The Fastest Way to Pay Off All Your Debt


– 80% of Americans are
living paycheck to paycheck because of debt. So, let’s talk about how
to free up your finances and your future. (upbeat music) All right, this year we are doing a series on each of the Baby Steps. So, if you missed last episode, we talked about Baby Step 1, which is saving a $1,000 emergency fund. In this episode, we’re gonna
talk about Baby Step 2, which is getting out of debt. So, we’re gonna bring
on my dad, Dave Ramsey, who came up with the Baby Steps and has been walking people through them for the last 25 years. And then we’re gonna talk to a couple who are working their way
through the debt snowball, and they’re in the middle
of their debt-free journey. It’s great, because they’re just starting to feel the freedom in getting
control of their lives, and best of all you guys,
they have hope again. Now, a lot of people think
that debt is not bad. Like, it’s just a normal way of thinking. That’s what society tells us. And in fact, 80% of Americans are living with some form
of consumer debt right now. Listen, you cannot create a life you love while you’re in debt. When you are in debt, it forces you to live life looking
through the rearview mirror because you are chained
to stuff in the past. So, how do you get rid of debt? Well it all starts with the debt snowball. Okay, this is the best way, the most effective way, to get out of debt. And this is the debt snowball: where you list out all of your debts smallest amount to largest amount, regardless of the interest rate, pay minimal payments on everything, and pay off the smallest debt first. And once that’s paid off,
you roll all the payments, all the money you were
throwing at the smallest debt, to the second smallest debt. Then once that’s paid off, you have the minimal
payments of the smallest debt and the second smallest debt to roll over to the third smallest debt. So it gets bigger, and bigger, and bigger. You’re money continues to expand to start knocking down each debt. And I love this because what
this takes is motivation. And once you pay off that smallest debt, motivation comes. Your
behavior starts to change. Now, some of you might
be thinking, “But Rachel, shouldn’t you pay off the
highest interest rate first?” Yes, technically that would
be mathematically correct, and that method is what they
call the debt avalanche, which is terrible by the way. I mean, avalanche or snowball? Okay, snowballs are way more fun. I don’t want to be caught in
an avalanche. No, no, no, no. So, stick with the debt snowball. But again, mathematically speaking, yes, the debt avalanche could
save you a few hundred bucks, mathematically speaking, but when studies have been done of people who do the debt snowball versus the debt avalanche, they actually get out of debt faster using the debt snowball. Again, because it’s all
about your motivation, it’s all about your behavior change. And a debt snowball, it has worked for millions
and millions of people, and I promise, it can work for you. But up next, I wanna talk
about something that you need no matter which Baby Step you’re on. (light piano music) So, earlier this year
I was at a live event, and before some of our live events we do these backstage experiences. So you can purchase these tickets and me and the other speaker will go back, and answer questions, and
meet people backstage. And during one of these
backstage experiences, this man came up to me, and he
was like six foot something, like huge, he was tall,
big, big, big beard. I mean just like this burly man. And he asked me if he could
talk to me for a second. And I was like, “Yeah, sure.” And so he pulled me aside,
and he just started crying. And it took him a second to kinda console himself
to even get his words out. But he began to tell me that him and his wife were on
the journey of the Baby Steps. And they were working their way through, and she actually watched
The Rachel Cruze Show for motivation, which is obviously so fun
to hear, I always love that. And I could still see though, obviously the sadness from his tears and the way he was talking
that something happened. And so, as he began to tell me his story, three months prior to that live event, him and his wife, they got in a car wreck, and she actually ended up passing away, leaving him with their
three young children. And so, at the time I was newly pregnant, and I mean, you just put
yourself in that situation and I’m like, that’s the
absolute worst thing that could possibly happen, and that happened to him and his family. I mean, it’s unimaginable. And then he began to tell me though that he had purchased term life insurance, him and his wife, and
they had it in place. And so, he was saying, “Rachel, this is not the way to
get to Baby Step 7, but because of term life insurance, I don’t have to work,
our house is paid for, everything’s taken care of. And if we had not gotten that, this entire grieving process
would look so different.” And in that moment, I was like, man, that’s why we do it, you guys. We talk about term life insurance
all the time on this show, and you know that Winston and
I, we use Zander insurance, I talk about it all the time. And you might be thinking,
“Okay, that’s great. Maybe I’ll get it one day.” But listen, stuff happens you guys, and you want to make sure that you and your family
are taken care of. And I was so thankful
for him and his story that money didn’t have to play a role in their grieving process.
