The Beauty of the US – Everyone Has an Equal Chance


I was thinking the other day about what it would be like to go out on your own, a few hundred dollars in your pocket, and try to make it in the world.  Thinking about trying to find a place to live, find a job, buy clothes, food, and other necessities.  One thought was that it would be difficult for someone who came from an impoverished background, with both parents on welfare because of medical conditions or lifestyle choices, to get a decent job because such an individual would not be able to get the education needed to move into better paying jobs.  It seemed like they would be at a great disadvantage to someone from an upper-class or middle-class background.

But then it occurred to me – those in the US whose parents are poor have an equal ability to pay for college, even at elite school, as those who come from wealthier backgrounds.  If anything, they are in better shape than the typical middle-class family.  How so?

Hey – if you like The Small Investor, help keep it going.  Buy a copy of SmallIvy Book of Investing: Book1: Investing to Grow Wealthy, buy one of the products shown, or just click on one of the product links and then browse and buy something else you need from Amazon’s huge collection.  The Small Investor will make a small commission each time you buy a product through one of our links.

There is an enormous amount of educational welfare available, coming from both the Federal Government and the schools themselves, that really make the ability to pay for school equal for all, or even to the advantage of those from poor backgrounds.  A student whose parents make $150,000 per year will probably pay something like $25,000 per year to go to Duke University or Harvard.  If that same student’s parents also had a couple of million dollars in the bank, even if they made $80,000 per year instead of $150,000 per year in salary, they would probably pay most of all of the $45,000 per year it costs to attend Duke or Harvard, including room and board.

Someone whose parents make nothing and have nothing saved up would pay nothing to go to those same schools.  They could go to a community college, a state school, or even an elite private university and pay nothing to do so!  Between the reductions or eliminations in tuition that these schools provide to students who show financial need and the grants given out by the federal government, which do not need to be paid back, students from poor backgrounds see little if any cost for going to college.  So there is really no financial reason for a student not being able to leave home and gain the education needed to make very good money in the US even if his/her parents didn’t make more than $10,000 per year their whole lives.

So the first lesson for those reading this article from poor backgrounds:

There is no financial reason that you cannot learn the skills to increase your income.

Now it is totally different for someone whose parents do make decent money, but are not willing to support their children financially for college.  In this case, the schools and the federal government will look at your parent’s wealth and income and expect them to support a portion of your educational costs based on what they could fund if they wanted to, even if they choose not to do so.  This is really unfortunate since there are parents out there who do cut their children off when they leave home even if the schools and the government expect them to provide support.  It is understandable from the school’s prospective, however, since if colleges just took your word for it, virtually everyone would not give any money to their children for college so that they could go for free.  (Boggles the mind to see that people who would never take charity for other things see nothing wrong with having others fund their children’s education when they could do so themselves, but apparently there’s no taboo when it comes to accepting college financial aid.)  So this is a lesson for parents of middle-class or upper-class background:

Your children will likely get little in terms of financial aid, regardless of whether or not you have saved up money for their college education, so start saving early and plan on footing at least part of the bill to keep them from being buried in student loans.

There are some ways out get out from under this cloud, including waiting until you are 23 or older to go to college, or getting married right out of high school.  Some of the other criteria for not needing to include your parent’s information on financial aid forms are listed here.  There are also a lot of scholarships out there that can help cover college costs that don’t require showing financial need.  These might be an option if you generally have good grades and have been involved in various activities to show you are well-rounded.

Want all the details on using Investing to grow financially Independent?  Try The SmallIvy Book of Investing.  

Now, there are other factors that keep children from impoverished families from going to college and raising their income.  Many don’t have good grades while they are in grade and high school, which is understandable if they have no one at home pushing them at all, or even have a home life that makes it difficult for them to perform well in school.  But again, there are still ways to make a better life for yourself than a series of dead-end, low-pay jobs.

Community colleges:  If you are able make it into a community college, which again could be free for you if you come from a poor family background, you have another chance to change your destiny.  If you concentrate on your studies and get good grades at a community college, many universities would then accept you into their schools.  If you are fortunate enough to get in, spend at least two hours per week doing homework and studying for your classes for every credit hour you are taking.  For example, someone taking 12 hours should be doing 24 hours of work outside of class, for a total of 36 hours per week.  Also, go to office hours for help if you don’t understand something, and spend time getting to know your professors since you will need them for references when you apply to the university.

Trades:  Jobs in the trades pay a lot of money.  If you can do electrical work, plumbing, carpentry, computer repairs, and other similar jobs, you can make a lot more than you will working in retail or at a fast food job.  Many jobs in these areas are earned through experience with a professional in the industry.  If you are willing to be a good worker, showing up on time, being willing to work hard and get the job done, and are willing to learn all that you can while you are on the job, you can get a job with a trade professional and learn what you need to eventually do work on your own.

