Book Review – The Psychology of Money. Likely the best book I read this year

I waited for this book to come out for a while, and it surely doesn’t disappoint. The Psychology of Money by Morgan Housel is an excellent book on personal finance, our thinking towards money and how that drives a lot of our decisions in life. Not only does the book contain a lot of wisdoms and high quality content, but it is also well and crisply written that you can finish it in a weekend, unlike a lot of other books that are unnecessarily lengthy.

If you care about growing your net worth, investing and making important decisions in your life (who doesn’t?), I really recommend this book. It will transform what you think about money and life. Below are a few nuggets from the book. Have a nice weekend!

The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people.

Few people make financial decisions purely with a spreadsheet. They make them at the dinner table, or in a company meeting. Places where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together into a narrative that works for you.

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

“At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have … enough.”

The idea of having “enough” might look like conservatism, leaving opportunity and potential on the table. I don’t think that’s right. “Enough” is realizing that the opposite—an insatiable appetite for more—will push you to the point of regret.

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

Think of it like this, and one of the most powerful ways to increase your savings isn’t to raise your income. It’s to raise your humility.

Be nicer and less flashy. No one is impressed with your possessions as much as you are. You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration. And you’re more likely to gain those things through kindness and humility than horsepower and chrome.

Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong. Because it’s never as good or as bad as it looks. The world is big and complex. Luck and risk are both real and hard to identify. Do so when judging both yourself and others

Less ego, more wealth. Saving money is the gap between your ego and your income, and wealth is what you don’t see. So wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future. No matter how much you earn, you will never build wealth unless you can put a lid on how much fun you can have with your money right now, today

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

Jim Simons, head of the hedge fund Renaissance Technologies, has compounded money at 66% annually since 1988. No one comes close to this record. As we just saw, Buffett has compounded at roughly 22% annually, a third as much. Simons’ net worth, as I write, is $21 billion. He is—and I know how ridiculous this sounds given the numbers we’re dealing with—75% less rich than Buffett.

Why the difference, if Simons is such a better investor? Because Simons did not find his investment stride until he was 50 years old

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

Savings in the bank that earn 0% interest might actually generate an extraordinary return if they give you the flexibility to take a job with a lower salary but more purpose, or wait for investment opportunities that come when those without flexibility turn desperate.

If you have flexibility you can wait for good opportunities, both in your career and for your investments. You’ll have a better chance of being able to learn a new skill when it’s necessary. You’ll feel less urgency to chase competitors who can do things you can’t, and have more leeway to find your passion and your niche at your own pace. You can find a new routine, a slower pace, and think about life with a different set of assumptions. The ability to do those things when most others can’t is one of the few things that will set you apart in a world where intelligence is no longer a sustainable advantage

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

The idea is that you have to take risk to get ahead, but no risk that can wipe you out is ever worth taking. The odds are in your favor when playing Russian roulette. But the downside is not worth the potential upside. There is no margin of safety that can compensate for the risk.

Room for error does more than just widen the target around what you think might happen. It also helps protect you from things you’d never imagine, which can be the most troublesome events we face.

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

Where debit meets credit – This debit card features credit card benefits

I came across an interesting startup called Point, which offers Point App and Point Card. Point App is a mobile wallet application from which you can apply for and manage your Point Card. Point Card is a debit card that offers benefits similar to those of a credit card. Benefits include 5x points on subscriptions such as Netflix, Spotify, Hulu and some others, 3x points on food delivery & ride share, 1x points on everything else, no foreign transaction fees and more. Instead of banking on your missing your payments, Point makes money from interchange fees which are a small percentage of your spend and a subscription fee. In order to use Point Card, a customer must pay $7/month or $5/month on an annual plan.

I think this card will be helpful to those who are conscious of their budget and interested in credit-card-like benefits. 47% of Americans carry credit card debt that amounts to $890 billion in total in Q1 2020. Failure to make payments on time results in a high interest which often comes in the range of 13% – 26%. Further inability to make payments repeatedly will put a revolving customer in a vicious cycle as in that case, compounding interests work against him or her. I work for a bank and a credit card issuer and let me tell you: we want you to be delinquent on your credit card debt. It’s a significant source of revenue and profit to issuers. With Point Card, the risk of delinquency is taken away as you can only spend money that you actually have. There is no temptation to make impulsive purchases on credit and break personal budget.