Like, all of that was taken care of. And again, that’s not the way you want to get to Baby Step 7. But man, how much more
stress, and heartache, and life heaviness would be on that family if they didn’t have life insurance. So, if you do not have
term life insurance, go to zander.com, get
started on a quote today, because they will find you the best rates, and they’re going to take
care of you and your family. Again, if something were to happen, having term life insurance is
one of the best safety nets that you can have for your family. All right, up next I wanna
bring on my dad, Dave Ramsey, and we’re gonna get back to talking about getting out of debt because this is one place that can free up your family as well. But debt in general, it’s changed,
you guys, over decades now. And so, we’re gonna hear all
from big Dave’s perspective when it comes to that. (musical tone) All right, you’re back. – I am. – Here you are at “The Rachel Cruze Show”. – Almost like I work here. – (laughs) Almost, sort of. You’re
sort of connected, I guess. Okay, so this episode’s
all about Baby Step 2, and you’ve been known as
the get-out-of-debt guy for decades now. So I’m curious from you, you take calls on the radio everyday, what has changed about debt in 25 years? Like, peoples questions,
have you seen a difference from 25, 30 years ago with debt to today? – I think there’s different, we’ve gone through different ebbs and flows of which kind of debt is
the crisis of the day, the flavor of the day. When we first started, everybody was talking
about credit card debt, how evil and how horrible
credit card debt is, and we still think it is. – Do you find that people
are in more credit card debt, it’s become more normalized
than even 30 years ago? What do you see around
that subject specifically? – 30 years ago people wrote checks. – Yeah. – And so, it was a big deal. – The chunk-chunk of the credit card. – You would run across the thing. – You know what I always
think about? Home Alone 2, when he’s lost in New York, and he has to give it to the guy, and they pull it out, and they chunk-chunk, and he
gets into The Plaza Hotel. That’s always my thought
of credit cards back then. – It’s like pulling out the
cell phone in Jerry McGuire that’s this big. Same thing. It shows you the age of the movie, right? So credit cards are,
what’s happened with them is, the debit card has
eclipsed first the check, and now checks have
just about disappeared. And then the debit card
has become so normalized, and we’ve helped with this.
We’ve made it very, very popular as an alternative to the credit card. So the credit card kinda looks like the dirty, crazy cousin
of the debit card now. – The crazy thing is that
Millennials, studies are showing, are actually getting into
less credit card debt than their parents were. – Because they have this option,
and it’s been put forward. I mean, people are starting to realize the credit card is the cigarette
of the financial world. It used to be cool, and
all the movies had it, in 1950’s everybody’s
smoking everything, right? And then people start talking about, hey this stuff kills you. And then the surgeon general came out. And then we put it in
the elementary schools and said, “Oh children, don’t
smoke. It will kill you”. – D.A.R.E. programs popped up everywhere. – And that’s what’s happening gradually with the credit card, only
in a more adult level, to where the Millennials
are coming along going, hey, this credit card didn’t
work for our boomer parents. They got screwed by
this. We’re not playing. But it’s not at the forefront
of society’s mind today. Then we kinda went through this thing where we went from car
payments to car leases. Car companies realized they could make a lot more money on leases than they could on regular
payments on regular car loans, and so they start pushing. And today, 78% of the cars
that roll off a new car lot are car fleeces, and the reason is they
make more money on them, but we went through a phase because it was kinda
new and it was faddish. And then of course we moved into the
student loan epic plague, because it has grown. It’s exploded. – But the difference though, of 30 years ago with
students loans and today, is massive, probably
more so than car loans and credit cards combined. – Because of just the volume
of it, the number of dollars. And there’s a little
bit of a stigma shift. You know, my generation
to the next generation, those are two previous to today. If they took out a student loan, they kinda did it holding their nose. And now everybody’s like,
well that’s just what you do. And so, the stigma has gone away from it. The fear around it has gone away from it. But now this epic plague
is bringing the fear back. Which is good news because
it’s waking people up going, this is not working. – So, debt has somewhat changed, shifted the conversations
around it in 30 years. But the way to get out and the mindset around it hasn’t changed in the sense of the things you need to do. So, we talk about budgeting
all the time on the show about being intentional, and it’s the best step you can take to not just get in control of your money, but to get out of debt. So, do you still find that to be true, that budgeting is still a key
part of getting out of debt? – Well, because you have to
control the fuel that you have to get out of debt with, and the fuel is the money. And the money, the way you
control the fuel, is the budget. It’s you turn it up,
turn it down. And you go, okay, we’ll turn this one down, this one down, this one down,
so that more comes over here. And so we’re cutting back lifestyle because we’re sick and tired
of being sick and tired. We’re really angry. We’re really scared. We really have had it. We’re
really going to change. And we’re not going on vacation. And we’re not going to a restaurant. And we’re gonna dress the