A final issue for those from poor backgrounds is that their families may continue to drag them down.  Someone whose parents have serious drug or health issues may feel an obligation to take care of siblings still in the home or their parents after they leave the house.  Realize, however, that you can’t save someone from drowning if you yourself are barely keeping your head above water.  It can be better for you and for them if you work to get yourself on firm financial footing first and then help where possible instead of trying to support siblings and parents by working a low-pay job and giving them what you can.  You might also be preventing them from getting welfare because you cause the income of their household to be too high to qualify for food stamps and housing assistance.

While it is difficult, the best option may be to cut financial ties temporally and concentrate on getting through school and raising your income, and then helping them out.  Encouraging your siblings to do what they can, such as getting a job while still in high school and/or working hard at school to get the grades needed to qualify for college is also better than trying to support a family on a minimum wage salary.  Two, three, or four people can do more than a single person can do alone.  Remember that anyone who has health has substantial wealth, even if they have no money in their bank accounts.

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

How to Start Out on Your Own


My son, who is a junior in high school, asked me tonight if I could talk to a friend of his who was a senior and who was going to be leaving his house soon and start out on his own.  His friend didn’t know anything about personal finance and wasn’t sure how to get started.  My son wondered if I could give him some advice on money management and how to get set-up in the adult world.

That got me thinking.  Hopefully most children have some sort of help with the transition.  Maybe their parents help them get into their first apartment and then they start to pay their rent from a job.  Maybe they go off to college, which their parents help finance, and then they get a job before leaving school, or come back home for a month or two while they look for a job after college.

But what if you were a couple of months away from graduating high school, and your parents just said that once you graduate, you were on your own?  You just needed to leave home, maybe graduation night, and do whatever you could?  How would you prepare, and what would you do?

Hey – if you like The Small Investor, help keep it going.  Buy a copy of SmallIvy Book of Investing: Book1: Investing to Grow Wealthy, buy one of the products shown, or just click on one of the product links and then browse and buy something else you need from Amazon’s huge collection.  The Small Investor will make a small commission each time you buy a product through one of our links.

Hopefully you would have a little time.  Let’s say that you had three months to prepare.  Here are the things that I would do:

1.Look at the basics:  Food, shelter, clothing.

To survive, you would need to figure out how you could acquire the basics.  How would you get money for food, shelter, and clothing?  Food for one person would probably be about $200 per month if you planned to eat at home, cook your meals from basic ingredients, and rarely if ever eat out.  Shelter could be somewhere between $200 and $400 per month, depending on where you live, if you did things like rent with a roommate, rent a room in a house, or look for other ways to save money.  You therefore would need to make somewhere in the vicinity of $10,000 – $12,000 per year to pay for the bare necessities for yourself (no children here).

You might be able to get a job that includes shelter (and maybe even food) such as a nanny or live-in housekeeper.  You might also be able to cut your rent by helping your landlord take care of the place by helping with yard care and maintenance.  A little creativity goes a long way when you’re scraping by at the start of life.

2. Think about work.

To gain the money needed for food, shelter, and clothing, you would need to have a job.  To just cover your basic expenses, you really could make it with a full-time minimum wage job at the start.  While you might start out as a fairly basic job, you should use the first job (and the jobs after that until you land your dream job) to learn skills that will help you get a better job.  If you work in a fast food restaurant, use it to learn things like how a business runs, how to please customers, and how to deal with coworkers.  You should also be looking for whatever training your employer can provide since the more skills you have, the more money you can make.

3.  Save up a baby emergency fund.

You probably won’t be able to gather up a full emergency fund of $9,000-$12,000 with your first job, but at least work hard to save up a baby emergency fund of $1,000 or so.  That money will help with some things like a car repair, a short job loss, or a minor illness.  Ideally you should save this money up before you even leave the house.  If you can’t, save as much as you can from your job (and maybe a second job) to get there as soon as you can.

Want all the details on using Investing to grow financially Independent?  Try The SmallIvy Book of Investing.  

.4.  Figure out college or a trade school.

Even if you don’t have help from parents, you should look at college or training in a trade.  Luckily, if your parents do not make a lot of money, you will probably be able to go to school for free or nearly free through grants and financial aid.  This might involve a work-study program, but there is nothing wrong with working part-time in the school cafeteria in exchange for thousands of dollars in tuition being waved.  If your parents do make a lot of money, but simply cut you off, it will be a bit more difficult since the schools may still expect you to be able to get help with tuition from your parents.  Using community colleges, that cost a lot less, for the first couple of years and then transferring to a university to complete the degree might be a good way to keep costs down.

Also, if you’d rather work with your hands than sit at a keyboard all day, many trades pay as well or better than jobs for those with college degrees.  Electricians and plumbers can do very well, especially if you eventually start your own business, as do technicians, nurses aides, and other jobs that require an apprenticeship or a couple of years at a trade school.

