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Kids, ignore your elders: college is worth it

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CollegeOld folks can offer wisdom about many things, but you might not want to trust them when it comes to 21st century economics.

I’m hearing too many older people espouse the view that college degrees aren’t as valuable these days because more people have them. They need an Econ 101 review. It’s true that the price or value of something may drop if the supply increases—but only if the demand for that thing does not increase as well.

In the case of college degrees, demand has risen dramatically. Part of that is because so many jobs that didn’t require degrees have been made obsolete by technology or been outsourced overseas. (When Grandpa says he knows lots of people who made good livings without post-high-school training, ask him what they did—and if those factories and union jobs still exist.)

But employers are pickier as well, using college degrees as a screening device for jobs that in the past didn’t require them.

It’s true that incomes for college graduates dropped during recent economic hard times and unemployment rose. But the situation was a lot worse for folks without a college degree, according to a Pew Charitable Trust report released yesterday.

Back to supply and demand: The demand for post-secondary educations helped push up the net cost of college during the 2000s. The College Board says the net price of college tuition (the sticker price minus financial aid) rose 75% between 2002 and 2011.

But now demand seems to be softening, according to a Moody’s Investor Service report, thanks to a tough economy and a smaller pool of high school students. As a result, more schools are freezing tuition costs or at least holding down the increases and offering more financial aid. That’s good news for those heading off to college in coming years.

None of this means a college degree is worth any price. Too many families are overdosing on debt to get educations they really can’t afford. Getting a good value also requires college students to pick their majors carefully, since some degrees are worth a lot more than others.

But college degrees are and will remain all but essential in the 21st century if you want to get ahead financial, or even just remain in the middle class. That wasn’t true in Grandpa’s day, but it’s true now.

Are you ready?

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A big storm is threatening the East Coast, and my buddy Elizabeth Razzi had some good advice yesterday for getting ready:

 “From my experience, most important prep includes doing ALL the laundry, making milk jugs of ice for the fridge, clearing leaves from drains and having a good supply of ground coffee for the French press.”

At the same time, Ann Carrns over at the New York Times’ Bucks blog was wondering about “Keeping Cash on Hand, Just in Case.” Carns asked whether it might be prudent to have a stash of green in case hackers took down an ATM network. Of course, the more likely scenario is that nature will be the culprit: hurricanes, floods, earthquakes, blackouts and other disasters can make getting cash tough.

I’ve kept a stash of cash handy ever since I lived in Alaska, land of extreme weather and earthquakes. Up there, I also learned to keep a two-week supply of food, water and fuel at home, to carry emergency supplies in my car and to always keep the car’s gas tank at least half full. (You can learn more about emergency preparedness at www.ready.gov, among other sites.) Our supplies include camp stoves for cooking, since both gas and electric lines can get disrupted. You can get single-burner camp stoves for about $20 and propane cylinders for around $5.

We’re so used to modern conveniences, from a ready supply of electricity to a steady supply of ATM cash, that it can be hard to imagine what we’d need to survive life for several days without them. If you’ve ever flipped on a light switch when you knew the power was out, you know what I mean—our brains really aren’t wired for disaster. But taking a few minutes to gather some supplies, check flashlight batteries and tuck away a little cash can make getting through any disruption, by nature or otherwise, a lot easier.

What emergency preparations have you made? What do you still need to do?

What I learned from our “almost free” vacation

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Back in June I wrote a post about “How to get free summer travel.” I’d arranged a 5-day trip with my daughter to the Pacific Northwest using a variety of rewards programs. The trip, which we took over Labor Day weekend, was a heck of a lot of fun. Like most vacations, it wound up costing a bit more than planned but I also learned a few things.

Including:

Re-price your reservations before you go. I checked both hotel and car reservations a few days beforehand to see if prices had dropped. They hadn’t at the Doubletree in Portland, which was in fact sold out. But the rates at Enterprise car rental fell like a rock. Plus, Enterprise emailed me a last-minute 10% off coupon for being part of its frequent traveler program. My cost for the two-day car rental went from over $100 to just $37. I love that.

Don’t try to make a same-day connection on Amtrak. We took the sleeper car up from Los Angeles, and the train fell waaaaay behind schedule–five hours, in fact. That was good news for us, since we got to see some gorgeous scenery around the California-Oregon border that would normally pass by in the dark. Passengers who were trying to make a connection to the Empire Builder, the train that goes from Portland to Chicago, weren’t so happy. They had to get off in Klamath Falls and ride several hours on a bus to meet the other train. If I were to book an Amtrak trip that involved a connection, I’d try to arrange it so that we had an overnight stay in between.

Portland’s public transportation is awesome. There was a light-rail MAX station right outside our hotel, and it took us everywhere we wanted to go while we were in town, including the Saturday Market and the zoo. A day pass for an adult was just $5. Parking at the zoo alone would have been $4, and a hassle, since there are limited spaces. When it was time to leave, I took the red line out to the airport to pick up our rental car–easy peasy.

