Get in Line – getting rich as a life goal

I am not in the habit of reading USA Today but today’s cover story about GenNext caught my eye. The article reports that “eighty-one percent of 18- to 25-year olds surveyed in a Pew Research Center poll said getting rich is their generation’s most important or second-most-important life goal.” Any wonder why there are so many personal finance blogs??

We all know that it is statistically impossible for more than half of any population to be better than average. Don’t let this distract you from your goal. In my opinion, it just makes the game more interesting. Just like the challenge of getting into a top school, achieving this goal will require you to be at the top of your game. Recognize that you don’t have an original thought and make sure you have a plan to succeed.

One plan that I think works is to follow the “Lessons to Live By” (shown in the sidebar). Let me go out on a limb – embrace these seven lessons and it will be impossible not to achieve your financial goals. But, you do need to work each of these lessons – a focus on one or two is unlikely to do the trick. All you need to do is:

1. Find good teachers and mentors


2. Become financially literate


3. Budget & understand your income and expenses


4. Pay yourself – save 10% of your earnings.


5. Borrow cautiously.


6. Invest prudently


7. Be charitable to the less fortunate.

Still not clear? Well stay tuned. My next posts will address each of these seven topics one by one.

And don’t worry about that average thing. As President John F. Kennedy said, “a rising tide lifts all boats.” This focus of GenNext could have good implications for the broader society if properly channeled. You may be average but if we raise the average, both in America and worldwide, we will all be better off!

If You Don’t Know Where You Are Going, Any Road Will Take You There – the importance of setting goals

Did you have some thoughts about setting goals for the New Year but let them pass? My experience is that having these goals are one of the most important steps in achieving financial independence. This is a good time to focus on your main goal for this year and your long-term goal.

I spent the first 10 years or so of my business career focused on doing what it took to deliver excellent service to my clients. Then I had a wake up call (a denied promotion) that got me to focus on dedicating my effects more to my financial situation than my clients'. I call it my Johnny Paycheck moment. If you don’t know what I am talking about, you are missing a great song. Have a little listen to Take This Job And Shove It

With that as my theme song, I became determined that I would put myself into a position where I would never have to work again. I figured out the “number” I needed to make me my own boss. My husband was not as sold on this goal but agreed to go along for the ride. Up until this time, we did the bare minimum in taking care of our financials, we had no debt to speak of and had some retirement savings. In order to achieve my goal, however, I knew that I would need to do better than that. We needed to start saving/investing on a after-tax (non-retirement) basis.

We reached our goal within 10 years. Yes, once he saw it was achievable, my husband started to become a believer. Sure we had some lucky breaks along the way such as promotions and good returns on our investments. My view, however, was that “the harder I worked, the luckier I got.” I achieved this goal because it was a primary focus in my life. For those of you familiar with The Secret, you could even say I attracted it.

It is easy to say you have a goal. What you really need to do is to make sure that you have the proper tools to make that goal achievable. I found an article by Bruce Wares, entitled, The Importance of Setting Goals, that says it better than I can. Have a read.

Mr. Ware’s article should help you in your goal setting. Remember, effective goals are conceivable, believable, achievable, measurable, controllable and have a singleness of purpose. Ensure your success by writing down your goals. Keep reminding yourself of the goal. Whenever, I started to go off course, the lyrics “take this job and shove it, I ain’t working here no more” came into my head!! Find a similar way to motivate yourself to success.

Book Review - Altas Shrugged by Ayn Rand

I first read Atlas Shrugged when I was about 17 years old. It was recommended to me by the manager of a Denny’s Restaurant during a job interview. I still find a certain amount of irony in that but I am forever grateful for his recommendation (even through I can’t remember his name).

Atlas Shrugged and Ayn Rand’s other book, The Fountain Head, really shaped my thinking about my purpose in life and capitalism. You might also be interested in knowing that Alan Greenspan, the former fed chairman, was a close friend of Ayn Rand and author of articles published in her books and magazines. My own personal view is that this should be required reading before anyone could register to vote. Fat chance but I can dream can’t I?