Point Card may not make sense for every one, though. I mean, if you are willing to pay a few bucks a month to have a cool-looking debit card and some nice features that mimic those of Apple Card, by all means. If you want to break even on a $5/month annual subscription at 1x points redemption rate, you’ll need to spend at least $500/month for this investment to make sense financially. If a family puts all utilities, car insurance and subscriptions, and other discretionary expenses on a Point Card, it can easily exceed $500 while the family can avoid the risk of delinquency.

I do think it’s an interesting concept that can appeal to a group of consumers. As a fan of personal finance, I want to see more folks in control of their own finance and stay away from the temptation from card issuers. I hope that as Point scales and continues to be nimble without a big budget in marketing as well as physical branches, it can offer more rewards to attract more customers.

Book review: The Wealthy Barber Returns

I saw a hedge fund manager recommend this book on Twitter, but accidentally grabbed the newer version instead of the recommended original. Nonetheless, here is my review. This short and easy-to-read book which is a compliment contains some common sense regarding personal finance. If you just begin to dip into the personal finance space, this book can be a good place to start, though I am sure there are better books. If you want to enrich your personal finance knowledge, there may be some ideas from the book that can be interesting. If you live in Canada, this book may even be more interesting as the author spent a significant part of the book discussing matters specific to the Canadian systems only.

The two main take-away points from this book, if that’s all you will leave it with, are this: 1/ live below your means and 2/ save early.

There is no surer way to approach financial independence than keeping your expenses below your income. In fact, the lower your expense is than your income, the better. It’s quite common to see folks who spend most or all of their income every month. Those are the paycheck-to-paycheck folks. When life throws them a twist as it very often goes, there will be no saving for a rainy day. If you look at the current pandemic (as it is still going on), not only is it not a rainy day, it is a freaking storm. People lose jobs and health insurance. Income is gone, but bills are still there to pay. In fact, 40% of Americans are reported not to have $400 for an emergency. That’s so crazy to think about. Even though the idea of living below your means is so laughably obvious, the reality clearly shows that it is a foreign concept to many.

The book emphasizes a key trick in making sure that you save money every month: save before you spend the rest, not spend and save the rest. Say, if you earn $3,000 a month, put 10-20% somewhere as savings and spend the rest. That approach allows you to save at least $300 a month. After two months, at least you can say that you are NOT among people who don’t have $400 in cash for an emergency. On the other hand, if you decide to save whatever is left after the first 28-29 days of the month, you likely won’t save much. As human beings, we are terrible in self-control.

“You don’t have to become a miser and live a life of austerity. You just have to exercise a little discipline and a little common sense. You’re probably wondering, “If that’s the case, why aren’t there more successful savers? Why haven’t we all been able to slightly reduce our spending?” The blunt answer? A little discipline and a little common sense are a little more than most of us can muster.”

Excerpt From: David Chilton. “The Wealthy Barber Returns.” Apple Books.

The second key take-away is that you should start saving early. The earlier and more consistent you save, the better. Instead of typing out why you should, I’ll let these charts from JP Morgan demonstrate the power of compounding interest, which is usually called “the 8th wonder of the world”

chart jp morgan retirement
Source: Business Insider

As you can see, the earlier and longer you save, the more compounding interest works in your favor. To reach $1 million at retirement, you can either save $361 monthly, starting at the age of 20, or save $1,400+ a month at the age of 40. Which one do you feel is more daunting? Especially given the more responsibilities and expenses that come with being older? Exactly!

There are other topics addressed in the book such as:

  • If someone asks you to do something that involves spending, practice saying “I can’t afford it”
  • When you should take out a line of credit
  • What is good debt and what is bad debt?
  • A basic primer on index funds and why you should strongly consider them as an investment vehicle

Overall, I think the book does offer value. I can see that it’s even more helpful to teenagers who are interested in building wealth and strategizing their life to financial independence and happier life. To those who may argue that saving fir the future will come at the expense of today’s sacrifice and the enjoyment of life, here is what the book argues, which I agree with

One of the most damaging misconceptions in personal finance is that saving for the future requires sacrifices today that lessen people’s enjoyment of life. Surprisingly, it’s quite the opposite! People who live within their means tend to be happier and less stressed. That’s true not only for the obvious reason — they know their financial futures look bright — but also because they’re not consumed with consumption. They’re not in the emotionally and financially draining race to acquire the most stuff they possibly can. A race that, it should be noted, has no finish line and thus no winner.

Excerpt From: David Chilton. “The Wealthy Barber Returns.” Apple Books.

