Value of Education at SIF and Money Funk

It’s not everyday I actually blog from my area of professional and academic expertise: education.  Today in cyberspace  you’ll find two of my posts about the costs and value of education:

A college education–more than an investment? here at SIF and

Private Education: Worth the Money? on Money Funk –a post that asks whether spending $8,000 a year (or more) on private education in k-12 is worth it .

If you’re new to SIF, welcome.  Please feel free to take part in the conversation on education . . .or any of the other recent topics here.  You can also subscribe to the RSS feed for automatic updates.

College Education: more than an investment?

Warning: personal opinions and biases regarding education follow!  I’m going to argue that education is more than a simple, financial investment.  In my case, it was one of the best frugal luxuries I’ve allowed myself.  I’m even going to argue that it can constitute a ‘good debt.‘  But I’ll do that later.  First, let’s see if we can agree on a few facts. . .

Investing in college: not a sure thing.

Do you see college as an investment on which you’re seeking a return?  If so, you’ll want to take a look at Is College Worth It? (Forbes.com).  In it, Rich Karlgaard situates the college education within the context of other  investments and explains why it may not be quite the investment we imagine it to be.

Asset classes–stocks, bonds, real estate, collectibles–are always competing with one another. Each clamors for our spare dollars. For periods we favor one asset class over others (e.g., stocks from 1982 to 2000). But when a collective judgment is reached that a particular asset class has been bid up too high, dollars are pulled and the asset class shrinks in value. Real estate may now be at that point. . . .

Do you suspect that this asset class–a four-year-college degree–might be overpriced? I do . . .

The entire article is well worth the read, however, to summarize:

• the price of a college education has skyrocketed
• high prices have resulted in students needing to take on debt to fund school
• the costs of an education (and the interest on the loan) necessarily reduce the return on your ‘college investment.’

College: a smart investment if your degree actually leads to a higher paying career.

And as we know, the financial return only comes about if the college grad actually finds employment at a higher rate of pay than he/she would have found without a college degree. If you’re looking for an excellent discussion of whether the costs of an education outweigh the benefits, I recommend this broadcast from NPR:  Is a College Education Worth the Debt? In it, Professor of Economics, Richard Vedder at Ohio University points towards some moments in which college is not the slam-dunk investment students imagine it to be:

Forty-five percent of people who go to college, four year colleges, don’t get a bachelors degree within six years. Those people often have met with disappointment and their investment isn’t particularly good, necessarily. Another group of people graduate from college and then have trouble getting jobs and end up taking jobs for which a college education is not really a prerequisite. Twelve percent of the male carriers in the United States today have college degrees. And I have nothing against male carriers with college degrees, but I don’t think it’s an absolute necessity to have a college degree to deliver the mail.

Some college investments have a higher return than others.

It seems we’ve awakened to the idea that a degree that will not automatically translate into  employment in a high-paying field that will allow you to pay of loans. I’m glad that as a society, we’ve been able to have this discussion!  Yes, the kind of degree matters.  So does your actual academic outcome and the actual experience (internships, research etc) you were able to glean during your University days.

But what if your goals in going to college are not financial?

I bet there won’t be much controversy surrounding the notion that the college ‘investment’ isn’t all it’s cracked up to be or on the notion that a college degree isn’t necessary for success. But there are other considerations in getting a college education.  What if, you want to be a more highly educated and informed person? That was certainly my own goal when I went to college.  

To me, the education was the end, not a means to an end, which means that the $12,000 I spent on my undergrad years was not exactly a financial investment–or at least not solely a financial investmentl! So what the heck was I thinking?  Well, basically, I spent $3,000 a year plus interest (which I paid back later) to have the opportunity to focus on my studies at a private University.  And I took advantage of the opportunity to do so by learning all I could, sampling a variety of classes and disciplines, schmoozing with my professors and other interesting people, researching in remote locations and gaining ideas and insights I’ve carried with me since.  It’s an experience that has shaped me and that can never be taken away.

Maybe education is simply the greatest luxury I’ve allowed myself. My biggest ’splurge.’  Would I have gone down such a path if the cost had been $100,000 in student loans?  Probably not.  But I would argue that four years of my life and $12,000 plus 3% interest for a few years was worth my time–regardless of the return on my investment (which incidentally turned out to be reasonable,although you certainly don’t need a college degree to earn a teacher’s salary).