Ayn Rand had a unique place in history that, in my opinion, provided her with some interesting insight into political and economic systems. She was born in czarist Russia. As a teenager she was an eyewitness to the Kerensky and Bolshevik Revolutions. In her early twenties, she lived under communism in Crimea. After that, she moved to America.

The Objectivism Reference Center provides a good summary of the book. Rather than create my own, I have noted their summary:

“The plot is framed as a mystery story, but with strong elements of romance and science fiction, as well as Rand's trademark philosophical ideas. There are actually two mysteries: one about why so many of the world's most productive minds are disappearing, the other about who invented a revolutionary new kind of motor. As you might guess, the solutions to the two mysteries are closely related. Readers follow the struggles of Dagny Taggart, a railroad executive, and Hank Rearden, a steel magnate, as they attempt to answer both of these questions and stave off the collapse of an increasingly irrational and collectivist society.”

The book really does have an interesting story line but it can be a bit heavy with Ms. Rand’s discourses on her philosophy. I’ll confess that I skimmed over these parts. Just understanding the plot, enables you to understand this philosophy, Objectivism, well enough. For a first read, I wouldn’t focus too much on trying to fully understand Objectivism. If you are looking to understand this better, I suggest you go to The Ayn Rand Institute web page which includes Ayn Rand’s discussion on Objectivism in her own words. She said that Objectivism, holds that:

1. Reality exists as an objective absolute—facts are facts, independent of man's feelings, wishes, hopes or fears.
2. Reason (the faculty which identifies and integrates the material provided by man's senses) is man's only means of perceiving reality, his only source of knowledge, his only guide to action, and his basic means of survival.
3. Man—every man—is an end in himself, not the means to the ends of others. He must exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself. The pursuit of his own rational self-interest and of his own happiness is the highest moral purpose of his life.
4. The ideal political-economic system is laissez-faire capitalism. It is a system where men deal with one another, not as victims and executioners, nor as masters and slaves, but as traders, by free, voluntary exchange to mutual benefit. It is a system where no man may obtain any values from others by resorting to physical force, and no man may initiate the use of physical force against others. The government acts only as a policeman that protects man's rights; it uses physical force only in retaliation and only against those who initiate its use, such as criminals or foreign invaders. In a system of full capitalism, there should be (but, historically, has not yet been) a complete separation of state and economics, in the same way and for the same reasons as the separation of state and church.

While I don’t subscribe fully to Objectivism, the points about every man being an end in himself and capitalism as the ideal political-economic system made so much sense to me as I absorbed the story of Atlas Shrugged. The book discusses many headlines of the day. As you read the headlines in the book you might be amazed at how they mirror the headlines of today. In my opinion, Atlas Shrugged also makes it easy to see how government interference can result in negative consequences.

I recently reread this book as I was concerned that it’s “me” focus was inconsistent with my faith. I found that it really wasn’t. I think that as you focus on doing what is right for yourself, you also end up doing right by others. Take my life as an example. I came out of college hell-bent on making money. And, to be honest, it was my singular focus for many years. During this time, I never lost sight of my personal values and once I achieved my goals, I started to focus on how I could give back to society. I think I have contributed more to society by focusing on my own goals first.

Looking for Some Quality Time? -- Speaking Engagements

As you read my blog, I hope you can see that I am passionate about these subjects. I have an important message to deliver and want to reach people while they are young. The earlier you start thinking about these topics, the easier it will be to become financially independent.

My goal is to empower as many people as possible. I intend on using a number of tools including this blog, public speaking and perhaps books or recorded presentatons down the road. I believe that my own story is a powerful testament. With the proper education, motiviation and discipline people can become financially independent. There is no need for get rich quick schemes!

I am available to speak at your events -- small or large -- on any of these topics. I can deliver one of my standard presentations or tailor the presentation to your specific group. If you would like further infomation please contact me at moneyempowerment@yahoo.com.