kids in consignment clothes. And we’re really, for the next 18 months, the next 36 months, whatever it is, we’re really gonna sacrifice deeply, and that shows up in the written plan. That is not just a random
series of decisions. – Yep, so good. And then also, taking responsibility. When you look at your life
and the mess you’ve caused, not to put shame, but to say, okay, I’ve done this. But then at the same time, I have the power to be
able to clean up this mess. Do you see that as still a huge
step in getting out of debt? – Absolutely, the power and the dignity to make their own decision. And, you know, and really the realization that no one’s coming. The Lone Ranger’s not coming. Whatever’s happening, the
pioneers are all surrounded, they’re being attacked, or whatever, and the calvary is not coming. And so, you are the problem
and you’re the solution. And that’s both wonderful
news, and it’s scary news. – Yes, absolutely. And then, the third is a tool that you’ve been teaching for decades now, is Financial Peace University. And we talk about this,
but getting signed up, going through that course,
being around like-minded people, this is a huge step to help
accelerate your journey. – In a much more intense situation, if you’re dealing with
someone who has an addiction there’s two things that they do. One is, they quit hanging out
with their friends who drink, if they’ve got a drinking problem, because you’re gonna become
who you hang around with, it’s just nature. And you know this because you don’t let your
kids hang around people, the kids that are misbehaving, because they’re gonna
misbehave like that kid. And so, you can’t hang out
with your drinking buddies if you want to quit drinking because you have a drinking problem. And guess what else you do? You get in a group of
people who are solving this, called 12 Step. And so, you go to Alcoholics Anonymous, and you sit down, and you go, “My name is David, and I’ve got a problem”. Now that’s a much more extreme situation. That’s a heavier burden than just simply changing
your behaviors on money, but it’s exactly the same
equation, only on a lighter form. And so, you can’t hang out
with your broke friends who are putting stuff in your
face on Instagram all the time that you can’t afford, and
that they can’t afford either, and you can’t keep hanging out
at the bar, if you’re a drunk, with drunks. And you need to get in the group of people who are positive peer
pressure in your church and in your 12 Step that are gonna turn this around with you. And so, you get around a
bunch of people who are going, hey, this is now, in this
group, being weird is normal. – Yes, and walk with it. So you guys, if you haven’t
checked it out, do it. Because again, those are the things, besides just the debt snowball and the tactical side
of getting out of debt, that’s really gonna help the mindset shift while you’re in Baby Step 2. – It’s a very unusual person
that has enough backbone and enough chutzpah to completely change
their lives by themselves and not have people
like-minded around them, and not have continual content and input from new lessons coming at them. If you can just sit in
the corner, in the dark, and change your life, you would’ve probably already done it. – That’s a good point, so good. Always wonderful. (hand clap) Thanks for coming in. – Good times. – So fun, so fun. All right, coming up next,
Micah and Chelsea are here. They’re on Baby Step 2, and we get to see what life
is like for them on this step. (musical tone) – Before we decided to get out of debt, we stayed frustrated with our finances, frustrated with each other constantly. – I was really confused
about how much we had, neither of us knew. – Every time we got a
check it was a relief because we thought, okay, finally, another band-aid to
kinda fix the problem. We both grew up with money
being a huge stress always, and to start our family,
when we get married, I didn’t want that same environment. I didn’t want the inheritance
to be frustration. – Especially for our marriage,
and thus for our kids. – I’d heard about Dave
Ramsey when I was early 20s and knew he had written some
books, and that was about it. Something about pay something off and then roll that money to the next. – I had found the app through a friend, but didn’t know it was
the Dave Ramsey app, a few years back. And I had shown him, but we had looked at so
many budget apps together, I think I caught him at the wrong time and he was just like, yeah, we’re not gonna
do an app right now. It took him finding it and
being like, look at this, and us sitting down together
and really playing with it. – I think the ah-ha moment for us was probably the same as most people when they do the budget
for the first time, is you see what’s left over. She showed me, and I said, “No, that’s not
right, you miscalculated”. And there is an
unbelievable amount of peace to having every dollar, and
having every thing in control, and you’re in control of it. – I tell people all the time,
I think it’s actually freeing. It keeps us on the same page all the time. We don’t have to fight,
I don’t have to ask. – It’s good for your finances, but it’s also good for your
marriage, and teamwork. There’s a transparency there that is necessary in a marriage. It’s not just when you’re debt-free, but it’s while you’re
in debt and budgeting. It’s brilliantly titled Financial Peace. It is a really comforting thing. – All right, Micah, Chelsea, thank
you so much for being here. – Thanks for having us. – So we always talk about how you can wander your way into debt, but you cannot wander your way out. And Baby Step 2 is tough because you have to be fully committed. And you can’t just be on the plan-ish. We call that ish people. And so, you would say that
you were kind of ish people before being fully committed. So kinda tell me your story around that. – Yeah, so before we really dove into it, I guess we were as ish as it could be. I knew how to spell Dave
and that was about it. – There you go. – I knew Dave Ramsey.
