By belatedly mustering a high level of personal integrity, I can fess up to admitting that today’s column includes what may appear to be stolen material. You may wish to check with your lawyer before reading the balance of my written words to make sure you avoid ending up in criminal court as a witness for the prosecution.
Bart Dalton is a financial advisor with Edward Jones located in Lakewood. If you think you can benefit by connecting with a financial advisor, I recommend that you visit and interview Bart.
Bart is a pleasant, intelligent no pressure money investment guy. Allow me to provide you with a convenient link to Bart’s worldwide website, Bart Dalton – Financial Advisor. Tell Bart; Joe Boyle – The Suburban Times sent you.
Bart’s monthly mailer brochure for August titled Edward Jones Perspective included an essential article titled 4 Money Mistakes Most College Students Make.
I am going to focus on just one of the 4 mistakes listed in the referenced article titled “Getting caught in the credit card trap.” If I wrote about all 4 mistakes, we could be looking at a 4,000-word column which is too much for a person as busy as you.
While at first blush it looks like I stole the material, I am about to share, if truth be known, actually Edward Jones got the idea from Joe Boyle.
My wife and I were working smart not to fall victim to the four mistakes starting back in 1966. If we examine our finances between 1966 and 2019, the record shows in over a half century we paid only 50 cents in credit card interest. Had it not been for a tiny time management error, we would have paid no interest. Other than the 50 cents, we have escaped paying the 12% – 22% credit card interest for decades which amounts to thousands and thousands of lifestyle crushing dollars. We have accomplished this easy feat even though we use credit cards every day and for amounts equalling thousands of dollars.
Credit card companies start to suck college students into financial disaster by stroking their ego. It can make a college student feel grown-up and important to be sought after by banks offering to introduce them to their credit or debit cards. The banks make it all sound so easy. And it is easy; to get into life-damaging credit trouble.
College students often apply for a wallet or purse full of cards. The card company lulls the student into thinking it is okay to add charges on the card beyond what the student can genuinely afford.
My wife and I came up with a money management rule decades ago which we have always followed. RULE: If we cannot afford to pay off the proposed new balance in full based on the new item we are thinking of purchasing we do not purchase the item. No matter how small or large our balance may be; $5 or $50,000, we always pay our credit card balance in full and thereby avoid all interest charges. If we must pay interest, why pay 22% when we can get a loan for 4%?
Students keep adding to the card balance until the card reaches the maximum credit limit. Rather than paying the card down or off, the student activates another card and repeats the cycle running the new card up to its maximum limit. The student can repeat this bad credit card behavior until they hit a financial brick wall.
Imagine you are a student without much money. You receive your credit card statement. The document indicates your balance is $1,000. Your minimum payment is 1% of the balance or a ridiculously low figure of $10.00. Your interest may range between 12% – 22%, making the interest payment another $10.00 – $18.33. Add the interest to the minimum monthly principal amount, and the student is tempted to send in only the $20.00 – $28.33 minimum payment. If only the student had enough savvy to understand they should pay off the full $1,000. If the student took that action, he or she would avoid all interest charges; Zero interest even though they borrowed the money for about a month on their credit card.
Students end up buried with high balances on all their cards and monthly payments and total balances that never go away. Students may find that high credit card debt will cause credit card vendors to stop romancing them. Ultimately the lenders may refuse to issue new credit cards. At the point, the student’s house of cards comes crashing down, meaning they can no longer maintain their excess-spending lifestyle by adding living and lifestyle expenses to yet another new credit card.
If you are a parent with a college student, please teach them these financial principles. If you are a college student, please use your college caliber brain to think about what your parents, Edward Jones, and I are trying to share with you. If we are correct in what I have written, and you choose to follow our suggestions, you will benefit for the rest of your life. If we are correct and you decide to ignore our recommendations, you will pay for your mistake for the rest of your life.
Most college students are age 18 or older, which makes them an adult. If your son or daughter goes off to college and ignores your, Joe Boyle’s and Edward Jones’ advice, don’t beat yourself up over their failure. We did our best to help them be successful as they make their way in their new world. Some college students need to learn life lessons the hard way. We tried. That is what matters.