A Word on Book Reviews

In her book,Management Skills for Everyday Life: The Practical Coach (2nd Edition)Paula Caproni identifies five skills that are hallmarks of effective managers today:

• invest in lifelong learning and critical thinking
• Develop self-awareness
• Create a broad and diverse network of high-quality relationships
• Design a workplace that brings out the best in individuals and teams
• Craft a meaningful personal and professional life

I couldn't agree more with Ms. Caproni's assessment that these are critical skills for success. She talks about them in terms of effective managers but I think it can be expanded to a life lesson for everyone. I like the list because it is short and sweet and something that you are likely to remember.

Reading books is all about developing that first skill of lifelong learning. Ms. Caproni was not the first (or last) to recognize this as an important skill. Anyone into investing knows that this is a point frequently made by Warren Buffett and his long term partner Charles Munger. If you don't know about Mr. Munger, you are missing out of big part of understanding Mr. Buffett's success. Charlie Munger has a lot to say on a lot of things and usually a very good way of saying it. He agrees with Ms. Caproni about lifelong learning but says it like this:

“Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a temporary unpopularity with your peer group . . . then to hell with them.”

If you keep reading my blog you are likely to read more about Buffett and Munger. They have had a strong influence on my life. In fact, you may have noticed that Mr. Munger's book Poor Charlie's Almanack Expanded Second Edition. The Wit and Wisdom of Charles T. Mungeris on my recommended reading list. I will be writing a book review for this book as well as each one that is one my list. I will also be adding more books. I have kept the list to a few that have had the strongest influence on my life for now in the hopes that one of the titles might peak your interest . My reviews will explain what I learned from these books.

I held off writing book reviews because I wanted to figure out a way to link the book to a place where you could purchase it. I finally figured out that I could do this with the Amazon affiliate program. Call me slow, but what do you expect from someone that was a little early for the "internet generation." Anyway, I now have these links in place. In the interest of full disclosure, I feel compelled to tell you that I might make some money if you use these links to buy a book. I say might because I haven't made any yet so I don't really know how it works. I say some because, at a 4% commission rate, I am unlikely to quit my day job due to the income from these links. Ok, so I don't really have a day job but you get my point! I tell you this because if you want to support me that is great. If you have issues with the link then just don't click it. Go directly to Amazon or favorite bookstore to buy it. Or, if you really are looking to save money, check out the book at your local library. This is the sensible thing to do, but I must confess that spending money on books is one of my splurges. I don't buy Starbucks, but I do buy books! Books are one of the joys of my life and I hope I can turn you on to some good ones. Stay tuned!

P.S. I am available to review books. If you are a publisher or author and want me to review your book please contact me at moneyempowerment@yahoo.com

Now Would Be a Good Time to Start Paying Yourself – what to do with that recent raise or bonus

This is the time of year where you may have a debt hangover from spending too much during the holidays (you just didn’t want to listen to my advice in Just Don’t Do It!! did you?). Anyway, you live and learn – it is only a mistake if you fail to learn from it. It is never too late to regain the focus.

This might be a good time to rethink your saving/investment plan since you may have recently received a raise or bonus or expect to in the coming months. This is the easiest time to start or increase your allocation. You are (or should be used to) living within your means at your current pay level. You can allocate all, or a large portion, of your raise/bonus to saving/investing.

Remember, as shown in the sidebar, my fourth lesson to live by is to “Pay yourself -- save 10% of what you make”. In my opinion, this is the bare minimum to be financially prudent. If you have lofty goals such as retiring early you will need to do a whole lot better than that. How do I know? Because my husband and I had such goals and we achieved them! From our mid-30s on we directed probably close to 80% of our raises and bonuses into our investment portfolio. Sounds draconian but it did enable us to retire before we were 40. Saving this much had two important outcomes. First, it has put us into a position of being able to afford anything we want. Second, since we got used to being cautious consumers, we became less materialistic and decided that we really don’t need to have the hottest new car or biggest house – thus making the first goal much easier to achieve!

