How Much Should a College Student Be Spending on Living Expenses


 

Million DollarsCollege tuition is obviously a big part of the expense of college. but if you attend a state school or get a scholarship, living expenses will often be more than tuition expenses.  Part of the problem is that a lot of students spend a lot more than they really should, especially if they are borrowing the money on student loans.  Everything you borrow will need to be paid back with interest, and that loan balance can really add up quickly when you’re adding to it every year without feeling the pain of actually paying anything for it (yet).

Today I thought I’d look at the expenses that a typical college student has and what those expenses should be if you’re really trying to save and not start your life with a huge student loan balance.  Here’s what I found:

Rent: $400/mo or $4800/year

One of the biggest expenses is rent.  While you may be able to save a little money on rent by going home during the summer months, you’ll probably need to sign a yearly lease, so expect to spend money on rent during the summer as well.  Summer can also be a great time to take a couple of extra classes and increase the likelihood that you’ll graduate within four years, and since each year saved means a year saved on tuition and room and board, trying to get out fast is definitely a good strategy.

I think that most students should be able to get by with $400 in rent or less per month.  Note this may mean taking on roommates and/or getting creative if you choose a school in an expensive area.  Just remember that this is temporary and you’ll be able to get out into a better living arrangement in just a few short years.  Maybe also take a look at apartment prices when looking at colleges.  Don’t want to have 5 roommates?  Maybe San Francisco isn’t the city for you.  Looking further from campus might also be a good option since places near campus often fetch a premium (apartments are a lot cheaper just across the bay from San Francisco in Oakland, for example).  Another option to the standard apartment is to rent a room in a home instead of a full apartment (which can be great if you get to use the kitchen and other parts of the home as well).  Perhaps you can even get a special rate for helping out around the place or providing tutoring and some part-time nanny services for the family’s children.

Food: $200/mo or $2400/year

At $200 per month, assuming 90 meals, that’s a little over $2.20 per meal.  While this may not seem like much when compared to restaurant prices – even the fast food chains anymore – it is actually quite doable if you cook at home and are selective in what and how you cook.  Specifically:

  1. Learn to cook basic meals.  Cooking for yourself will cost a lot less than eating out or even buying TV dinners.  Avoid complex recipes that call for 50 ingredients and instead focus on learning to cook basic things like meats and vegetables by themselves.  You can also find many books with easy recipes and limited ingredients.  A basic cooking book (or an online version) like Betty Crocker or the Joy of Cooking is also a good way to learn cooking skills.
  2. Limit meat, making things like chili and stews that can be stretched with beans and potatoes and which use lesser cuts of meat.
  3. Make batches of things and then freeze portions.  This both saves time and allows you to save on food prices since buying more costs less per pound.
  4. Grow a container garden for some of your fresh produce (or see if you can start a small garden plot if you’re renting a room in a home).
  5. Use budget stretchers like rice, potatoes, and beans.  Each of these can be bought extremely cheaply but are filling.
  6. Avoid processed foods.  Not only does processing often add things you don’t want to your food like lots of salt, but it also adds costs.  Buy dry beans and rice, buy ingredients instead of pre-prepared meals that you heat up.  In general, the less that was done to the food before you buy it, the cheaper and better.

Insurance: $1500/year

Here I’m assuming your health insurance is part of your tuition or your parents are paying for it on their plan.  That leaves auto insurance, which might set you back $1500 per year because of your age.  You don’t need renter’s insurance – just don’t have anything in your place that is really valuable.  You also don’t need life insurance unless you have dependents.

Clothing: $100/mo or $1200 per year

Fashion should not be your concern when trying to get through college.  You can get the basics for about $100 per month, maybe asking for clothing as gifts around the holidays as well.  There is also nothing wrong with blood drive shirts and other “free clothing” you gather up.  Thrift stores are also great places to get some nice clothing if you head there often and learn when the new things come in.