Buying or renting a place

Let me save you the suspense. This answer to this question is pretty much down to each individual case. It differs from one person to the next. Nonetheless, I still think it’s legitimate to put on the table some arguments. Personally, I prefer renting.

It’s not “building or increasing immediately your equity”

Some of my friends, after settling on the decision to become a home owner, told me that they wanted to start building equity. However, what exactly does “building equity” mean? In the trading world, equity means stocks. In the accounting world, it’s the difference between total assets and total liabilities. Hence, equity in the personal finance world simply refers to the difference between one’s assets and one’s liabilities.

Let’s say if you have $100k in cash and want to get $300k in mortgage, in addition to $50k from your own money, to buy a $350k house. Excluding all the administrative expenses related to buying a house, the moment you buy that house, your equity doesn’t increase immediately. Your original equity was $100k since that was what you had in assets and no liabilities. After you buy a house with the mortgage loan and half of your cash, the house and the leftover money will push your asset to $400k, but your liabilities will also increase to $300. The notion that your “equity” is built or increased immediately upon the closing of a house is simply false in my opinion.

“It’s a high return investment”

Yes it is, but with caveats. When you invest in stocks, unless you are day-trading which may involve fees and continuous monitoring, there is no other expenses involved. Personally, I spend time on researching which stocks I like and want to buy. Afterwards, it’s a case of “sitting on my ass and letting my return compound”. I don’t spend a single dollar on anything else. To become a home owner; on the other hand, can involve a lot of other expenses such as home improvement, broker fees, house evaluation fees, mortgage payments, maintenance, housing taxes and so on. One of my friends was told by a seller that she would have to pay to repair the street leading to the house in question after closing the deal. It would have added another $20,000 to the equation.

Similar to the fact that noone can tell with certainty whether a stock will go up or down, noone can predict exactly when to sell a house to get the biggest profit. Take this current crisis as an example. The housing market was great before February. After the crisis hit, it is in shambles. It is an opportunity for those who can afford to buy as houses are cheaper, but it’s an absolute disaster for those who were poised to sell as the prices won’t be as good any more. The point is that owning a house comes with a lot of expenses that can make what seems to be theoretically a sound investment no longer sound. Of course, if all works out well, investors can reap out much bigger rewards from a house than from owning stocks. One has to be aware that there will likely be numerous expenses involved and that a big payout is not guaranteed.

An unpredictable event can turn your investment on its head

Ask yourself this question: would you borrow to invest in a stock that you don’t know will increase in prices?

If the answer is no, then put some more thoughts on whether it’s a good idea to borrow money to invest in a house. Institutions have teams working 8-10 hours a day to come up with models that can help the institutions make as much money as possible with their assets. Do you think car dealerships put you on a payment plan with lower downpayment out of the goodness of their hearts? Do you think banks give you a mortgage simply because you are a good and nice person? No, they do it because they believe that they can have a reasonable return on investment. If you default on the payments, your car or house or your other assets can be collaterals. If you think you own a house, try to default on your 29th or 30th year of your mortgage and see who actually owns the house. Covid-19 put many out of their jobs and stripped their ability to pay mortgages. Nobody could foresee this pandemic. How many can actually factor this kind of crisis in their investment plan?

The way I look at the idea of owning a house is that I’d have to borrow money at a significant interest (compounding), endure a lot of expenses in a foreseeable future and still have no desirable outcome guaranteed. It’s an awful lot to ask. That’s why I prefer renting and investing money into stocks which offer a much better degree of liquidity, a much lower level of maintenance and still reasonable odds of return on investment. Of course, when there is an emotional reason to invest in a house, there is no counter argument as it’s purely personal. From purely a logical investment perspective, my choice is rent, for the time being.

Pandemic creates an inflection point

There is no need to talk about the havoc that this pandemic has brought on to our society. Everybody in the world should all feel it now. Terrible as it is, the pandemic presents an opportunity for us to look at the issues that we overlook in normal times

Paid sick leave

The US is one of the only few, if not the only country, where citizens don’t get paid sick leave. When there is a risk of a wide-spreading pandemic, the lack of this benefit forces workers to go to work even though they may be sick; which increases the threat of a spread. After this catastrophe blows over, perhaps it is time for us to bring this issue to the national spotlight and to pressure lawmakers into taking actions

Stock buybacks and corporate bailouts

The fact that corporations are asking for a big bailout after years of continuous stock repurchases and lucrative executive compensation is inexcusable and intolerable. While there is a case to be made that bailouts chop off a body part to save the body and corporations should be forced to return the money once healthy again, it doesn’t make it right the fact that tax payers’ money is used to bail out companies whose failure to prepare for a macroeconomic risk is the executives’.