Life is all about making choices. If you recently received a raise or bonus you have a choice of what to do with it. Reward yourself by keeping it. Your plan might be different depending on your financial position.

1. If you have credit card debt or upside-down loans, use this found money to pay it off.
2. If you haven’t started a saving/investment account start it. You may want to read (or reread) my post Just Do It on how to start saving.
3. If you already are saving a percentage of your income, increase the allocation. My post Chomping at the bit? – how to start an investment portfolio might help you with this.

The best way to make sure you follow through on your intent to save this raise/bonus is to set up an automatic electronic transfer from your checking account for the same day (ok, maybe the next day) that the funds will be coming in. That way you can make sure that the money doesn’t tempt you to do something foolish. If you are not convinced, think about how the government gets its taxes. They don’t give us the “choice” to pay these taxes – the money is taken right out of our paycheck. Most of us soon learn not to even count this as our money (a topic for a whole separate conversation!). If it works for the government, why not let it work for you.

Sure you might want to take some portion of the funds and blow it on a cool new toy or entertainment. Just make sure that you don’t overdo it. My experience is that the “high” I got from watching my savings grow was much better then the temporary buzz I got from spending it on something that I didn’t need and didn’t last. When you think this way, you are well on your way to achieving financial independence.

The View is Lousy from Here -- fixing upside-down car loans

Many of you may have read my November 19, 2006 post, Paying Cash for Your Car and said, “yea right, but what if you already have a vehicle and are upside-down with the loan?”

For those of you lucky enough to have never heard that term, “upside-down loan” is the politically correct term for owing more than what the vehicle is worth. You may not have heard it because you are not in that situation. Congratulations, you can stop reading here. If you are not sure whether you have an upside-down loan, then your first course of action should be to check it out. Compare the balance you owe to the current Kelly Blue Book balance. While you are at it, you might want to take note of the interest rate on the loan because that will be the topic of a later post.

If you are upside-down, you should take no comfort in the fact that you are not alone. The Auto Industry Forum quotes research that indicates that anywhere from 26% to 40% of consumers are upside-down on these loans. You are looking for financial independence and need to do better than the crowd. You should use it as an early warning sign that you need to shore up your finances.

So an upside-down value does make life more difficult – but not impossible. You just need to remember one of the cardinal rules – stopping digging!! The last thing you should do is trade the car/truck in and roll the shortfall into a new loan. There really is no easy way out of this but you can take some comfort in learning an important financial lesson on a relatively inexpensive purchase (read this to mean you can AVOID having the same thing happen to you on your home mortgage).

We are looking to fix the problem here so I won’t talk too much about how to prevent this situation. The easy rules are 1) don’t finance more than 90% of the value and 2) keep the loan shorter than your intended holding period. If you want to read more, I suggest you read the Bankrate article, 9 ways to avoid, correct upside down car loans. One final word. Some might advise you to buy gap insurance to protect you from an upside down situation. As a former insurance executive I will tell you that, in my opinion, this is just a gimmick to raise your payments and take advantage of your need to trade in cars quickly. Holding the car longer than your loan is all you need to do. If this is an issue, then you are not learning what it takes to become financially independent. I would avoid leases for the same reason.

If you are upside-down there are three things you can do to fix it.

1. Keep and maintain the car/truck – The piper must be paid. If you are unhappy with this option, do it anyway. Just funnel your anger positively by reminding yourself that you won’t let it happen again. If you are still mad, look at item three below.
2. Try to refinance – This option, it difficult but worth trying especially if you have a very high interest rate and a relatively new or expensive car. When shopping around for a better deal you need to be careful and avoid too many credit inquires (as it will go against your credit score). You also need to make sure that you understand the terms of the existing loan and the new loan to make sure that you are not making the situation worse. You especially want to make sure that you are not extending the length of the loan.
3. Make extra payments – Use the monthly payment to remind yourself that you are digging out of a hole. Make extra payments whenever you can as these will reduce the outstanding principal and lower the amount going toward interest (more on that later)

Take heart and understand that the problem will be fixed in a relatively short period of time if you stop digging. Whatever you do, DON'T trade it in as you will be compounding the problem. And learn your lesson for your next vehicle purchase. Always plan on a loan that is shorter than the expected holding time of the vehicle!