I knew he had written a book, and that was about what I knew. We had some friends that
were hosting FPU, and we went to their house one night and got a cute little folder, and we were like, great, we’ll order water
when we go out to eat. And we went to one class
and didn’t go back. And also didn’t realize it was
a regular thing you attended. So it was, that started
Daveish, and we always knew, at least I always knew,
that credit cards were bad and snowballs were a thing. And so, we said we snowballed, but we might had done it once or twice. So we don’t count out debt-free journey until we really started the budget. We just wandered in darkness and was confused and frustrated. – Yeah so, Chelsea, what
did marriage look like when you guys were in that season? – It was okay, but we just either avoided and/or I wouldn’t even say argued as much as just constant frustration and miscommunication. – Yeah, so were you guys, so you felt like you
didn’t really have a plan, it was kinda just like here and there. So what was the catalyst? What was the point that you were like, okay, something has to change, something has to be different? – Every time she grocery shopped it was— – Those were arguments. – Okay, okay. – We felt good because
we had good intentions, but we didn’t follow through
with any kinda budget. So we felt like, it’s almost like, I think I’ll start a
diet, and feeling like, good for me, I thought
about having a diet. (Rachel laughs) I feel thinner already. – I think I’m gonna be a
runner, that feels good. (group laughs) – So that was kind of the
mindset. We just stayed frustrated because there was always confusion. But as income increased, we start to see, I’m making more so we can
pay more, we can do more. And that was a hard part
when we initially started and thought we were gonna go at it, I had gotten laid off,
she had gotten pregnant. And I started a job, and I
was getting $800 a month, and that’s what we had, and there was no way of surviving. – The income was the
problem at that situation. – And so, just promotions and job changes, it kind of led and grew quickly, and then we saw we have enough to where we can really go at it. And that’s always a Dave thing. If it’s not a debt problem,
it’s an income problem. And it was initially. – So what was the one thing that really helped you guys
get out of debt, would you say? – The budget app. – The budget app, EveryDollar, okay. So tell me about that? How was that, doing it for the first time? – I mean, it took us a few
months to really get in the groove and really start seeing, but even just the first
month he was like, what? I got done and it was like, we can put this much towards debt. He was like, no, I don’t
even make that much. Are you sure you did everything? And it was really freeing to see how much we could get
done as quick as we could. – And when we had started or
knew about Financial Peace, I kept thinking, financial
peace is when you’re debt-free, but part of that peace
is having structure. – Even in the process, yeah. – And that budget brought peace. I mean, we’re gonna be
doing our budget meeting on the way home, and that
was the turning point. – So compare your budget conversations before doing EveryDollar,
and all of that, to after, because it sounds like night and day. – Oh yeah. It used to be, I would write
it down on a piece of paper, and sometimes he would, and
we do math really differently, so he’d show me what he did
and I’d be like, what? – How did you get there? – And vice versa, we’d
do the exact same thing, and neither of us even understood the way each other did math. And then we’d end up not talking about it because you’d be like, you
know what? No, we can’t. Either we’re gonna argue or we’re just not gonna talk about it, so a lot of times we didn’t talk about it. – And so now, it’s so opposite because you’re on the same page. So would you say, we talk
about, especially with couples, that working together and doing a budget eliminates so many money fights and money problems within a marriage, would you say that’s true for you guys? – [Micah] Oh yeah. – And not even just that, I think it’s relationship building. It’s more than just taking
out something. It’s adding. It’s changed so much of the
way that we think about it. – Within marriage, and then also, obviously,
with paying off debt, because doing a budget is a
big part of Baby Step 2, getting out of debt. So what did you guys start with? How much debt did you start with? – Well, we didn’t really know, and that was a terrible
feeling, is not knowing. And unfortunately for about a year we would get another letter
in the mailbox saying, hey, your ADS loan has
been bought out by so-and-so, and now you owe us this
with this interest. So ultimately, overall,
once we figured it all out, it was about $80,000–85,000. – Okay, and how much
do you guys have left? – $5,000. – $5,000. You’re like, right there. How does it feel? Because, I mean, I know you’re
technically not debt-free, you’ve got one more month, you’ve got to get that paycheck in, but emotionally it’s there. So like, how do you feel? – It feels good to know that our money’s going toward the green, it’s going towards something, something that’s really in the positive. And that alone is exciting. – So good. Okay, so what encouragement do
you have for people watching that are like, okay, I’ve
got my $1,000, I’m about to embark on Baby
Step 2 on this journey, and I think I’m
committed, I might be ish. But what encouragement would you say to be fully committed to this process? – I would just say,
especially if it’s a couple, just really be open to talking about it, and getting started, and
trusting each other with it. It just helps so much
to get on the same page, and you’ll be shocked at
how much you can get done, even if you have a fairly small income. – I had a friend ask me,
how are you doing this? And my response, he took it as an insult, but I just said, well, self-control. And that’s what we
don’t have as Americans, as just people blessed
with so much that we have. If we wanna get it, we can go get it. Ultimately, I think it’s just
self-control and patience. And that’s the hardest
thing to have, to pray for, and to just manage. – Well you guys are incredible, I mean, seriously, the
amount that you’ve paid off, and that you’re so close, and that you guys are