Of course, attending college (and spending your time drinking beer) does not an educated person make. Many scrappy and motivated folks can educate themselves to a higher degree than someone who attends university without making the effort to learn.  That said, for the truly motivated student, having access to professors and a learning community can be an opportunity to grow in ways you simply can’t on your own–depending on your discipline.  I personally believe it helped me push myself farther, learn more and see perspectives I would have missed otherwise.

What say you?

Is a college education a good investment?  Is it more than that?  Is it wise to attend college and take out loans (like I did) just for the ‘joy of learning?’  Is it really that important to be an educated person?

Radical simplicity, frugality–for couples only?

Last week, in the discussion following the post, Risks you’d take to live your dream, Maus posed a question that deserved a post in its own right:

Patricia’s story, as well as that of Trisha’s here at SIF and Jacob’s at ERE, makes me wonder if living at the edge is easier (or at least easier to contemplate) if you have a spouse or partner. While I have no qualms about living a simple life, indeed I embrace it; I am held back by the prospect of loneliness or isolation, especially in the later stages of life. It is one reason that I remain rooted in outrageously expensive California. There are no (habitable) houses for $250 a year; but my family and friends are nearby. To me, the prospect of real hardship can only be borne with the knowledge that I can draw on the support of friends and family.

What do others think? Is the single versus coupled dichotomy a false one with respect to radical simplicity?

Couples, simplicity and frugality: practical considerations.

Simple, frugal--easier for couples?

Immediately after reading Maus’s comment my mind began to mull over all the ways in which I’ve found that living in a couple makes it easier. Financial advantages of living in a couple include shared lodging and entertainment.  Less tangible benefits such as moral support and companionship can make situations comfortable and happy when they would otherwise feel austere.  Should you fall on hard times, you (ideally) have a partner or spouse to help boost your morale or support you.

Honestly, though, how many people have you heard complaining on blogs and in real life that they would love to indulge in radical simplicity, if only their spouse or partner would agree? While I admit this is not my particular experience, it’s not difficult to find examples of people who feel that their husbands,wives, partners stop them from achieving the degree of minimalism they seek, from spending less or from ‘dropping out of the rat race.’

Sometimes couples support each other during hard times, but not always. I’ve also seen couples fight over reduced incomes, money troubles or simple discrepancies in how money should be spent.

Do radical simplicity, frugality and social isolation go hand in hand?

Maus seems to draw a link between simplicity and “loneliness” or isolation, but does one really follow the other? If you look at Patricia’s example, she and her partner left the UK to resettle in a rather rural (read remote) area.  I left many of my friends and all my family behind to move to France.  Jacob from ERE is also living a somewhat uprooted lifestyle, although he left his native Denmark years ago.

I suppose that one could conclude that leaving your native culture and moving someplace new requires that you leave behind your connections, however, I’m not sure that leaving family behind is necessary. At least one of the examples above, Jacob, happens to live in an extremely high-rent area.  He certainly hasn’t found himself forced to move and leave it all behind in order to simplify.  Patricia and I have moved and simplified, but if you remember from Patricia’s story, she has a lot of local friends and a very rich social life in Portugal.  As for my husband and I, we now live much closer to his family and our friends in France, so we hardly find ourselves alone–quite the contrary.  As DH recovers from his accident we’re surrounded by family and friends.

If you think about societies where social isolation occurs, do you think of radically simple ones? I personally think of affluent societies. I’ve never been  to Cuba, but whenever I watch a documentary on that country, I see people living lifestyles we’d probably consider quite radical by US standards, and all the while, they find themselves tightly connected to the society around them.  For example, in Cuba, I recently learned that drivers are required to pick up hitch hikers and that taxis can’t leave until they are full. That’s just one example of the way societies can be simple in terms of material goods and highly complex in terms of interdependence and relationships.

Sharing resources and living a simplified life can bring all kinds of contact with others. Patricia found herself bartering with neighbors; Jacob has theorized about sharing large tools between neighbors.  The most radically simple lifestyles I’ve ever currently witnessed were in Madagascar–where people were appalled to learn that occasionally in the US, an elderly person can die at home and the fact can go undiscovered for some time.  In Madagascar, this is unthinkable.

What do you think about living simply and frugally?