Regulations over gig economy

For months, gig economy companies such as Lyft and Uber have fought regulations that would require them to treat workers as employees. What that means is that workers would be entitled to healthcare insurance, paid leave and other benefits that white-collar workers usually enjoy. Some folks I saw on Twitter, most from Silicon Valley, even blasted the regulations. However, a study by The Hustle may change perspectives on this. According to The Hustle, 57% of the surveyed drivers would still drive because that’s the only way to make ends meet. Some are not even making enough to pay for their rented vehicle. Furthermore, the lack of health insurance means that they and their family are vulnerable than ever. In light of this crisis and the impact on gig economy workers, is asking for a well-designed regulation to protect workers too much to ask?

Source: The Hustle

Healthcare system

The lack of tests in the US, compared to what is going on in other countries, is seriously shocking. Ask any American and it’s very likely that you will get told that the US has the most advanced healthcare system in the world. That’s true…for rich people and for very sophisticated treatments. However, when it comes to healthcare for ordinary folks and normal ailments, there is a lot to be desired for in the US. The country had disappointingly managed to fail to deliver a universal healthcare solution even before the pandemic broke. Now, the case cannot be made even more pressing. Recently, it’s reported that a woman was hit with a $35,000 bill for COVID-19 treatments and tests. How was that acceptable? It could happen and bankrupt any of the middle class Americans, or, worse, paycheck-to-paycheck folks.

Work from home

This one is polarizing. Proponents of WFH must be ecstatic to make their case when essentially everybody is required to work remotely now. On the other hand, some will experience cabin-fever, frustration and the drop in productivity. Personally, I prefer going to the office. I prefer meeting my colleagues face-to-face and have a setting that helps me focus on my work more than my comfortable home.

Furthermore, WFH presents an opportunity to test a company’s infrastructure. For most of last week, my colleagues and I experienced a laggy and slow connection. Even though home internet bandwidth can contribute to the issue, it’s undoubtedly our company’s network being not set up for a spike in traffic. Additionally, mass remote working can change how managers keep staff productive and keep track of their work.

Personal finance and change in lifestyle

Many of us now face, if you haven’t already, layoff or a drop in salary as companies are downsizing to survive the pandemic. Income may dry up, but the bills will still be there. Without a fund for a rainy day like we are going through, a financial struggle or bankruptcy is likely. The 11-year bull market since the 2009 crisis which many didn’t experience makes folks become complacent. After this COVID-19 disaster, it’s a great time to ponder hard decisions and establish sensible personal finance practices.

This is a scary and confusing time. But what happens in the next few months will be very interesting as decisions are to be made.

Soaring student debt

The Walls Street Journal had an unbelievable and scary article on the state of student debt in this country

A record $89.2 billion of student loans was in default at the end of June, New York Federal Reserve data show. Of the $1.48 trillion outstanding, 11%, or $160 billion, was at least 90 days behind on repayments—and the true rate is likely double that, because only half the loans are currently in repayment.

Source: WSJ
Source: WSJ

It never stops amazing me how students in this country can get into so much debt by trying to acquire education and the means to make ends meet. A high school friend of mine has a 6-figure student debt with monthly INTEREST payment of $500. I personally know people from my university in Omaha who accumulated debt and struggle to find jobs. Jobs may wait to meet us, but the bills and interest usually can’t wait to break us.

There is a proposal from some politicians to wipe out student debt. It’s impractical and what problem does it solve? The debt will fast pile up again for the next generations. I don’t think anything will change unless there are solutions to the issues:

  • Ridiculously expensive tuition fees for degrees that fast decrease in value
  • Laughable expensive books that benefit no-one but publishers and professors who work with them
  • Lack of knowledge on personal finance by students

Of course, the reality is highly complicated. Yet, I believe it would be hard to think of a worse scenario than what we currently face. Real solutions should be in place, yet the graph above shows that none has been since 2004. Else, the amount would have gone down instead of going up. If other countries such as those in Nordic countries, France or Germany or many other in Europe can get it done, why can’t the US?