working together as a team. I mean, it just transformed, I know, so many different parts of your lives. And so, I’m so thankful that
you came and shared your story. – Thank you. – Thank you guys so much, and I can’t wait for you
to be debt-free next month. – Yeah, thank you. – So exciting, so exciting. Thanks for coming on. – Appreciate it. (upbeat music) I just love their story. And for you guys, I’m so rooting
for you to get out of debt. And so, I hope that this episode
motivated you to do that. Thank you so much to all of my guests for coming on this episode, and
thank you guys for watching. Now to get everything that we
talked about in this episode, make sure to click the
link in the description. And I always want to hear from you and answer your questions. So, I set up a new voicemail just for you. You can call, leave your message, and I may answer your question in a future episode of
the show or the podcasts. So, just call 844.944.1075 and ask. If you haven’t subscribed
to my YouTube channel or my podcast, make sure you do that so you don’t miss anything
new coming out from me. And as always, make sure to
take control of your money and create a life you love. (musical tones)

3 Rules to Meet Career Goals & Increase Your Salary


– Most new accountants, if we’re defining new accountants as someone just out of school they come to the workforce with a number of positive attributes. They’re very confident, they’re extremely
collaborative, very adaptive, they challenge the status quo, they have leadership qualities, they have an entrepreneurial spirit and maybe for all those reasons that those individuals have a
right here right now approach. My advice to those individuals would be to think longer term. Your career is a marathon, it’s just comprised of
a number of sprints. Think about those future sprints and how do you think about
those future sprints? You develop what I call a career plan. First, write down your
goals in time increments. What do you hope to
accomplish in year one, year three, year five plus? Second, next to each of those goals I want you to write down how you plan to accomplish those goals. What specific actions
are you going to take to achieve those goals? Third, and this one often gets overlooked, is write down who can help
you achieve those goals. There’s absolutely no shame in leveraging others to
help you achieve your goals. The career plan is a
living, breathing document. You need to make sure you pull that out at least every six months. Put it on your calendar to
check in on your career plan every six months. Stuff happens, things get
in the way, things change and you’ll have to make
adjustments on the fly. (lighthearted instrumental music)

How does UK Tax work? – What you need to know about HMRC & PAYE


I get asked a lot about tax codes and how
tax works so we’re going to tackle this topic here and explain it with some quick
examples. Tax in the UK can be a bit tricky to understand
and there are lots of confusing headlines and stories out there to bamboozle you. This
is a basic guide to tax in the UK, check out part 2 if you want to know more about how
taxable benefits such as company cars or medical expenses work.
We are going to discuss personal tax from earnings. Let’s start at the top; HMRC.
HMRC – which stands for Her Majesty’s Revenue & Customs – is the department of the
government responsible for collecting taxes. This is what people mean when they talk about
‘the taxman’. These are some of the types of tax HMRC covers:
VAT Income tax
National Insurance Corporation tax
Capital gains tax Motoring taxes
Inheritance tax Stamp duty
Insurance Premium Tax Air Passenger Duty
PAYE It’s a long list! In this video we are only going to look at
PAYE. PAYE – or Pay as You Earn – is a type
of income tax. It is the amount that is automatically deducted from your salary on your payslip
each month, before you even get a sniff of it.
HMRC gives you a tax code. We’ll discuss tax codes in a minute.
Your tax code determines how you will pay tax and your employer uses your tax code to
deduct the correct amount from your salary each month and give it to HMRC.
PAYE is applied to your normal salary, sick pay, maternity pay, directors’ fees and
pensions. Tax codes. A tax code is usually in the form
of a number followed by a letter and it is a calculation of how much tax you need to
pay in the tax year. You can find your tax code on your payslip or P60 (which we’ll
come back to) and on the letter they write you at the start of each tax year.
Tax codes are calculated as follows: The tax-free allowance for everyone is currently £11,000 This means you can earn £11,000 before you start to pay tax.
This gives you the tax code 1100L which is what most people receive.
Ok, for this example we are going to use this tax code. We will look at how your tax code
can change a bit later. Once you earn over £11,000, you are taxed
at the basic rate. This is currently 20%. So if you earn £20,000 per year, you pay
tax on £9000 at a rate of 20%. This means you pay £1800 tax per year, or £150 per
month. Your employer deducts this automatically from your payslip – hence the term ‘pay
as you earn’. If you earn £30,000 per year, you pay tax
on £19000 at a rate of 20%. This means you pay £3800 tax per year, or £317 per month. Higher rate tax is paid on income above £43,000.
So if you earn £50,000, you will pay: Zero tax on the first £11,000 as above, 20% tax on your income between £11,000 and £43,000, This is £32,000 at 20% which equals
£6400. And you’ll pay 40% tax on your income above £43,000. This is £7,000 in this example which equates to another £2800 in tax. This brings your total tax bill to £9200 or £767 per month. I’ve heard people get this mixed up and think that as soon as you enter the 40% tax
bracket, all your income is taxed at 40%. This is not how it works. The higher rate (40%) tax bracket applies all the way up to £150,000. Above this point
you will pay 45% on your income. Also, if you earn above £100,000, your tax
free allowance diminishes proportionately to zero. If you have any questions about this,
leave them in the comments below but for now, we will assume that most people watching this
channel aren’t worried about this problem. To calculate your tax just remember this; If you earn more than £43,000; the proportion above this amount times 40% and the remaining amount between the two thresholds, – which is £32,000 – times 20% So what if your tax code is not 1100L?