Is it possible when you’re single?  Is it easier in a couple?  What are your experiences in this area?  Does simplicity lead to social isolation?  Does living in a couple protect you from the precarious nature of life?

Saying “NO” to Fitting in. And weekly post picks.

I could type you a grocery list hundreds of items long detailing all that my husband and I have said ‘no’ to as we’ve cut our expenses and our time commitments. The tangibles (gadgets, toys, clothes) that we didn’t collect. The experiences (vacations, cruises, dining out) that we don’t indulge in. . .

For the rest of this guest post, go Early Retirement Extreme, one of my favorite blogs, in case I haven’t mentioned that in the past

I also encourage you to check out a few other gems I found this week:

From the Wall Street Journal: The Foreclosed Families of Abacus In which Frugal Scholar takes us through a careful consideration about the people behind the loans that Goldman Sachs bet against.

What Can One Person Do? On the Ultimate Money Blog.  A reminder that our steps toward doing the right thing for the planet isn’t as futile as one might think.

An Amazing, Eco-Friendly, 24-roomed, Transformer Apartment Check out this link on everyday minimalist for a convertible apartment.  You just have to see it for yourself. . .

Dual Household, Single Income–and frankly, the whole blog.  I discovered the Gai Shan life this week.  It chronicles one woman’s efforts to support her parents and sibling using only her income, her wits and her sense of humor.  Definitely worth a few clicks.

Where would you be without debt?

Picture yourself, without debt: The sensation of your stomach not twisting into knots when you open your credit card statement.  No mortgage payment, no student loan payment.  Your paycheck is your own again.

Will you miss debt? If someone had asked me this question when I was struggling with student loans and credit card debt, I would have laughed . . . or maybe growled.   I’m sure all of us can think of better things to do with a chunk of the paycheck than reimburse money already spent and the interest that keeps compounding away.

I can’t picture my life without debt. Don’t get me wrong:  It’s not that I enjoyed being in debt, in fact, I hated it—however, the opportunity to take out loans and access credit changed my life–by giving me an education I’d never trade away.  My education allowed me to travel the world, gain new perspectives, one could argue it allowed me to meet my husband.

My husband and I may go into debt again–and we’re happy about it. Why?  Because we may soon have the ability to buy a home for about what we currently pay in rent.   Of course, it would be great to just be able to buy a home ‘cash’ and never pay a mortgage or rent again.  But how many people do you know who can actually do that?  Once again, credit presents me with a big opportunity . . . as well as a healthy dose of responsibility and risk.

Debt that shackles you versus debt that lets you grow:

I can think of some debts I wouldn’t enjoy paying back. Dining out or vacationing on credit come to mind.  So does paying interest on car repairs because the emergency budget didn’t quite cover them (ouch!  I’ve been there.)  And who wants to be stuck in that cycle of credit bondage where the rates sneak up on you and you find yourself barely paying the minimum payments.  Just the mention of it makes me grind my teeth as I remember a lot of sleepless nights.

But not all debt is quite so painful or damaging. In fact, a little can get your foot in the door—which is why the credit crunch hurts so much for small business owners, first-time home buyers, students . . .Think of all the people who owe their start to a little credit.

Do you have debt you can’t wait to get rid of?  What about debt you couldn’t live without? Using debt to acquire something you can’t afford quite yet always involves risk.  If the future doesn’t pan out as you expect, you could end up struggling to make payments.  And credit costs more, there’s no arguing against that.  But debt can have its positive sides as well.  I must admit, I’ve had some moments in my life where debt seemed worth it—how about you?

No Shopping Compact: limits, unintended effects?

Whenever I read a post like this one at Consciously Frugal about Joining a No Shopping Compact, I’m enthusiastic. Is it necessary to not buy anything new for a year?  Not at all.  But if you feel drawn to the idea of changing the way you view shopping, spending and consuming–forever, then not buying new for a year might interest you.  What do you think?  Have you ever given this a try?  Would you?

The notorious new hat

Changes after a year of not buying new.

Back in 2007 the not buying new experiment forced allowed me to find new (if slightly less convenient) solutions for my problems.

