For my life is something that I would strongly consider and Brad.
debt
2357 - 2513 Jonathan Mendonsa This is really you know this is a topic that is front of mind right now for our country as there has been a lot of attention driven towards this orthodontist Mike Marou who right now has a million dollars of student loan debt. The Wall Street Journal just recently did a piece on it and Travis did a case study on Mike Muros situation on his Web site as well which was a very interesting read. And frankly he the public has ripped this guy at large I mean he I think even saw a clip from Dave Ramsey on YouTube just calling this guy the most hated man in America and just an idiot. And while you know I certainly understand the points that a lot of his critics have made. I don't think that this is too far of a stretch you know as a society we have been sold a bill of goods that no matter how much debt you need to take on to get that dream job once you get that dream job it's all going to be OK you know and you have a dental school and this is one of the most expensive dental schools in the country that this is just what their tuition is. And this is a guy probably just from an entry level middle class family like us that's trying to get his family to a better place that says oh the best college accepted me just like we are talking about in the episode with Travis. I got into this fantastic college. All I have to do now is pay for it. I should just take out the student loans and get the job. And you know it's when you're like two or three years into this and you realize wow I have 300 400 500 thousand student loan debt and then you start running your interest calculation on that and you realize that your interest on this alone is more than a mortgage and you have no way of paying this back unless you get the job. It's almost too late. And so I don't think you know I don't think this was a smart financial move but I don't think this is a bad person and I don't think that this guy is in any more of an idiot than the rest of us. His just by the time he realized what a financial disaster this was going to be it was almost too late. So I know that the income based repayment programs have critics and probably rightfully so. I think the larger story is the crazy price of tuition for all of these programs. And honestly our government programs that will allow anybody to take out any amount of debt for any degree at any cost. Mike Meraux is just maybe an extreme example but the natural product of essentially what's happening which is enabling because the government will lend any amount for student loans. That means schools know that they can charge any amount in this cycle just gets perpetuated over and over again and there's really no incentive for colleges to reduce costs as long as people believe that they can take out any dollar amount necessary to go to school because the job will always justify it. And we know that simply not the case.
college, college-loans, debt, families, ramsey
2513 - 2587 Brad Barrett Yeah it's a very complex thing. And my first reaction is there's got to be some personal responsibility. I mean you take out according to Traviss article here a million sixty thousand dollars in student loan debt at an average interest rate probably around 7 for around seven point five percent and that is crazy. How. On what planet do you think. And that's a good idea even coming out as an orthodontist so I see that personal responsibility sign but I also see what you're saying. We've been sold a bill of goods that the dream job is worth any amount of debt and going to the dream college is worth any amount of money. So there are conflicting ideas here obviously and I'm a little conflicted. Personally I don't know where to come down on this. I certainly don't think this guy's an idiot by any means. I think it was a very poor choice to take out over a million dollars in student loans. I'm not sure on what planet that ever happens but I know it does happen right Travis said. He's consulting with a couple of people who have had over seven figures of student loan debt. And it's hard to even say that right like when you say Jonathan that you had six figures. It sounds crazy to me but seven figures. Could you imagine that.
college, college-loans, debt
2587 - 2598 Jonathan Mendonsa I know it's all the anchoring and he's making me sound frugal. Yeah I'm fantastic. He's basically free college was basically free.
college
2598 - 2622 Brad Barrett Yeah it's it's pretty crazy but you deal with the choices you have. And we're definitely going to link up Traviss article on the show notes and he talks through how he would consult with this orthodontist if he came to him and said hey Travis help me out. What are my options. And I think that's a neat kind of case study to to play through especially since like you said Jonathan it's so pertinent and timely in the public public eye here.