I’m glad you asked. Your tax code may have a different number or a different letter.
We are going to cover this in part 2. Don’t forget to subscribe.
Remember, the figures used in this example are based on the tax year 16-17 and will likely
change from year to year. The basic concept remains the same though. Further information
is available from the HMRC website.

How to Pay For School | Tips On Saving Money For College


Hey everyone, so college is one of the biggest
expenses you face as a young twenty-something. According to data from valuepenguin.com, the
cost of college is, on average, anywhere from $4,800 a year for a typical community college
to as much as $50,000 a year or more for a private four-year college. That’s quite a chunk of change to somebody
who’s just graduated high school. So it’s not surprising that the student
loan debt in America is over $1.5 trillion with the average person carrying approximately
$30,000 in student loans. Even with the additional income commanded
by those with at least a bachelor’s degree that amount of debt can really hamper early
progress toward financial success. This is especially true if you happen to graduate
during a time when good jobs are scarce as many people have in recent years. So that begs the question of how we can better
prepare ourselves for the costs of higher education? That’s what we’re going to be talking
about today. In today’s video, we’re going to be discussing
how to save money for college. There is no doubt that college is great for some
people. Higher education is downright mandatory for
certain career paths like doctors and lawyers, but it isn’t for everybody. You can create a very comfortable life for
yourself with or without a degree. So before we talk about how to save money
for college I want to briefly discuss some statistics and reasons why some of you may
not actually need college at all. According to the Bureau of Labor Statistics,
the median income for high school graduates in 2017 was about $37,300 per year. For those with bachelor’s degrees, it was
about $61,800. And for those with advanced degrees, it was
about $75,400. There’s certainly a pretty big leap between
high school graduates and those who have at least a bachelor’s degree, but we also have
to consider the time it takes to get that degree and the cost of college itself. According to ValuePenguin.com the average
annual cost of a four-year college for in-state residents is about $25,000. For out of state residents that number increases
to nearly $41,000 a year. Private schools are even more expensive than
that with the average cost clocking in at over $50,000 a year. Those numbers include costs associated with
tuition and fees, room and board, books and supplies, transportation, and other miscellaneous
expenses. Judging by those numbers a four-year degree
at a school in your state may set you back about $100,000. That’s quite a chunk of change. Assuming that you put the full cost of that
degree on your student loans with a 4.5% interest rate and the standard 10-year term you would
be paying over $1,000 a month after graduation. That’s also quite a chunk of change. In fact, it’s about 20% of the median income
for those with bachelor’s degrees. John isn’t sure of what he wants to do for
work, but he’s been told that you need to get a college education to make it in today’s
job market so he goes to school. He pays about $25,000 a year for his education
and winds up $100,000 in debt by the time he’s wearing the cap and gown on graduation
day. He’s now 23 years old and gets a job earning
$60,000. He lowers his tax bill as much as possible
by investing in his 401K and IRA. After taxes, this would look suspiciously
like $4,200 a month. Not including the student loans he lives on
$2,000 a month. Since his student loans are costing him $1,000
a month, his total expenses are $3,000 a month. Therefore, John has about $1,200 a month left
over to invest. At an average 8% rate of return, John would
have $217,000 to his name when his student loans would finally be paid off at the age
of 33. This is certainly not bad and with his student
loans now gone, he will be able to start aggressively saving for his financial future. However, similar success can be achieved without
a degree. Jane also wasn’t sure what she wanted to
do for work, but unlike John, she decided to not pay for college unless she had a good
idea of what she wanted to do. She found a job at 18 making $36,000 a year
and just like John investing in her 401K and IRA to lower her tax bill as much as possible. After taxes, she takes home about $2,550 a
month. She lives on $2,000 a month just like John. She invests her leftover cash and has a net
worth of $167,000 at the age of 33. If Jane continued to invest like this she
would reach financial independence at the age of 45. That is a little later than John would be
based on these numbers but it is still far earlier than the average person, despite the
fact that she’s only got a high school diploma. Both John and Jane’s situation are good
ones to have. John had an idea of what he was going to school
for and was able to make it pay off for himself in a big way. Jane didn’t have a reason to go to school
so she saved herself from the costs by finding a good job that didn’t require higher education. She could, of course, decide to go to college
further down the road if she found something she really wanted to do that had a higher
education requirement. And with a full-time income, it would be much
easier for her to save money for the degree than it would’ve been in her youth. Bob’s situation is not as good. Like Jane, he didn’t know what he wanted
to do but he’s been told that you need to get a college education to make it in today’s
job market so he goes to school. He spends three years at college (racking
up $75,000 worth of student loans in the process) but never finds what he’s looking for. He doesn’t end up getting a degree and settles
into a job paying $36,000 just like Jane did. Like John and Jane, he lives on about $2,000
a month, but unlike Jane, he also has student loan payments to make. His payments are about $777 a month. That eats into the rest of his income and
then some so he is not able to invest at all. Unless something changes he’s just going
to go further into debt with time. And unfortunately for him, student loans are
incredibly tough to get rid of even through bankruptcy. Ultimately, this is the scenario we want to