Alcohol:  $20/mo or $240/yr

If you have student loans you have no reason to be buying $8 drinks or $4 beers in bars.  It is much cheaper to buy alcohol from the store.  You can also make wine for about $3 per bottle or less and beer for a quarter a bottle or less.  If you go out with friends, just stick to cokes or waters, maybe buying one beer.  Is this a sacrifice?  Yes, but that’s how you get out of college without a lot of student debt.

Gasoline:  $200/mo or $2400/yr

Assuming $40 per tank, $200 will allow you to fill up a little more than once per week.  If you’re living on or near campus, you may not even need that much.  This does not leave a lot of gas for cruising around town, but it is plenty to get back and forth from campus and make an occasional run to the store.   You can also cut your costs by riding a bike to school.

So really, that’s about it for expenses.  Adding them all up, you end up with about $12,000 per year in expenses.  It may not seem like a lot, but if you really cut back to the minimums, it is possible.  This isn’t how you’d want to live your whole life, but it is worth it to live this way for four or five years and graduate with maybe $25,000 in student loans instead of $100,000 or more.

Got an investing question? Please leave 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.

History Doesn’t Repeat, But Sometimes It Rhymes


boatdock2I had a long car trip, so I did as I frequently do on long trips and rented a book on CD from Cracker Barrel.  They have a system where you can rent at one location, then return the book to any location along the way.  I picture CDs crossing the country a little at a time.  Actually, since some of the books are 12 hours long or more, maybe they move rather rapidly.

This time I rented Playing with Fire, which turned out to be historical fiction about a Jewish family living in Italy who were sent to the death camps in Poland.  One brother, who played the violin, ended up being pressed into service playing in a small orchestra at a death camp in Northern Italy. The Commandant had the group play music all day long to drown out the noise from the executions and the screams coming from the crematorium from those who were not quite dead before being thrown into the ovens.  In the end, the members of the orchestra were killed and fed to the ovens as well before the Nazis fled to avoid capture.

While the characters were fictional, the book portrays real events that happened in Italy during 1942-1947.  Italy saw about 20% of the population of Jews killed during WW II.  In Germany and Poland, it was about 90%.  Of course everyone has heard about the horrors of that time and calling someone a Nazi is just about the worst thing you could call them.  And yet we fail to learn the lessons.

This has happened other times, although perhaps to different degrees.  In Russia, millions were killed by Stalin and other Soviet leaders after the violent Bolshevik revolution.  In Cambodia, the educated and literate were marched into the jungles and slaughtered.  I have no doubt that Hugo Chavez killed many of the farmers who refused to give up their land in Venezuela during the more recent take-over.  In all of these cases, while the Right is usually blamed for fascism, this was done by Socialists (note, the Nazis were the Socialist party in Germany).  Socialists who employ envy as a means to bring them to power and justify their actions.  Indeed, in Vietnam and North Korea the same thing has been done, although many times starvation has been used as the means of execution rather than a bullet or club.

Often when these events happen, people wonder how decent people could stand by and allow such brutality to happen.  And yet we see the stirrings of exactly the same thing in the United States today as we saw in Germany.  The speakers may be different, but the themes from Sanders, Warren, and others are the same.  In Germany Hitler vilified the Jews and convinced the population that they were the source of their problems.  Because the Jewish people have a culture of forming businesses and serving others, many of the shop owners, bankers, and business owners were Jewish.  They were also prominent as professors, engineers, and lawyers.  Because the Jews “controlled the means of production,” to borrow a phrase from Karl Marx, the Nazis were able to convince many of the other German citizens that their lives were miserable because the Jews were oppressing them, and that they should therefore take from the Jews and eventually kill them.  Hitler used envy to stir the population and turn them against their Jewish neighbors.  This envy turned to violence, as seen by the formation of the black shirts who would go and victimize the Jews even before the Nazis started marching them to the gas chambers.