Back then, I was working horrific hours at work, so for me, convenience had a very large pull!  I find that habits keep me efficient and speedy, changing habits takes time, energy.  But it was worth it.  Some of the long-term changes:

• Buying new: no longer my default: I’ve gotten in the habit of waiting to see if I can do without an item, if I can find one used someplace for purchase or if someone I know is giving one away.  I recently got a pressure cooker this way.
• I no longer feel entitled: I no longer tell myself, “I work hard–I deserve this!”  I’ve found other pastimes that make me happy.
• When I do buy something new, I  feel like I’ve failed at a challenging and unending game. Yes, I’ve actually come to enjoy the whole ritual of thinking of other options.

No-shopping compact over, what now?

Since finishing up my year without buying new, I’ve made a few notable purchases–especially before moving to France where everything is so much pricier (ahem, and where most women are shorter and have smaller feet than I do!) Here’s a list of my major new purchases since not buying new for a year:

• Shoes--I have a harder time finding comfy shoes in France (this could be because I’m still a French newbie) .   Also, I am shocked and awed by the cost of shoes in France!
• Winter clothing (specifically warm jackets, but also pants and sweaters).  Back in San Diego, I was rather lacking in this department and I didn’t feel like waiting until I was freezing in France to buy clothes.   I took advantage of the financial meltdown sales in January of 2009. . .
• Underwear! (January 2010) After my year of not buying new followed by rather sparse spending habits, I thought this was justified
• A hat: I recently purchased a hat to keep my face from frying when I’m out walking with my husband.  I had baseball caps but felt they weren’t really protecting me on the sides . . . I came across such a hat and voila! But I think I let that burning sensation pressure me . . .

Looking at all these purchases, I’m left wondering if I’ve come up against a limit of the ‘no shopping compact’ and if eventually, we must all revert to buying new. Interestingly, most of my new purchases are for clothing.  We bought a bit of furniture when we moved to France, but we found it at an antique shop–hence it has all been in existence longer than I have . . .

Unintended Effects?

It would seem that some things I need, I simply can’t make or find used, but my brain is still working at the problem long after I’ve finished with the ‘compact.’ Picking at the above list,  take that hat, for example.  I’ve dabbled in sewing before and looking at the way it’s made, well, it’s quite simple actually.  I could have made it from reclaimed fabric–say from a pair of pants that bit the dust.  I found myself also wondering. . .couldn’t I make underwear out of old t-shirts?  That might make you laugh, but underwear is really the one thing I will not buy ‘used.’ So, it seems, the game is not over–at least for me.

What about you? What items do you buy new?  Are there any you prefer to make, or buy used?

Risks you’d take to live your dream

In a recent discussion following the post, Have you Ever Felt Poor?, Patricia, a long-time reader of this blog and a citizen of the UK who now resides in Portugal, made a rather incredible revelation in the comment section:

Strangely enough I felt poorer when I was in a good job, earning a relatively good wage, than I do now when I earn practically nothing. At the time both myself and partner worked long hours, earning high wages, but also had that ‘hamster on a wheel’ syndrome, we also had a mortgage, insurances, utility bills, car & fuel bills… it just went on and on, it seemed the more we had , the more we felt we ‘needed…

So we got off the wheel… and here we are 4 years on… living on about 4,000 euros per year… and happier than I’ve been in years.

As I’m always interested in seeing how people live on shoestring budgets (4,000 euros a year is pretty good, if you ask me!) the comment lead to an email back and forth between the two of us, which Patricia agreed to let me turn into a post.  I’d like to take a moment to share Patricia’s way of life with you–the nuts and bolts, the risks and the benefits.

The nuts and bolts of Patricia’s shoestring budget:

Re-purposed boots: in the spirit of frugality.

Patricia and her partner live just outside the village of Figueira in a home they bought cash and fixed up.   As part of their renovations, they created a cottage that they can rent out for income, her partner also gets the occasional odd job to bring in money.  A great deal of what allows them to live on such an unstable income is their fine-tuned frugality and the ability to do things themselves:

• Most of the fruits and vegetables they eat are home grown
• Patricia has worked out a barter system with a few locals to get “eggs, honey, books and other odds and ends”
• They turn the fridge of 10 months of the year, relying on their stone built house to keep things cool.
• A log burner stove allows them to do the cooking, heating and drying clothing in winter  using wood they collect from the forest.
• They make their own bread, conserves etc.
• Their water comes from a well in their garden
• Their mode of transportation is a scooter, used on occasion.
• Patricia invests one third of everything they earn through renting their cottage in food staples like flour, pasta sugar and vinegar. . .for weeks, months without income.
• They have no computer, TV or radio, instead enjoying the local peace and tranquility, a good game of cards, or visits from their many friends in the area.