Free Money!!!! -- finding scholarships

The other day as I was checking news on my stocks I saw an interesting headline for Walmart. “Need Money For College? Wal-Mart and Sam's Club Foundation to Reward Up to $7 Million in Community Scholarships.” The article noted that the deadline for applying for these scholarships is January 12, 2007. More information can be found at http://www.walmartfoundation.org (click on the Education tab at the top)

Besides being proud that Walmart is doing this (Walmart gets far too much negative press in my opinion), the article got me thinking about scholarships in general. If you are in school you are probably on your winter break right now – a good time to find all that free money out there! The CollegeBoard notes that over $134 billion in financial aid is available. There are very few times in life where people give you money – especially for something you were going to do anyway. If you are looking to become financial independent, it is worth the effort to seek out these opportunities. The internet eases the effort. The CollegeBoard has a great article to get you started. http://www.collegeboard.com/student/pay/scholarships-and-aid/8936.html The CollegeBoard identifies seven steps in this process.

1. Start With a Personal Inventory – taking time to identify all of your personal characteristics will expand the potential scholarship opportunities
2. Research Local Scholarships First – your town, county, high school or college may offer scholarships. Chances for these scholarships should be better since there is less competition.
3. Check Membership Organizations and Employers – the Walmart article demonstrates how organizations of all types and sizes sponsor scholarships. Look for opportunities in any organizations that you or your parents are affiliated with.
4. Use a FREE Scholarship Search Service – The CollegeBoard identifies four FREE scholarship search services that can provide you with a list of possible scholarships. I am emphasizing the free aspect of this because you should NEVER pay for scholarship information (see discussion below).
   Scholarship Search Fastweb Scholarship Research Network Express Wiredscholar
5. Contact Your State Department of Higher Education – Most states have scholarships for residents that attend college in-state.
6. Research Institutional Scholarships – You college website and financial aid office should be able to provide information about scholarships that are offered for your school.
7. Employ Scholarship Application Tips when Appling for Scholarships – remember presentation is at least half the battle. Make sure you read the How to Apply for a Scholarship article for advice on creating a winning application. http://www.collegeboard.com/student/pay/scholarships-and-aid/8937.html

So dig in and have fun! If this becomes "found" money make sure that you set some of it aside for your saving/investment portfolio. Also, make sure that you heed that advice of “if it sounds too good to be true it probably isn’t.” There are many scholarship scams out there that you need to avoid. Reading the CollegeBoard article “Can You Spot a College Scholarship Scam?” http://www.collegeboard.com/student/pay/scholarships-and-aid/408.html will help educate you on these scams. In general avoid any situations where they are charging fees or asking you for money. Don’t give out personal information unless you’ve initiated the contact and be wary of “financial aid consultants” as they can be shady and financial aid officers often resent their intervention.

The Tax Man Cometh -- income tax preparation

As unpleasant as it might be, this is a good time to start thinking about your 2006 tax return. I suspect that many of you don’t give much thought to your return. You turn it over to someone else to prepare and are happy if they tell you that you are getting a refund. While you are not alone (more than half of the 130 million returns each year are done by paid preparers), you make two critical errors when taking this course of action. First, having a clear understanding of your tax situation helps move to the path of financial independence – if you are not involved in preparing your taxes you miss a great opportunity to focus your financial goals. Second, getting a refund means that you overpaid – a clear sign that you are not managing your money properly.