avoid. That’s why it is crucial to have an idea
of what you’re going to college for. Your idea may change after you’re there,
which is fine, but we don’t want to just go to college to find our reason for pursuing
higher education. At tens of thousands of dollars a year, that’s
just too expensive of a risk to take. So first thing’s first, try to get an idea
of what jobs you might want to do by shadowing people in the fields you’re interested in
throughout high school (or earlier if you have the chance). If you find that you would love doing a job
that doesn’t really require a university education then you have saved yourself tens of thousands
of dollars if not more by forgoing the pursuit of a degree. If you end up finding a job that does actually
require a University degree, then you can start looking into ways to save on college
costs. This could include many things such as going
to a community college to get your two year degree before transferring to a 4-year University
to get your higher degrees, looking for scholarships or grants, looking for part-time jobs you
can do while at school, and saving early in things like ESA and 529 plans if you have
the time among others. These strategies can make a pretty big difference
in the cost of college and the amount of catch-up work you’ll have to do after graduation. For example, according to ValuePenguin’s
data, the average annual cost of a community college is just $4,864. Heh, and I say just $4,800 as if that’s
not also a lot, but it significantly cheaper than the 4-year university. If you got your two-year degree from the community
college it would run you about $9,700. You could then transfer to a 4-year university
and finish your bachelor’s for an additional $50,000. In total it would cost about $60,000 compared
to going to the 4-year university from the beginning and shelling out six figures. ESAs and 529 Plans are both ways to save for
educational expenses. ESA stands for education savings account. The 529 Plan gets its name from the IRS Code
number that it’s based on. Both the ESA and 529 Plan allows for tax-free
growth and withdrawals as long as you are withdrawing the money for qualifying educational
expenses. While contributions to the ESA are not tax-deductible,
they can be withdrawn tax-free for qualifying primary and secondary expenses as well as
college. You can choose just about any type of investment
you want and can contribute $2,000 per child, per year. ESAs must have a beneficiary listed and that
person must use the money by the age of 30 to avoid any taxes and penalties. If they aren’t going to use the money before
30 you can transfer it to another beneficiary as long as they are related to the original
beneficiary. This is really cool because it means that
if you’re saving for your kids college and they end up deciding not to go you can transfer
the account to your grandchildren! However, there are income restrictions with
the ESA. The restrictions begin with incomes between
$95,000 and $110,000 for individuals and $190,000 and $220,000 for those who file jointly. 529 Plans are offered by most states and are
a little more restrictive with their investing options than the ESA. For most states there are a few portfolios
that you can choose from when investing your money and you can reallocate your investments
twice a year. To make up for this the 529 Plans do offer
higher contribution limits of $14,000 per year and the money is still withdrawn tax-free
for qualifying expenses. There is no age limit for those using the
money. So if you’re beneficiary decides they want
to go back to school in their forties they’re free to do so with this money. Withdrawals can be used for college expenses
including tuition, room and board, and textbooks and supplies. However, they cannot be used for primary and
secondary school expenses like the ESA can. Unlike the ESA, there are no income restrictions
with most 529 Plans. And finally, just like the ESA, you can transfer
from the original beneficiary to someone else as long as they are related. With both of these plans, it’s important
to consult a financial professional as there are sometimes some differences in the fine
print, but this is generally how the options look. But as you can imagine these options can give
your son or daughter a massive head-start when it comes to saving for college. Assuming an 8% return and that you begin putting
money away for your child’s future educational costs when they’re born you could have an
ESA valued at over $80,000 by the time they’re 18. This could grow to as much as $120,000 by
the time their graduate college. The 529 Plan, due to it’s higher contribution
limits could be a great way to play some catch-up if you are starting later on in the game. At $14,000 a year, you could put away over
$110,000 in as little as 6 years assuming an 8% average annual return. However, if neither of these strategies work
for you there are still other options such as summer work. It’s great to be able to work during the
summer to earn money to pay for school. If that’s not enough though, there’s no
shame in working part-time during the school year as well. Your 30-year-old self will thank you for it
someday. Consider if you went to a community college
to get your two-year degree. It costs you approximately $10,000. If you then went to finish your bachelor’s
at a 4-year school you’d be paying about $50,000. In total your educational expenses are around
$60,000 over the course of 4 years. If you worked a full-time job in the summer
(13 weeks) that pays $12 an hour you would earn about $6,240. If you also worked 20 hours per week during
the school year (39 weeks) you would earn an additional $9,360. In total, you would have an income of $15,600. After taxes, this would likely be about $14,000
a year in income. With $15,000 a year in educational expenses
that would nearly pay for your entire degree! Within a few months of graduation, you could
be debt-free and off to the races building your investing portfolio. This may not help you save for college early,
but it will certainly help limit the damage excessive student loan debt can do to your
financial picture going forward. So those are some strategies for saving and
paying for college. Have you used any of them to help pay for
your or your children’s education? If not, what strategies did you use? Let me know in the comments section below.