Risks and insecurities of living abroad on a tiny income:

I especially appreciated Patricia’s willingness to detail a few of the struggles she and her partner faced in the pursuit of their dream:

It’s hard to describe how we live really, most people recoil in horror when I tell them. The insecurity of our lifestyle is incomprehensible to most.

We sold up all we had , gave up good paying and secure jobs  to come here, live in a semi ruin  with, at that time, no water, electricity, sewage, plumbing … anything at all really except the bare shell of the house and the land… It cost us more than we could really afford, and took the rest of our capital to make it partly habitable…

As Patricia went on to explain, living on minimal wages from odd work here and there can be precarious even when you’ve fine-tuned your budget to the extent she has.

When I say we often have no money, I dont mean we are just a little broke or that we don’t have any to spare… I mean we REALLY HAVE NONE.

I was also surprised to learn that Patricia and her husband have had serious difficulty qualifying for Portuguese health care. I thought that people within Europe would have an easier time, but apparently, Patricia and her partner have been caught in some red tape (oh, I’ve been there in France too).  They could receive emergency care, but would have a hard time covering costs of tests, x-rays etc.

The benefits of knowing how to live on almost nothing?

As much as the above mentioned concerns may seem a little out of the comfort zone, I bet we can all imagine some of the benefits of living the way Patricia and her partner do. After hearing about all the trials and tribulations they’d faced, I asked if Patricia thought it was all worth it.

Our peace and tranquility and quality of life is wonderful, we gave up an ugly, dirty crime ridden stressful life to come here.(plus good job and mortgage).. and I’d starve rather than go back to that rat trap…

Here I can take joy in different things… today I heard a cuckoo for the first time this year… we hear woodpeckers a lot too… I have time to bake, cook and grow… I can take joy in the special time I have with my partner now too. . . just sitting by the kitchen range with a book…

I could go on forever…

So what do you think?

Do you find yourself ‘recoiling in horror’ as Patricia puts it? Do you have our own dream that you’d go to great lengths to achieve? Or have you done it already?

Car-free Sunday: Weekly Post Picks

Mini-Tip for using the car less: be close to services AND nature.

The view on our way out of town--on foot.

I’m headed out this morning to take advantage of the sunny weather and go for a walk/hike with my husband.  One great thing about the city we’re currently staying in is that you can actually leave from downtown and hike on foot.

In may cities, finding shops and services within walking distance proves easy.  It’s getting out of town and into nature that is not.  Hemmed in, we find ourselves using the car.  I don’t know where we’ll end up living when DH get’s his transfer notice in May or June, but I hope we can find services AND fresh air withing walking distance.  It’s not easy to do.

This week’s post picks: Here are a few posts I’ve enjoyed in the blogosphere this week. You’ll see them featured on my side bar all week.  Enjoy!

Fabulously Broke in the City: Sometimes I Wish

The Young and the Thrifty:  Variable and Fixed, Open and Closed Mortgages

One Green Generation:  Are We Normal?

Early Retirement Extreme:  Money Versus Resources

Wealth Pilgrim: Friend discovers husband’s credit card debt, screams, “I want a divorce!”

Well Heeled Blog: Dream Apartment or New Job–What would you do?

Funny About Money: Women’s Work Manifesto

Eliminate the Muda: Combat the Closing Techniques: the Reverse Psychology Close.

Punch Debt in the Face: Carnival of Personal Finance.

How do you chose a ‘new’ car?

Before I start . . .Does our new car look funny to you??

After four months of mourning our 1994 Twingo, we’ve purchased another car.  It took me some time to warm up to the idea.   I had this fantasy of making the Twingo last until some new alternative energy vehicle could be invented or until we learned to live without a car at all.  Ahem–until a Ford Fiesta crashed into the Twingo, totaling it.

I’ve actually enjoyed being car free.  Still, we’re not quite there in terms of figuring out how to do without a car.  My husband, set on something safer in the event of a future crash (even with a dreaded Fiesta), began to eye cars like this one:

Our new Kangoo.