2622 - 2795 Jonathan Mendonsa Yes. Now we did not get Mike Marou to come on the podcast and give us you know kind of what action he is taking but we do have a case study for you guys. And while that was maybe a more extreme example and it's one that's kind of in the mainstream news this is probably much more reflective of the actual type of situation that people are grappling with. So this is from Carol and Carol says. Good afternoon gentlemen. First and foremost I'd like to thank you for the content you put out. You've truly transform my way of thinking and enlighten my mind with the necessary tools to create a better future for my family. I'm new to the fi community and taking steps to lower our debt. The most painful Bill I'm currently trying to tackle is my wife's student loans. Although it's not a hefty amount as others may have it's still forty three thousand dollars. Our income is pretty stable and will continue to be so for the next few years until we decide to start a family. Now this leads me into my questions my wife student loans are on an income based repayment plan with forgiveness backed by the federal government. I am in the military therefore we move around a lot so unfortunately her opportunity to get a high paying job for a short period of time is unlikely keeping her payments rather steady. Therefore it's safe to assume that our current payment of forty four dollars and 83 cents is going to stay that way for the life of the loan which is 144 months. That is a total repayment of six thousand four hundred fifty five dollars and the rest is forgiven at this point you might be asking why is this guy even asking for advice. This sounded a little too good to be true to me. After a little research I found out the forgiveness programs for college debt are really what they say they are except the year that your loan is forgiven the institution that lent either loans sends you a 10 '99 which basically turns our sixty five thousand dollar yearly taxable income into one hundred fifty five thousand dollar taxable income. Year 12 of the loan. Now I'm not entirely sure what the tax laws will be in 2030. But basing this off of next year's tax laws we will end up owing the federal government approximately 32000 dollars in federal taxes in the year 2030. I estimated this on two factors. First the compound interest on the loan will bring the loan up to nearly 90000 dollars by year 12 when it's forgiven. And secondly we would have to file our taxes married filing separate. Once we have a family in order for the loan holder on the loan to keep the monthly rate low. So my income won't be counted into the payment estimate. In the end we would have paid a total of 38 thousand four hundred fifty five dollars on a forty three thousand dollar loan. My question is is the risk worth it. The risk is they re-evaluate their income yearly and although her earning potential stays low. What if the laws change in the year 6. We now have to pay a compounded loan whose interest brought it up to sixty thousand dollars. Should I just go and pay it off and not even deal with the forgiveness. Thanks for taking the time to read this. And if it adds value please pass it on to your listeners. These forgiveness programs aren't always what they seem to be So Brad. This is a complex question that frankly based on my own experiences I am not capable of answering and I would imagine you would find yourself in a similar situation.
college-loans, debt, families, military, tax
2795 - 2798 Brad Barrett Yes I do not have any expertise.
2798 - 2807 Jonathan Mendonsa There is the cop out. Very nice. Fortunately we are not just reliant on our own experiences. Travis was happy to weigh in with his thoughts.
2807 - 3021 Travis Hey it's Travis from student loan planner or I'm calling in for the listener. Case study about the 43000 student loans. So this individual his wife has Debt its 43000 the income based repayment programs are giving them an artificially low payment of about 40 something dollars a month and they are absolutely right. And if we file taxes jointly their payments will go up and the question about getting no tax on the forgiven amount. So and generally for somebody in this case I would ask you know do they have a debt to income ratio just for their student loans or federal student loans over 2 to 1. So do they owe more than double their household income. If they do not then I would ask the second question does this person work at a not for profit or government employer and are they going to have 10 years and the person that renter said here is the wife the wife has to be the one that works for 10 years at a non profit or government employer fulltime. Doesn't sound like that's in the cards in this case. So for somebody who probably makes more than I'm going to guess 50000 as household debt to income ratio would actually be below 1. So yes this person is temporarily benefiting from artificially low state loan payments that will go higher. And I think that there was some confusing things that I'd want to get more details from the person if I could ask them in a submission. But overall I would say this person needs to just tighten the belt dedicate at least 500 hours a month towards this forty three thousand dollars state alone and probably even more than that. Preferably maybe a thousand or more a month with the idea of getting these loans out of mind. You know out of sight and paid off within five years or less because they want to start a family. They've got all these things going on. If you live a lifestyle that's going to lead to financial independence you being able to cut back and you'll have a really high savings rate anyway. So it makes sense to apply that to the debt in your life so that you don't have these monster payments that are hanging over your head. So in this case I definitely think that it would probably better just to get rid of debt and just maybe try to refinance Guaranies lenders that will give a smaller interest rate. The husband is going to have to co-sign for the wife since she doesn't have a high stable income so he should probably be able to co-sign for her so they can get a lower interest rates and more of their payments are going to principal so I would do that. The reality is that whenever you have student loans the interest is often simple interest instead of compound interest because the federal government programs they just accrue the interest they don't compound it. So the reader in their explanation as a little bit off on their understanding of these forgiveness programs and the old lot of money if you owe more than double your income then regardless of what sector you're in these income based repayment programs can be excellent ways to achieve financial independence. You just have to figure out you know do you want to go as low as possible paying your loans back. Or as aggressive as possible payday loans back. You have to decide which one of those it is and if you're doing the passive approach and going for the government programs you better make darn sure that you're optimizing them in the best way possible. And if you want to pay the loans back. Don't screw around to put it nicely and pay you know. Maybe you know a lot of 15 to 25 year type repayment schedule. Get serious about it get rid of this debt. Make it an emergency and really anywhere in between those two approaches is a mistake. So it sounds like the listener is really falling into that category of making a lot of mistakes and paying too much in interest. So get rich get off the income based repayment programs cut your spending and try to dedicate that cuts towards your higher debt payments.