So, that is the foundation for my unconventional recommendation that you prepare your own taxes this year. Yes you heard me correctly. I said you should complete your own tax return this year. The entire tax code is complicated but my guess is that your tax return is not. Also, there are several tax programs out there (TaxCut and TurboTax) that are inexpensive and do a great job at walking you through the process. Even if you have someone else prepare your return, I still suggest that you use one of these programs to prepare your return and then compare it with the “pro’s” version. There are great sales on these programs in January and you can usually find a copy for under $30. As an added bonus, you might find this software bundled with financial planning software (e.g., Quicken or Money) that you can use to start your budgeting.

If you are still not yet convinced, I will give you more to think about. Just because you pay someone to prepare your return, doesn’t mean it is correct. Last April, The Washington Post ran an interesting article that reports the results of a GAO study that revealed errors in 19 out of 19 returns brought to them to test the accuracy of work done by large chain tax-preparation firms. I encourage you to read the article yourself. http://www.washingtonpost.com/wp-dyn/content/article/2006/04/04/AR2006040401863.html

Why are there so many mistakes? Have you ever heard the term GIGO – garbage in; garbage out?. No matter how qualified the tax preparer is, if they don’t know your individual tax situation they can’t prepare the return properly. This means you have to provide them with the right information or rely on them to ask the right questions. You owe it to yourself to make sure that you at least understand what information has tax consequences so that you can provide it to the preparer. This is where TaxCut or TurboTax comes in handy. These programs walk you through a questionnaire that asks all the right questions (at least for all but the most complicated tax situations). I will leave these programs (or your preparer) to ask all the questions but I will provide you will the general categories that should be addressed:

• Who needs to file? – Your requirement to file is based on your income level ($8,450 for single filers) but it is important to note that even if you are not required to file you might want to file to recover any tax withholdings you made or receive credits that you may be entitled to (see below).
• What is your filing status? – There are four different filing status (married filing jointly, married filing separately, single and head of household) each of which has a different tax rate. Determining your status may not always be as easy as it seems and mistakes are costly (e.g., filing single when you qualify as a head of household)
• What are your exemptions? – Exemptions reduce your taxable income and are based on your marital status and dependents that you have (or if you are a dependent)
• What is your income? – Determining your income is not always as easy as it seems. For instance did you know that gambling winnings are income but gifts are not? You essentially need to identify any cash that you received during the year and assess whether it is taxable income or not.
• What are your deductions? – Deductions are items that can reduce your taxable income. You can take a standard deduction (a preset amount) or itemized (if you have the proper documentation). Itemized deductions fall under the general categories of i) medical, ii) taxes, iii) interest, iv) charitable contributions and v) other miscellaneous deductions such as casualty and theft losses and some employee expenses. Not all expenditures in these categories qualify as deductions so it is important to maintain good records and assess each expenditure independently.
• Are you eligible for any credits? Credits are very good as they reduce you tax liability dollar for dollar and, for certain lower-income filers, could result in you getting a refund from the government even when you paid no taxes! There are some pretty significant credits related to child care, education and the working poor. This is an area that paid preparers are likely to miss if they don’t know you situation.

There may also be an issue of the expertise of the preparer. The Washington Times article notes that these erroneous returns were prepared by individuals that are not “enrolled” agents. The GAO encourages you to seek out an enrolled agent (essentially a CPA or former IRS agent). While this might help some, it will be more expensive and still doesn’t solve the GIGO issue. You have to take charge by having enough of an understanding of taxes and your situation that you can assess the competency of the preparer. Let me challenge you by stating that if you can’t be bothered to do that, you are unlikely to ever be truly financially literate. It is a dirty deed that must be done!

I hope that I have inspired you to at least attempt to prepare your tax return. Even if you get started and then turn it over to a paid preparer, you will have become more educated on the topic. Gathering the information for your tax return will help you organize your financial paperwork to start a budgeting process. You may identify areas that you did not document and thus have a better understanding of what you need to do for next year. As I said before, budgeting is an iterative process that will improve over time.

