The Cost of an Education

Photo provided by chrisof4 at morguefile.com

A personal finance blogger was criticized this week for commenting via twitter that he wouldn't be paying for his son's photography degree. The article wondered how much influence parents should be able to have when financing a child's college degree. I have a child that has just graduated high school. I have also completed two college degrees within the last 5 years so this is a topic that resonates with me.

While we know that college graduates earn more over their lifetime than those without a college degree, I believe the type of degree matters, especially after the recent financial crisis. The purpose of a degree is not studying a fun subject or partying for several years. The purpose of a degree is to give the graduate an advantage in obtaining employment after the degree has been earned. Some degrees are naturally more in demand than others. 

Maximizing A Degree's Earning Potential

A photography degree might seem like a great choice to someone with significant aptitude in that area, but it is unlikely to guarantee the graduate an ability to earn an income, at least not at first. It will take the graduate time to purchase the right equipment, build a portfolio and develop clientele. What stands out to me is that a photographer is typically self-employed, and a self-employed individual could benefit from a business degree. If the student wanting to pursue photography would also obtain a dual degree in business, they would be maximizing their earning potential.

The student would have a much better chance at finding employment after graduation because of the business degree. The earnings from that employment would allow him to pay off any student loans and dedicate some funds to building his photography business on the side until he was able to live off of that income exclusively. It would also give him the knowledge to know how to run a business - handle permits he might need for a shoot, lease office space, obtain insurance for his equipment, etc. Knowing how to manage such details would help him not let his photography business get sunk over small but important details. He would always have the business degree to fall back on during hard times, but it would complement his photography passion by allowing him to develop an effective strategy to pursue it and make it a profitable career.

Passion Tempered by Common Sense

I'm not saying that someone shouldn't follow their passions in life. What I am saying is that today's high school graduates entering college should look at their degree options objectively and make degree decisions that will create a solid foundation for their future, no matter what that future might bring. By tempering that passion with a little common sense, a person can protect themselves from becoming another drifting college graduate unable to find decent employment, which could also prevent him from pursuing his passion.

Looking back on my own decisions, I wish I had finished my bachelors degree when I was in my early 20s. Being a single parent would not have been so difficult financially if I had earned that degree instead of putting it off. 

Link:

http://thecelebritycafe.com/feature/2013/08/personal-finance-blogger-hits-nerve-about-paying-children-s-college-education

It Starts With a Plan

Photo provided by gracey on morguefile.com.

Budgeting

Budgeting scares me. Let me just say that right now. Every time I have tried to create a budget with all of those spreadsheets and columns including the extra stuff that you should be setting aside money for like tires and eyeglasses, I would get a little nauseas and have a panic attack. I still do. The problem was that a lot of these budgeting tools are not realistic for most of us single parents or those with limited means. To be quite honest, to actually budget for everything I was supposed to be including in the budget would have required me to work multiple jobs. As a single parent, that was not a feasible option.

I believe the key is to work with what you have. Work with the cash you have in hand every month. Start where you are. For example, if you get paid every two weeks, you will get 26 pays per year. That means that two months out of the year, you will get three paychecks instead of two. Some budgeting tools give instructions to average that out to a monthly amount by multiplying the average paycheck by 26 and then dividing by 12. Then use that monthly amount to work out your budget. That might work in theory, but it doesn't work in reality.

Instead, I suggest creating a budget based on the actual money in hand each month. This means that if you get two paychecks a month for 10 months out of the year, budget on those two paychecks every month. It’s far less stressful to budget on what you can count on every month. I feel the same way about child support, especially if it is not very regular as in my case. That might be a post for another time, though. The bottom line is that you should create a budget based on the money you know will be available each month.

Bonus Pays

What do you do with those bonus pays or those two months when you get that third paycheck? When those extra paychecks arrive, utilize the income to your advantage. Set some money aside for those eyeglasses, tires, or even Christmas presents. Put some money aside for nonperishables or pay down a credit card or doctor bill or just add it to your emergency fund. It's up to you to decide how that extra cash can be put to best use. Just make sure to use the money wisely, and that it helps you reach your financial goals.

I'm still working on my budget plan. I've been doing some research to decide what resources work the best for me. I have an old copy of the Total Money Makeover by Dave Ramsey that I plan to review, but I intend to take my time with this and work on a plan I can live with. Ultimately, for any budget plan to work, it has to be one you can stick with over the long term. I’ll keep you posted on how it comes together. Meanwhile, you could add your budgeting tips in the comment section below. 

Here are some online tools I plan to explore as I work on creating my budget:

Dave Ramsey's Budgeting Tools

Budgeting help

Budgeting Software Options

Next Steps:

Start planning a budget
Face the music with regards to the debt