The students I feel sorry for are those who never had an opportunity to learn these simple and easy to perform financial management axioms. I would hope that every child can learn these money management ideas either at home, in school, in life, or through common sense. While one does not have to be a genius to comprehend what I am trying to teach, it does take some intelligent thinking, recognition of the facts, making good choices, and discipline.
Let me set the record straight on one final point to avoid any confusion regarding how I feel about interest. While I have spoken negatively about credit card interest, I am not saying all interest programs are harmful. It can be smart money management to become involved in many financial arrangements where you are obligated to pay interest. Before doing so, a smart money manager asks several questions:
- Is it beneficial for me to pay interest on a particular item or project?
- What is the interest rate?
- What kind of interest; simple, compound, annual, monthly, daily, (Hourly interest – a favorite for Mafia loans).
- Is there a payment [or-more] clause?
- How is the interest calculated?
- Can I improve my financial profile by shopping for the best interest and financial loan agreement terms?
I began this article talking about stolen material. I did that in an effort to catch my reader’s attention while at the same time trying to write something that would be fun to read.
Realistically, I did not steal an idea from Edward Jones, and Edward Jones did not steal an idea from Joe Boyle. When you get right down to it, Edward Jones and Joe Boyle are merely making an effort to help college students establish their new independent adult lifestyle in a way that helps them succeed in both the long and short term.
Don Doman says
When I married by lovely Peg in 1966, I assumed her college debt. We paid it off as soon as we could . . . in 1967. I had a decent job, but in today’s world and high cost of college it is almost impossible for some people.
Bart Dalton says
Thanks for the plug Joe!
Jerry Dunlap says
Although she is starting her sophomore year of high school, I am going to forward this to my granddaughter. This should be required reading for any young person planning to further his/her education after high school.
While attending Pacific Lutheran back in the early 60s, I was able to secure a National Defense Act Loan. The terrific feature of this loan was the 10% loan cancellation for each year of teaching up to five years. After five years of teaching at Park Lodge, I only had to pay back half of the amount borrowed. Years later I read articles in the paper reporting on an astounding number of defaults on what I think had to be the greatest college loan program ever. Probably the reason is was cancelled.
Joseph Boyle says
Thanks for sharing my money lesson with your granddaughter.
I realize you may think it was a bad investment, on my part, since in the 1960s I frittered away my National Defense Loan on a University of Puget Sound education instead of wisely investing my loan money on a PLU education. I am proud to say, none the less, that my wife, (A PLU graduate) and I paid back my loans in full as agreed.
My use of the words “in full” is not meant to be disparaging as related to your 50% off loan reduction. Your dedication to teaching young people put you in a position to well deserve your discount. In fact, had I been in charge, you would have enjoyed a 100% discount for 10 years of teaching.
The loans made it possible for a couple short money guys like us to earn an education. To show our gratitude, we did the right thing by paying the loans back “in full” by either sending in money each year or serving our education system each year.
Such a wonderful loan program for students. In fact I just remembered about the time I was suppose to start loan repayments, I got my obligation deferred because I was a student again. Following that, I got a deferment because I was in the military.
Eventually my time for repayment came. I stepped up to the plate. The interest and annual payments were so user friendly too.
If I am elected president of the United States, I will look these loan defaulters up and deduct the amount owed plus 57 years of interest from their Social Security payments.
You will not see me on any presidental debate TV show, but I am willing to serve.
Joe and Jerry, you know do you not, that Presidential candidate Bernie Sanders has pledged to cancel all remaining balances due on student loans. By cancel he means that the federal treasury would reimburse the lenders. A slap in the face to you and the millions of others who honored their loan agreements to the full. Gotta love those Socialists.
Joseph Boyle says
If Bernie wins, do you think he will make his Socialist loan forgive plan retroactive for a couple of guys who graduated in the late 1960s, or will Bernie be thinking Jerry and I are old enough where we will not voting too much longer anyway.
No, Millennials only. People like you are the problem–you loan others money and expect to be repaid. Capitalist greed. Disgusting.
To digress a bit. The focus is always on student loans, never on the spiraling cost of tuition. In state residents will pay $27,000 this year to attend UW. Many have little choice but to borrow.
Joseph Boyle says
You make an important point.
Tuition today at UPS is $47,480 per year or $189,920 if you make out in 4 years.
My foggy memory tells me my tuition was $750 a semester or $6,000 for a 4 year degree. My job paid $5.50 an hour.
What ever are we to do?