college-loans, debt, families, savings, tax
3021 - 3028 Jonathan Mendonsa Travis I can't thank you enough for weighing in on this. That is incredibly valuable and we love having you participate in these conversations.
3028 - 3036 Brad Barrett Yeah that's why having experts are useful right Jonathan. So yeah I've loved Travis called in that voice mail. It was really Value-Added. So thank you again.
3036 - 3082 Jonathan Mendonsa For those of you that are wondering like how can I generate these calculations. I don't even know what factors I should be considering. Travis has set up a calculator to really make this incredibly simple and in light of that we're going to go ahead and link to it again in the shownotes. But to get access to that calculator you can just go to choose FI dot com slash Travis. He's giving that away for free. And also this is something that he is incredibly passionate about you know if you have questions he is very accessible reach out to him. I'm sure that he would love to talk to you. And you know talking about crowdsourcing personal finance. Brad this is one of the parts of the show that I love is really bringing in thoughts feedback and ideas from our community. And this facebook group that is quickly exceeding 20000 people in the Facebook group how unbelievable is that.
3082 - 3142 Brad Barrett Yeah it's really hard to believe. I mean 20000 is a number we're going to pass any day now. That is amazing to consider that we basically started this thing less than a year ago on the Facebook group and 20000 members so yeah we're going to certainly highlight a lot more posts each week on the Friday roundup from members of our community. I think that's really important. And a couple of it just jumped out to me like just with a quick glance was Kevin said this actually was not his receipt but he got one of those cool receipts from the library where. And you know of course choose FI Friends of the librarians you always like to say this receipt says you just saved hundred and twelve dollars and 89 cents by using your library. You have saved fourteen hundred and thirty dollars this past year. Thank you. How cool is that. That like their local library actually has that little that little ticket. Whenever you check out a book I would love to see what my family is up to it's got to be thousands of dollars. I mean literally thousands.
library
3142 - 3144 Jonathan Mendonsa You better believe it. You guys need to get larger tote bags.
3144 - 3185 Brad Barrett Seriously. Yeah we walk out of there with like 20 bucks and yeah the other one that jumped out to me was Carrie said I finally broke two hundred thousand dollars in net worth. And Adam then chimed in. GRATZ I just hit 170000 for the first time today. So yeah just too nice amazing milestones and for sure we want to talk about these milestones like it's said every single week here on the Friday roundup. So if you want to send in a voicemail just go to choose or find our com slash voicemail or if you just want to post in the Facebook group. Go for it. And we'd love to read some of these amazing amazing milestones. So yeah just wanted to point out a big contrast to Adam and Carrie.
networth
3185 - 3253 Jonathan Mendonsa You know it's not just a six figure net worth. Chad posted his you know where he is at now and he for the first time in his life has ten thousand dollars in an investment account. He's still working through his student loan debt still has 24000 dollars in student loan debt that he's working on paying off. But you know it's these little moves and he's been so focused on it and he is really rapidly moving towards an incredibly strong financial position. And I think there's a lot of people that you know maybe see a million dollars in net worth or six figures and net worth and say oh wow you know that that just seems like forever away. But the reality is the farther you get down this path the aggregation of these marginal gains starts propelling you towards this future starts helping you it starts helping you build this wealth snowball. And so you know the key is not to say Oh well I will never be a millionaire so I should not even get started. But it's to say what change can I make today to put myself and put my family in a better financial situation than I was yesterday. And let's keep making those choices. Let's do this over and over again. And then a year from now two years from now five years from now your tenure or future self will not recognize the place that you were in before.
college-loans, debt, networth
3253 - 3288 Brad Barrett Yeah there's no doubt it's just making those changes. And of course like you said it's not about the six figure net worth or the seven figure net worth. It's just about making your own life better today and every tomorrow thereafter. Right. So if that means getting out of debt or hey I paid a thousand dollars of my debt now and I'm only fifty thousand dollars in debt as opposed to 51000. Well that's a huge win as far as I'm concerned. So please don't think this is only about those that have reached six figures and net worth. It's about just making your life better.
debt, networth
3288 - 3299 Jonathan Mendonsa And you know we cannot finish this I've said without talking about just taking a few minutes and talking about the digital dialogue with NBC 12 here in Richmond this past week. What an experience. Brad Yeah.