As a final step I would ask you to determine what your effective tax rate was. This is determined by dividing your total tax liability (line 63 on Form 1040) by your total income (line 22 on Form 1040). This should be the basis for evaluating whether you think your tax burden is appropriate – NOT whether you get a refund or make a payment on April 15th. You should also use your tax return as a basis for adjusting your withholdings so that any refund or payment next year is as small as possible. Again, the software programs will help you with that.

I will leave discussing a broader issue that is a personal pet peeve of mine. This is a little off track but let me get on my soapbox for a minute. Because so few people actually pay attention to the taxes they pay, we have an uneducated citizenry that allows elected officials far too much discretion in collecting and spending OUR money. The U.S. tax system really is a clever design that serves to minimize discontent. Think about it. First, you have no choice but to pay as your employer withholds it from your paycheck. Then the rules are so complicated that few feel comfortable calculating your tax liability yourself. This leads to the likelihood that you have too much taken out of each paycheck. But when you get your refund you feel good about it! Since you don’t really know how much taxes you are paying, you tune out any discussion of taxes, leaving politicians to freely spend your hard earned money. Clever but totally absurd if you ask me. And yes, I am mad as hell about it and I am going to do something about it. What you ask? Why, I am going to get as many people focused on their own taxes as I possibly can! So go to it and take charge of your life!!

Buy Low - Sell High -- textbook buying and selling

Yes, this is a familiar phase in the investing world. Something easier said than done if you don’t have the proper knowledge and discipline. But today I want to talk about this phrase relative to something that really is a no-brainer – buying and selling textbooks!

If you are in school, I would wager that textbooks are one of your largest expenditures. According to a July 2005 study by the U.S. GAO, “the average estimated cost of books and supplies per first-time, full-time student for academic year 2003-2004 was $898 at 4-year public institutions, or about 26 percent of the cost of tuition and fees. At 2-year public institutions, where low-income students are more likely to pursue a degree program and tuition and fees are lower, the average estimated cost of books and supplies per first-time, full-time student was $886 in academic year 2003-2004, representing almost three-quarters of the cost of tuition and fees.”[1]

These costs are outrageous but you can do something about it. My first rule is – avoid the campus bookstore. Sure the bookstore is convenient but you will be paying out of the nose, even if you buy a used book. You may be able to find a student on campus selling the text book but my advice would be to go online. The explosion in web sites that buy and sell textbooks is a testament to how over priced these books have been at campus bookstores. I would be happy to see a little free market competition challenging this monopoly! Google “textbooks,” “buy” and “sell” and you will get close to 7 million hits! Some of the more well known sites include Amazon, Barnes and Noble, and Half.com.

I just completed a Masters program and bought all of my books on Amazon. More importantly, I sold most of my books there as well. The net outlay for these books ended up being a couple of hundred of dollars – much less than the costs noted above. I am not necessarily endorsing Amazon over any of the other sites, I am just telling you what I used. I used Amazon because I was familiar with it and found it to work for me. You might find another site works better for you.

Buy Low
Buying textbooks online is so much cheaper and easy that I can’t understand why everyone doesn’t do it. I suppose the main drawback is the shipping time. If you wait until the first day of class to find out the required textbooks you may fall behind in the assignments. Please don’t let you grades suffer. The easiest fix to that is to get this information before class starts – either from the instructor or the bookstore website. You might also be able to share a book with a buddy or use the library’s copy while you are waiting for your book. Worse case, you can pay for express shipping – it will probably still be cheaper.

I sense that another reason students don’t comparison shop for books is because they are not paying for them. Your parents or employer might be paying these costs. I think it just makes good sense to spend others money just as prudently as you spend your own but I know that is not the easiest lesson to learn. But you might be able to make this a revenue generating activity. For instance, if you parents are buying the books, you might be able to work out a deal to get a percentage of the saving. This might even give you a jump start to saving (see the November 21, 2006 post “Just Do It!). It might be harder to work out the same kind of deal with your employer but I think they would be impressed knowing that you are spending their money wisely. It could be a career boosting move!