Average car monthly payment

I came across this tweet from a Twitter user that is known for passion and knowledge about the micro-mobility area

A bit of tracking down his comment section led me to this article which is likely his source

Source: Nerdwallet

The figure doesn’t include other expenses such as gas, parking or insurance. A monthly insurance can go up to $100 easily and parking fees in my current building are $100 as well. Throw in gas expense and suddenly the cost of ownership can swell up to a significant amount. The estimate doesn’t take into account some ad-hoc expenses such as maintenance, decoration, paperwork…

If your income can easily cover the monthly expenses and a car is an absolute necessity every day; which is the case for many here in America, then owning a car is fine. The issue; however, is that there are many whose income isn’t stable or big enough to cover the expenses. They get themselves into debt and financial troubles for owning a car or upgrading one.

Buying a car is a big investment in my opinion and should be taken seriously.

I was a student for 2.5 years in a town where public transportation is horrible and have lived in the US for 3 years. I don’t drive and I can honestly say I survived quite well. If even I can do it, it’s possible.

Having more by wanting less

I was talking to a friend who kept telling me that she didn’t have enough time for all she wanted to do: translation work, teaching, preparing curriculum, researching for PhD program and running a business of multiple AirBnb listings. Many of us have the same issue: day time job, workout, cooking, eating, socializing, reading, side projects, family, friends, 8 hours of sleep, transportation, you name it.

The 24 hour allocation every day isn’t going to change. The more we want to do and complete, the more we feel that there isn’t enough time. If time isn’t going to expand, I believe that the solution to this issue is to want less. If we decrease the number of activities, we’ll have more free time on hand.

The concept can be applied to personal finance as well. I came across a report on how Americans incur more debt for weddings

The Washington Post reports that these companies—amongst them Prosper, Upstart, and Earnest—are offering five-figure-plus loans with up to 30% interest. Unlike other types of personal loans (which, in 2019, typically have interest rates between 5% and 36%, according to personal finance site Value Penguin), these loans are specifically for brides and grooms to help pay for their special day.

According to the Post, these lenders say that, already in 2019, they have issued up to four times as many “wedding loans” as they did last year for couples paying for their own weddings.

What’s driving this trend? It seems to be the confluence of several different factors. First, the majority of those taking out wedding loans are millennials, a demographic that is under substantially more financial pressure than previous generations. Millennials are spending more money on things like education (or, rather, paying off student debt), healthcare, and rent; their average net worth is $8,000, 34% less than Americans of the same age 20 years ago. That leaves a lot less money to spend on extravagant nuptials.

On top of that, the average cost of a wedding is rapidly rising. According the Brides‘ 2018 American Wedding Study, a wedding in 2017 cost around $27,000. A year later, in 2018, that number nearly doubled to $44,000.

Adding to that cost is the so-called “wedding tax,” the premium that party vendors—such as photographers, caterers, and florists—place on a product or service when its meant for a wedding.

Young Americans are racking up debt for Instagrammable weddings

A colleague of mine once shared his financial concerns about his upcoming baby and wedding. Apparently, he would have to care about paying for the wedding, the baby’s birth, a new car as his current one isn’t friendly to babies and day care. All of them are significant expenses. In many cases, many of us have only one income and a lot more expenses. As the number of expenses increase, the disposable income left shrinks and debts can rack up. Either we have to grow more income sources or expenses have to be cut down so that there is more free money in case of emergencies and more freedom. Obviously, having a secondary or third income besides a day job is more difficult than eliminating unnecessary expenses. So again, to have more, we should want less

Weekly readings 20th April, 2019

Half of Instacart’s drivers earn less than minimum wage, labor group claims. This is indeed an issue, but I am not sure if there is any wriggle room for Instacart to increase the minimum wage. From what I understand, it’s already a low margin business. Any pay raise for drivers will cut into the margin even further.

America’s Biggest Supermarket Company Struggles with Online Grocery Upheaval. A story on how Kroger has been transforming itself to stay competitive and avoid the ultimate outcome

Zoom, Zoom, Zoom! The Exclusive Inside Story Of The New Billionaire Behind Tech’s Hottest IPO. A profile of the CEO of Zoom, an imminent tech IPO this year. Eric Yuan was denied a US visa 8 times before getting one on the 9th try. Let that sink in.

Here’s How TurboTax Just Tricked You Into Paying to File Your Taxes. I used Turbo Tax this year to file my taxes and ended up paying $100 or so for the service. Though the service is advertised as free, there are numerous hidden fees that will end up on the final page of your application if you are not careful. Plus, several weeks ago, companies like Turbo Tax successfully lobbied Congress to stop IRS from building an online portal, which is a terrible decision.