5.  Move your way up the ladder.

College is one way to possibly increase your pay, but it is not the only way.  You make more money when you become more valuable and are able to serve more people.  If you have a special skill, are able to lead people, or are able to manage large projects, you can make more money.  Always be looking for ways to get additional training and experience through your work and other opportunities that present themselves.  Also always be looking for the next opportunity, either within your business or outside.

Realize that volunteer work can give you opportunities to learn new skills  You might not be able to get to lead a large project at work, but you’ll probably be able to organize charitable events such as food drives and can-ups since few people are wiling to step forward to do so.  You can also meet people you might not otherwise.  Some of the best people volunteer, including community leaders and small business owners who could be your net boss.

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Become a Lazy Investor


You don’t want to be a lazy worker since you’ll never see your income rise and you’ll be the first person laid off if you aren’t fired outright.  You don’t want to be a lazy spouse since it will hurt your marriage.  You don’t even want to be lazy when it comes to managing your money since you’ll waste all sorts of money buying stuff you won’t remember in a week.  One place where it is good to be lazy, however, is in investing.

Lazy investors don’t do anything very often.  They think about calling in an order to sell a stock that has gone way up in price, but then it is a week or two before they get around to it, so they only trade a couple of times per year.  They don’t feel like pouring through stock tables, so they pick a couple of mutual funds that cover the markets and just stick to them.  They use payroll deduction since they’re too lazy to send in a check each month.  They maybe check their account balance once a year, so they may actually miss a whole market crash and recovery (what great recession?).

Hey – if you like The Small Investor, help keep it going.  Buy a copy of SmallIvy Book of Investing: Book1: Investing to Grow Wealthy, buy one of the products shown, or just click on one of the product links and then browse and buy something else you need from Amazon’s huge collection.  The Small Investor will make a small commission each time you buy a product through one of our links.

Why does it pay to be lazy when it comes to investing?  It is because active traders do things that cause them to be bad investors.  They see the markets going up, so they put more money in just before it peaks and crashes.  They get scared in market crashes and sell just as stocks are hitting the bottom and starting to rally.  They go through their 401k account and shift out of the funds that have done poorly and into those that have done the best, buying those funds when they are high in price and selling the ones that are low in price right before they start to rally.  The next year they do exactly the same thing, trading back to the funds they owned before.  They watch CNBC and buy or sell stocks because some analysts tells them to, buying or selling with everyone else who saw that program and therefore getting a really bad price.


In the end they spend a lot in fees and make a lot of money for their brokers, and maybe get banned from trading by their mutual fund company, but they lag the returns of the markets.  They also create a lot of paperwork when they do their taxes since they need to account for each trade. So they do more work but get less done.

Want all the details on using Investing to grow financially Independent?  Try The SmallIvy Book of Investing.  

Be lazy and you’ll make all the right moves.  You’ll just own everything, instead of trying to choose, so you’ll always have your money in the stocks that are doing well at any given time.  You’ll rarely sell, so you won’t sell in a panic.  You won’t generate costs and tax paperwork by doing a lot of trades.  You won’t be stressed at night about what the stock market did that day because you’ll not even look at the markets.  Being lazy is great for an investor.

If you want to become a lazy investor and make more money, here’s a few tips:

1. Be lazy when selecting investments.  Instead of spending hours researching stocks, buy mutual funds.  And instead of spending hours pouring over mutual fund evaluations and reports, just buy the basics – an S&P500 fund, a Small Cap Fund, a Total Bond Market Fund, and a Total World International Index Fund.  Don’t have the money to buy all of these at once?  Just buy the Small Cap fund now, then add the others when you think of it later, maybe in a year or two.

2. Be lazy in your fund allocations.  Instead of trying to figure out which funds to buy based on what the talking heads are saying is going to be hot next year, just invest 25% in each fund.  Whenever you have money to invest, find the fund that is the lowest percentage of your portfolio and buy that one.

3. Be lazy when selling.  With mutual funds, unless you need the money within five years, don’t sell at all.  Just let your money ride.  If the market goes down, don’t sell.  If the market goes up, don’t sell.  Just lock it and leave it.  If you own any individual stocks, don’t sell them unless one becomes worth more than $50,000 or ten percent of your account, whichever is bigger.  If that happens, sell half, but not too quickly.  Otherwise, give time for the company to grow.

4.  Be lazy when sending in money.  Put your investments on auto-pay so that you don’t need to remember to send in money.  Just have it magically leave your checking account once or twice a month and go into your mutual funds.

5.  Be lazy when reading your statements.  Maybe open a statement once a year when you have nothing better to do, and then to mainly check and see if you’re getting hit with any fees.  So long as things are chugging along, don’t make any changes.

So there you have it.  Be active when it comes to exercise.  Be active when it comes to budgeting.  Be active at work and active with your kids.  But be lazy about investing, and you’ll do better than 90% of the other investors out there.

 

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.