3299 - 3327 Brad Barrett Jonathan it was amazing. We had an absolute blast. We were just welcomed with open arms there at NBC. And my friend Andrew Friedman who I know from our local crossfit gym that I go to he was the one who actually did the interview with us which was a ton of fun also because he's a listener of choose fi that's a neat thing. And yeah it was about a 30 minute interview and it just went really really well. I mean you and I just had a blast right.
fitness
3327 - 3379 Jonathan Mendonsa I don't think financial independence as a whole or the financial infinites retire early community has had to this point a more friendly and engaged interviewed than the one that just happened this past week. Andrew gets it. He was fascinated by the topic he was asking the right questions. He just wanted to understand and show this this life optimization strategy share with the people that have been following NBC 12 for probably decades at this point. And I believe based on the statistics that I had seen that this is their most watched digital dialogue ever. I mean this thing is taking off and I can tell you that forget it being a local Richmond story this is a video clip segment that I want to share with anybody that is just wondering what is financial independence what is this about. It was an incredibly easy to follow and engaging friendly interview and a great introduction to the world of Fi.
3379 - 3412 Brad Barrett Yeah Jonathan we set up a short link at choose FI.com forward slash NBC. That's a perfect spot to watch it yourself a kind of cool maybe to put a face to the voice here that you've been listening to for such a long time and to share it. I think it's a really good introduction for the fi community generally and in addition as we always say podcast episodes 38 and 21 but this might be might be right up there because many people frankly don't listen to podcasts right. So sending them a link to a Facebook Livestream is kind of cool.
3412 - 3470 Jonathan Mendonsa I love this as Gateway content. I think this is foundational content for anybody that just wants to quickly get a hit of what financial independence is all about. It is eminently shareable so please please share it with somebody that you've been trying to explain the why of fight to have them go. Take a look at this. All right guys unfortunately that is going to bring this episode to a close now. As you know we'd like to finish every episode by doing a drawing for a copy of a book that we have found useful and there's three books that we offer the first book is JL Collins book the simple path to wealth. The second book is Dominic porticoes book design your future and the third book is Vincent Puglisi freelance to freedom. If you want to enter this drawing all you need to do just go to choose FI dot com slash iTunes follow the written instructions there and leave us a short written review and then send us an email to feedback at Choose FI.com letting us know that you've left a review and what screen name you left it under we give away one book for every five written reviews that we get and we announce a winner on the Friday roundup and Brad how many winners do we have today.
3470 - 3506 Brad Barrett All right Jonathan we have two winners today and the first winner is Meg. And Meg actually blogs at the Web site. Big small choices dot com. And she said too fun to be learning this much. Brad and Jonathan provide an amazing amount of information but in a format that feels like you're just hanging out chatting they have me taking actions in my life. I would have scoffed at a year or two ago the guest the interview share inspiring stories and challenge the assumptions of the hosts and the community at large. I love the excitement the lack of dogma the actual missteps and the commitment to building community. Thanks guys. All right Jonathan.
testimonial
3506 - 3566 Jonathan Mendonsa The second winner is Louie Louie says this podcast is incredible the dynamic between these guys is so easy to listen to and they make complicated finance topics more palatable. I've been binge watching since March and I am almost out of runway. I'm not looking forward to patiently waiting weekly for two new episodes but I will I tell everyone I know that I love and wish I could retire early with me to check out the Why of Fi to start. As people start to get intrigued by what I'm doing why I have money and I'm happy and how on them and how I'm investing. I happily turn them onto our community and I think this podcast is an excellent resource. Keep up the good work Brad and Jonathan having this to listen to while riding my bike to work keeps me on fire for financial independence optional retirement and helps me spread the word. Thank you so much for starting and doing this gentleman. Well thank you Louis and thank you my friends for listening. The fire is spreading and will see you next time as we continue to go down the road less traveled.
Jonathan_Catchphrases, testimonial
3566 - 3576 Speaker You've been listening to chooseF.I. radio broadcast where we help middle class America build wealth. One life hack at a time.

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