DON’T PANIC

You can’t help but hear from the radio, TV, and internet that the Dow is down to 2004 levels and credit is frozen. You check your investments and realize you have lost a small fortune. Some of you have your credit lines decreased or eliminated. You wonder if you will have a job.

The best advice is DON’T PANIC. Take time to list all your assets. Include the small bank accounts, the unused credit lines, the retirement accounts, the 529s, the house, and the car. Then list all your debts. Include both secured and unsecured debt. Now, make yourself a promise to

1.       Pay off your debt as quickly as possible (see ideas at the end of the article) and

2.        Don’t take on any more debt except for a home or an education.

You want to pay for college, which is probably why you are reading this blog anyway. You tried to save for college and either your expenses outstripped your income or the stock market ate your returns. Here are some less expensive ways to get that college education.

Look at in-state public schools. Your state tax dollar subsidizes these schools so your cost is much smaller. You can get a world class education at State U or State Tech for less than half the cost of an old-name Ivy. So when you make that 6-figure income, you can do something besides pay off student loans.

Consider two years at a community college. Some of these schools offer a guaranteed admissions program for students that keep their grades up. You pay community college prices for the first two years and transfer to State U or State Tech. You pay only two years at the higher price and graduate with “State U” or “State Tech” on the diploma. You prove you are very smart by finding a less expensive way to get a great education.

Government student loans are still available. Earlier this year the government added quite a bit of money to the student loan system. Credit is not frozen for this group of borrowers. HOWEVER, if you are considering a private student loan, you will be entering the frozen credit arena. I cannot predict if you will or will not be able to find the money.

Beware the marketers… Colleges and universities spend thousands on marketing strategies designed to convince the public that a student must attend a certain school to get a job. This marketing is so entrenched in our society that even the most level-headed student and parent can be “taken”. I recently read an article by a respected columnist (Sunday, Wall Street Journal) rationalizing why his son should attend a pricey, small, liberal arts college rather than a state school. The dad’s reasoning was he, the dad, felt he had missed something in college by working and attending a state school. He wanted his son to have this “something”. The “something” was never defined. Don’t let pretty packaging be the determining factor for education. Don’t let this mysterious “something” increase your costs. This is a purchased product, like a car or a house. Be sure to get the best deal for your money

Bottom line, our economy is in a bear market due to the fact that too many people borrowed money they couldn’t pay back. As a result, our confidence has plummeted. That lack of confidence has lead to no loans. Rather than bemoaning the fact, remember the economy goes through cycles, both up and down. Right now, take this opportunity to position yourself to take advantage of the next upturn. And don’t panic.

Ideas to Eliminate Debt (somewhat painlessly)

To pay off your debt, eliminate non-necessities from your budget. Try packing lunch instead of buying lunch. Pack the night before so you don’t create more Morning Madness which leads to buying lunch for the sake of sanity. You will save money AND you will eat healthier. Try buying coffee instead of fancy sugar and cream with some coffee. Try generic brands at the grocery store. My children really like the Kroger store brands and some of the WalMart store brands. Cook dinner at home—hamburger helper and a salad are cheaper and quicker than going out to eat. Soups and stews can be put in a slow cooker in the morning and ready to eat when you get home—and the internet has free recipes for both.

Take your savings and pay off your high interest rate credit cards first. Start with the smallest balance, adding your additional savings to the minimum payment. When that card is paid off, cut it up or freeze it in water in your freezer. Take the money not paying that empty card and apply it to the next biggest balance.