How to Pay Off Your Mortgage 5 Years Faster


Can we just take a second to admire how friggin cute this little dood is? World…meet Tank. Tank…is still sleeping. Are these lights too bright for you? [dog thumping on floor] Hi everyone! Welcome to the very first episode of “2020 Tips in 20 Seconds or Less” I wanted to start making little videos like this because there’s been some things in just the past few years that I’ve thought, “Damn! If only I’d known that sooner…” Things that I’d love to share with my family and friends but aren’t exactly easy to bring up in conversation. That being said, your first [stumble on words] [idiot grumbling] [ARE YOU STILL NOT WATCHING WITH SOUND?!] I see a lot of you are buying houses lately. Congratulations by the way… Something I wish I’d known sooner: If you just split your mortgage payment in half, pay BIWEEKLY instead of MONTHLY, you can cut 5 years off your 30-year mortgage. 5 YEARS!! Essentially what you’re doing is making one extra payment per year but, if you can afford to do this now, you can avoid paying almost $30,000 in interest. Stay tuned for more 2020 Tips in 20 Seconds or Less I’ll see you next time. [Passive aggressively asking for
“Likes” via a cool animation]

Money Saving Tips #2 – Pay Yourself First


Hello once again guys, welcome back on my
channel If you haven’t watch it already, I highly
recommend you to go back and watch part 1 of this video series first so you can be up
to speed for this video. After the 5 tips you learnt in the previous
episode, another important aspect to save money is to make the process as simple as
possible using technology, or at least try to make the process as simple
as possible. What I mean by that is just to automatize
the process as much as you can, so you won’t be emotionally involved at all. Emotion is
just a bad thing when comes to money. So basically, all you need to do is to open
a different account (let’s call it “saving account”), where you will automatically pour
money into the same day you get paid on your main bank
account. There are several banks that allow you to
automatize the process depending on your country with what is called “standing order” and If
your bank doesn’t allow you to do that, listen to me,
and CHANGE IT. I think that in 2020 every bank in the world
must have what is called standing order. As suggested in one of the best books ever
written in regards to personal finance called “The richest man in Babylon” (you can find
the link in the description below) and I highly recommend
you to read it, my suggestion here is to PAY YOURSLEF FIRST This is a must for personal finance, pay yourself
first because if you wait and you start to spend your salary, it gets more difficult
later. Instead if you take off part of your salary
from day one, you’ll force your mind to find a way to live off of a smaller salary. It might sound difficult at first if you failed
before, but I guarantee you that if you follow these steps it won’t. After a while you will get accustomed to the
new amount you can live off of and in the meantime, you’ll start to see your savings
growing and seeing that it’ll allow you to be even more
motivated to keep on going and find even other better ways to save even more. It’s really hard (if not impossible) to go
wrong with this strategy in place. If you now start thinking where you can find
the money to start saving, and bla bla bla… Again, I suggest you to go back to episode
n. 1 and listen again tip n.4 such as “know your number”. There are several websites you can use to
start tracking your expenses and create budgets. I will go through the apps I personally use
in another video, however I put the links in the description down below of 2 of the most used
one, so feel free to check them out. Only with this simple exercise you’ll see
how easily it would be to cut at least 10% of your expenses if not more from day 1. Another thing that most people don’t think
off is utilities like electricity, gas, Internet bills. The chances are that out there, there are
much cheaper providers that you can choose from. You can cut back on your car, on clothing,
you name it. There are just plenty of way and you just need only to use your imagination
based on your specific situation. Again, 5% is strategy,
95% is mindset. Another tip I can give you here is to start
using apps that round app your purchases, so if you just paid for example 1$.69 cent,
it’ll be automatically rounded up to the nearest round number, in
this case it’ll be 2$. You’ll be blown away to see how much money
you’ll saved at the end of the month only by using this apps. You can find the one I use in the description
down below and I also think that there are banks that allow you to do that as well. I think that Monzo should be doing that. That is it for this video, thanks for watching
until the end, hopefully you can take something valuable from it moving forward. Don’t forget to click the like button and
if you haven’t done this already make sure to subscribe to the channel, it’s free and
you’ll not miss any new episode and don’t forget to hit
that bell notification as well. This is Fabio Mezzogori, I’ll see you in the
next one.