Today we hear Bernie Sanders stoking the same envy when he talks about rich Wall Street bankers being the source of the troubles of the middle and lower class.  We also see race baiting by the President and others, causing blacks to turn against the police and whites in general.  Often envy turns to hate and violence.  We are also starting to see violence, including the execution of policemen, attacks on people at Donald Trump rallies, and riots in the street.    While some would have you believe these are just spontaneous protests and riots, these are actually planned events being lead by Socialists and anarchist groups who want to bring down the fabric of civil society and replace it with fascism and a culture in which the strong victimize the weak.  We could very well see another holocaust in the US, this time the target being Christians, whites, conservatives, or producers and business owners in general.

Even many of the “non-violent” protests show force being used by the Left as a tool to gain their goal.  While activities like blocking the road or breaking into a building may not be violent, they are using force to take things away from others, even it is their time.  No doubt these types of actions will lead to violence as tempers flare.

It is time for people to see this manipulation of people using envy for what it really is.  Envy goes beyond wanting what someone else has.  It is a belief that they should not have whatever it is, and it (and they) should therefore be destroyed.  It leads to the gas chambers in Poland and the killing fields in Cambodia.  It leads to unspeakable acts to which normally caring people turn a blind-eye.

Socialism is fundamentally evil.  It is founded upon the fundamentally evil idea that it is right to take what is not earned from another.  Evil only leads to pain and misery.  We have a unique capability in America to pull ourselves up by spending our time tending to the needs of others through our work and making fair trades for goods and services.  We need to choose another path than envy.

We need to call out this evil for what it is.  We need to talk about what has happened other times people who have turned neighbor against neighbor using envy have been allowed to rise to power.  We need to talk about our common humanity.   We need to show that people do not become wealthy in the US by victimizing others, but by serving them.  This path is open to all and leads to wealth and happiness.  I already see the black shirts coming out of the shadows to lay their abuse on others.  Are we going to turn away?

Got an investing question? Please send it 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.

What do you think?  Please leave a comment?

Contact me at vtsioriginal@yahoo.com

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.

A Simple Way to Invest in your IRA


Fountain

 

Before the 401k, there was the IRA.  The simple investment account that anyone who had earned income could use to save for retirement.  For many years contributions to IRAs were held at a paltry $2000, but about a decade ago they were raised to $5500 per year .  Put away $5500 for both yourself and your spouse into IRAs each year and you really start saving up a serious amount for retirement.

One good thing about IRAs is that they let you invest in virtually anything.  One issue, however, is that they let you invest in virtually anything.  For many people who really don’t understand investing this can be a serious issue.  They just don’t know how to invest the money, so they do something foolish like:

1) Leave it in a money market fund so they lose money to inflation each year.

2) Invest in a set of high cost mutual funds recommended by their broker.

3) Put it all into a single stock, leaving open the chance that they can lose it all.

4) Trade in and out of different stocks, racking up a lot of commissions for their brokers but making little money themselves.

For those who don’t want to fool around much with investing, here is a really simple strategy for investing in your IRA:

  1. If you are younger than 45, put half of your money into a large cap index fund such as an S&P500 ETF and half of your money into a small cap index fund such as the Vanguard Small Cap ETF.
  2. If you are between 45 and 55, shift 30% of your money into a bond/income fund, the leave 35% of your money in the large cap fund and 35% in the small cap fund.
  3. If you are between 55 and 60, put 50% of your money in a bond/income fund and split the other 50% between a large cap and a small cap ETF.
  4. Assuming you’re retiring at age 65, between age 60 and 65 start to sell off some of your assets to raise cash.  Figure out how much cash you’ll need from your IRA  each year in retirement and raise that much cash each year, placing it in a CD set to mature just before you’ll need the money.  If you’ll have another source of income and won’t need to tap into your IRA just yet, just stay fully invested in the half bond/half stock portfolio.

So there you have it – real simple but really effective.  This strategy keeps your fees low, gives you plenty of diversification, has you take more risk when you’re young and can afford to wait for the market to recover, and starts to get more conservative when you start to near retirement.  The only trick now is to stick to it and not let your emotions get the best of you.  The worst thing you can do is let your emotions drive you into making a mistake.

Your investing questions are wanted. Please leave them 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.

 

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