In African Villages, These Phones Become Ultrasound Scanners. An example of how practical technology can positively influence and save life.

If you can. How millennials can get rich slowly. A short yet great read on personal finance.

The system needs to be improved and we need to be better

I came across some disturbing facts today. According to the USAToday, below are a few ramifications from the most recent shutdown:

Almost a quarter reduced or eliminated spending on health or medical expenses for themselves or their family

One in four visited a food bank

Forty-two percent took on new debt to pay for day-to-day expenses and bills. Two in five turned to family or friends, while one in five borrowed from a bank or credit union

Meanwhile, the Federal Reserve Bank of New York released the following:

Auto loan and student debts reach 1.265 and 1.442 trillion dollars respectively. Trillion with a T and one trillion is a thousand billion. Astonishing numbers. Clearly, something is horribly wrong right now when many Americans are living paycheck by paycheck and saddled with debt for things that are supposed to make their life better, namely education and cars. That’s not to mention mortgage or healthcare in emergency cases yet, but you should get the picture.

The facts above mean that many Americans will have little to almost no safety net. If a paycheck stops coming, all hells break loose. Debt payments wait for no one. Food must be put on the table. Utilities bills must be paid. Consequently, all the best years of our lives, theoretically, namely our 20s and 30s, are dedicated to just work and pay our debt. I mean, if we have to spend hours to just survive with little freedom, how is it different from modern slavery? How sad is it that we can’t afford to take time off to enjoy life because of the debt over our head? Or how frustrating is it to not have the freedom to choose and do what we want for the same reason?

I am no policy expert and I understand that it’s complicated to fix any of those issues. But there are things that we can definitely do, in my opinion, on an individual level because I totally believe that some efforts and adjusting our lifestyle can steer us away from a giant amount of debt.

Avoiding a high tuition tab

I met a few guys at UNO who dropped classes after already committing tuition fees for those classes’ credits. Two people in particular considered dropping out after two years into their degrees at the time. Understandably, there are some cases in which we all consider changing majors and hence, future career paths, but such cases are not the majority. Dropping out of classes is just an irresponsible use of money and time. Hence, finishing out classes and degrees will help us avoid getting more debt

I came to the US in 2016 with a graduate assistantship at school. In exchange for 20 hours working at school, I had all tuition fees and around 70% of my insurance waived. At University of Nebraska at Omaha, it meant around $7000 a semester, including summer courses. In total, I saved $49,000 of tuition fees after 7 semesters at school, let alone the insurance subsidy on top of that. If you don’t have a better alternative (a paying job), such a position can mean a lot of money saved and debt avoided.

Lower your textbook expense

High textbook prices are ridiculous in the US and Canada. Brand new textbooks which are usually required by professors for 4-5 courses a semester can amount up to $1,000. Being smart about how to spend on books can lead to significant savings. I wrote about two ways to save on book expense.

Take advantage of disruptions in education

Recent developments in the industry bring about more opportunities for affordable education for students. I wrote a bit about Lambda here. Basically, Lambda allows students to have intensive courses in IT with no down payment in advance. Upon graduation and after securing a job paying more than $50,000/year, students will pay back 17% of monthly salary for two years. The cap is $30,000 and if for some reasons, you get fired, no payment is required until you are employed again.

George Tech offers a $7,000 Master degree in Computer Science while WSJ reported the rising popularity of free college programs in certain states. If possible, take advantage of these affordable options. In fact, if you are an American or a permanent resident, you are luckier than immigrants like I am. The option above from Lambda is only available now to US Citizens or US Permanent Residents or EU Citizens. The rest has to make a down payment of $20,000.

Hold off on that new car

I traveled to Philadelphia last summer. A friend there told me about her roommate getting an auto loan for a new car on top of her 6-figure student debt. While I don’t think the story is typical of every student, it’s not an outlier either. It just doesn’t make sense to get a loan on something that doesn’t create value and instead diminishes in value over time. If a guy like Warren Buffett can live well and happily with an old car, I think broke students or graduates should be fine with driving used cars.

Study personal finance

It’s a pity that we don’t get to learn much about personal finance at school. I personally believe that it’s one of the most important things we should get out of college. Nonetheless, it will be immensely helpful to learn it in your free time and apply it to our life. A lot of our financial trouble comes from the lack of knowledge on personal finance and financial planning.