Check out the artist/farmers markets. Speaking of the Saturday Market: I was blown away by many of the vendors there. This weekend market along the river features some really skilled craftsman offering handmade stuff at reasonable prices. I stocked up for Christmas.

Splurge a little. My daughter’s a huge fan of the Great Wolf Resort and its indoor water park south of Olympia. The rates in the summer can be steep, but my sister and I decided to split the cost of a Kid Cabin room with bunk beds. That way, we got to spend more time together, our kids had a ball and we were each out of pocket $160 rather than $320.

Peach fritter with cream cheese? Might want to skip that. My friend Michelle Rafter suggested we meet at VooDoo Donuts for a treat. Yes, the long wait was worth it, but no, I don’t think I’d order the peach fritter again–it was almost as big as my head. Next time it’ll be the maple bacon donut, for sure.

Now available: My new book!

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Do you have questions about money? Here’s a secret: we all do, and sometimes finding the right answers can be tough. My new book, “There Are No Dumb Questions About Money,” can make it easier for you to figure out your financial world.

I’ve taken your toughest questions about money and answered them in a clear, easy-to-read format. This book can help you manage your spending, improve your credit and find the best way to pay off debt. It can help you make the right choices when you’re investing, paying for your children’s education and prioritizing your financial goals. I’ve also tackled the difficult, emotional side of money: how to get on the same page with your partner, cope with spendthrift children (or parents!) and talk about end-of-life issues that can be so difficult to discuss. (And if you think your family is dysfunctional about money, read Chapter 5…you’ll either find answers to your problems, or be grateful that your situation isn’t as bad as some of the ones described there!)

Interested? You can buy this ebook on iTunes or on Amazon.

Zombie debt and the Supreme Court

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This may be a first: I’ve been cited to the Supreme Court.

Specifically, a column I wrote back in 2006 about “zombie debt” was cited in a brief filed by AARP, the Consumer Federation of America, the National Association of Consumer Advocates and other good folks for a case known as Marx v. General Revenue Corp. The case is about whether someone who lost a lawsuit against a collector can be forced to pay damages if the lawsuit wasn’t filed “in bad faith and for purposes of harrassment.”

Olivea Marx sued debt collector General Revenue Corporation after it contacted her employer to find out about her employment status. Marx believed that General Revenue’s action violated the Fair Debt Collection Practices Act. She lost, and the U.S. Court of Appeals for the 10th Circuit ruled she had to pay more than $4,500 to cover the collector’s legal costs.

The Federal Trade Commission, the Department of Justice and the Consumer Financial Protection Bureau also have weighed in against the decision, saying it was inconsistent with the FDCPA, which says people who lose cases against collectors must pay defendants’ litigation costs only if the consumers sued in bad faith or for purposes of harassment.

Collectors complain about frivolous lawsuits. Consumer advocates counter that more lawsuits would be filed if people truly understood their rights. The AARP/CFA brief notes that there isn’t much regulatory enforcement of fair debt collection practices laws, which leaves private action in the form of lawsuits brought by consumers. Debt collection already tops the list of industries that draw FTC consumer complaints; imagine how much bolder collectors might be if they could win damages against anyone who sued them and lost.

 

Wealthy families may be missing an opportunity to save

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This post won’t be relevant to the vast majority of you. But if you’re rich or have rich parents, listen up.

There’s a window of opportunity right now to reduce future estate taxes by moving money out of large estates. People who don’t take action could be missing a chance to save their heirs a bundle.

Here’s the deal: Currently, the estate tax exemption limit and the gift tax exemption limit are both $5.12 million. Both are scheduled to revert to $1 million after Dec. 31.

What that means is that wealthy people can give over $5 million away (over $10 million for a married couple) without owing any gift tax on that transfer. Such gifts can reduce the size of the wealthy person’s estate, so that the estate tax bill will be lower when he or she dies.

The money can be given away directly, or put into certain kinds of trusts. Any good estate planning attorney can outline the possibilities. If you’re planning to pass money to your kids, or a business, or real estate, it’s worth reviewing these.

Interestingly, a recent survey from U.S. Trust found two-thirds of the wealthy folks it polled hadn’t taken advantage of this opportunity and didn’t plan to do so. The survey respondents all had a minimum of $3 million in investable assets, with 31% having $5 million to $10 million and 32% having more than $10 million.

Now, it’s possible that Congress with pass some kind of patch or extension of the current exemption limits. It hasn’t been able to agree on much late, of course, but that can always change.

Still, if you’re concerned about estate taxes, it would make sense to meet with both a fee-only financial planner (to see if you can afford to give money away) and an estate planning attorney to see if it makes sense to pass some money along to your heirs now, rather than waiting until death.