Sell High
Don’t forget the other side. As an undergraduate, I kept most of my textbooks, especially those for my major. I was a nerd – my guess is that most students don’t form such an attachment. For the others nerds out there, I would also tell you that there are probably very few textbooks that you should keep. Especially now as textbooks are changing so frequently, they become out-dated very quickly. Any reference material you need can be readily found on the internet or at local or company libraries. As with selling, avoid the bookstore. I am appalled by how little these bookstores offer While a little more effort is required to sell you books online, you will get far more money for them.

So what effort is required? Not much really. Again, with Amazon, all I needed to do was set up an account and list my book for sale. Amazon only charges a commission if something is sold (usually about 20%). Every two weeks any money due you is credited to your bank account (even if it is a small amount). The shipping is a bit of a pain because it requires a trip to the post office. I usually save the package that the book was mailed in and reuse it when I ship it out. The standard shipping is media mail where the rates are quite low and you do get a shipping credit so I usually find that it doesn’t detract from the amount that I receive. You have two business days to ship but I advertise that I ship within 24 hours of the order (I find that this encourages students to select my book because time is usually a factor. I also frequently offer expedited and international shipping for the same reason.). I suspect that I could have made more by using other sites but I used Amazon because it was pretty painless.

Just a few other points. I find that I need to highlight passages in my textbooks to fully absorb the information. Many students don’t do this because they plan on reselling it afterward. Don’t be penny wise and pound foolish. The emphasis should be on learning the material. If you need to highlight to learn, then that is what you should do. I find that it hasn’t hindered my ability to sell the books. I make sure that I accurately describe how much highlighting there is and price the book accordingly. There is a market for these books. Selling online also helps when you school updates to a new edition. Usually there is still a market for the older editions for a few more semesters for other schools that haven’t already switched to the new edition. Timing is also a factor, you want to make sure that you have your book listed a month or a few weeks before the semester. This will show you the current prices. If it doesn’t sell, try again for the next few semesters. I had a text that came out with a new edition and I thought I would never sell it. I checked a few semesters later and found that I actually got a better price by waiting!

And don’t forget – proceeds from these sales should be found money. Don’t just blow it away. Use it to start that saving account!

[1] http://www.gao.gov/new.items/d05806.pdf

Let's Get this Party Started! -- applying Covey's third habit of highly effective people

A body in rest tends to stay at rest,
and a body in motion tends to stay in motion,
unless the body is compelled to change its state.

Newton’s First Law of Motion

So now you know that I have two speeds, on and off! I am sorry that I have been away so long. We can all learn a lesson from this. If we don’t stay focused on our goals, days turn into weeks, weeks turn into months and before we know it, we are doing what is urgent but not what is important. Stephen Covey cautions us about this in the third habit of highly effective people, put first things first. As he describes it, the four quadrants of activities are:

	Urgent	Not Urgent
Important	I – crises, pressing problems, deadline-driven projects	II – prevention, production capability (PC)[1] activities, relationship building, recognizing new opportunities, planning, recreation
Not Important	III – interruptions, some calls/mail/reports/meetings, proximate, pressing matters, popular activities	IV—trivia, busy work, some mail/calls, time wasters pleasant activities

Source:The Seven Habits of Highly effective People (page 151)

As Covey explains, “Effective people stay out of Quadrants III and IV because, urgent or not, they aren’t important. They also shrink Quadrant I down to size by spending more time in Quadrant II” (page 153). As we start the new year it is good to be reminded of this habit.

I’ve had my wake up call. Why don’t you take a minute or two and estimate what percentage of your time last year was spent in each of these quadrants. Remember, this is for you alone, there is no need to share! I am not even going to tell you what quadrants I’ve been in these last few weeks!Make it a goal to shift your focus this year to more Quadrant II activities.

[1] Abilities or assets that produce the “golden eggs.”