Since I’m still working on my license here in France, the car is not for me, really.  DH tells me he’s excited to be able to load his skiis, bike and other toys in the Kangoo without using a rack .   I also suspect he thinks we’re going to have a bunch of kids to fill it with or something. . .

Our five steps to buying a car in the US or France:

Step one: select the qualities we want in a car.  Our priorities this time around:

• Cost per years of potential use left in vehicle
• Cost of potential repairs, availability of parts
• Gas consumption (strangely, our newer, larger car gets about 39 miles to the gallon, better than our older Twingo.)
• Safety**
• Room to lug toys**

** These two are new for us this time around. . .

Step 2:  Pick out a target make and model and decide what price we’re willing to pay.

• In the US, we look at Blue Book and Auto Trader to get an idea of prices.
• In France, we check the Argus (equivalent to Blue Book) and then check out the local adds.
• In the US, I check every vehicle with CarFax to make sure it hasn’t been in an accident–this is not possible in France, can you believe it?
• We also talk to any mechanics we know about pitfalls and records of the makes, models and years we’re considering.

Step 3: look at specific cars offered by individuals.

Once we see our ‘target’ vehicle advertised, we check out what individuals are selling.  We never go with a garage. We also don’t buy new–because we don’t like the idea of depreciation. I’ve also seen enough of the way that dealers carry out their ‘guarantees’ on new and used cars to have formed the conclusion that, in life, there are no guarantees.

Step 4: bring an ‘expert’ to check the car.

We’re lucky enough to have family in the US and the States who know a little bit about what kinds of sounds a car should or should not make.  We usually kidnap take them along for the occasion.

Step 5: negotiate–to an extent.

Since we know what the car should be worth, we’re in a better position to negotiate it’s price with owners.  That said, we never go too low, because we only bid on cars that seem to be in really good shape (ie they are well cared for, have a single owner etc).

How do you chose cars?

I’m just assuming that what we do is fairly standard procedure, but sometimes I’m surprised.  Do you follow the same steps we do?  Do you have any great tips for buying cars?

Do you wish you spoke any other languages?

Many of the readers of this blog already speak more than one language, but in my humble opinion, whether you speak just your native tongue or have mastered several languages, there’s always room for more! The only limiting factor is time . . .and maybe to a lesser extent, money.  Although for me, learning new languages falls under the list of luxuries I permit myself.

Our last trip to Italy, where I decided I need to learn Italian!

Languages I’d love to learn:

• Italian: because we’re close to the Italian border and because on our short trip to Italy a couple of years ago, I realized I can already understand it to an extent.  I know I’d pick it up relatively quickly. And it’s just beautiful!
• Arabic: a little of the writing, but my interest is in one of it’s spoken variations.  Again, my choice is partly local–here in France I certainly don’t need to speak Arabic to get by, but it could be fun given the numbers of people who do speak it here.  Also, I’ve always wanted to learn a language with a different alphabet and I hear the grammar is not too difficult.
• German: a heritage language for me.  Many of my non-English speaking ancestors were German and I even spoke a little German when I was very young.
• Hindi and Japanese–due to an interest in the cultures, films and ideas of these countries.

Languages on your list?

You’ve seen my quick list of languages I’d be thrilled to learn.  I arbitrarily stopped at the fourth bullet point . . . but in my mind, it goes on.  So that Are there any languages you’d love to learn?  What draws you to a specific language?

Why learn a new language?

Living in the European Union: another reason to learn a language.

People have all kinds of practical reasons to speak new languages: for daily communication, for work and business, for travel, for cultural activities like reading books or watching films in their original format, for exercising your brain and for learning new perspectives.

I personally enjoy the cultural perspective language affords. Did you know that in Malagasy, there are only 3 tenses? present, past and future.  The implications of this can be fascinating–try explaining how you should have, could have, would have done something  in Madagascar, and you’ll find it’s not such an easy task!

Language-learning: what’s in it for you?

My list of reasons for learning other languages is by no means definitive. DH put in the extra effort to learn English so he could live and work more seamlessly in the US when we lived there–and so he could communicate with his lovely in-laws.  I was initially drawn to Spanish because I had so many students who spoke it. As for French, I decided to learn that language when I was about twelve because I just liked the sound of it.  How about you?  What considerations have gone into the languages you’ve learned or would like to learn?