Can you do without ... a college education?

Making frugal, smart choices isn't just about the little things. Major life decisions should be approached with the same care and thought, if not more, as a monthly grocery budgeting plan.

For many, especially those of us who grew up lower-middle class, a college education will be the most expensive purchase of our lifetimes.

Do you really need it? The answer is, as always, depends on what you value.

College opens up the opportunity to work jobs that would not otherwise be accessible. College opens up the opportunity to make money. College can saddle a person with a debt equal to many years of their yearly income. College is asking a person to commit their personal and financial futures to what they think they want to do for the rest of their lives at that exact moment. All of these statements are true.

As mentioned in the post about debt earlier this week, the average college graduate will make about $1.5 million more than their high-school graduate counterparts during the course of their lifetime. But that's a good example of a bad statistic.

Not all college degrees are alike.

Advanced, professional degrees in the fields of medicine, law and engineering make up the vast majority of those extra wages. Take them out, and the college vs. no college numbers even up considerably. Some degrees actually have less earnings potential than your average HS grad.

Three Amigos

Three friends are graduating high school and have to decide what they want to do with their lives: Tom, Dick, and Harry. None of them are the high achievers who are going off to big-time schools in prestigious fields on scholarships.

Tom is enamored with the college experience. He's got good grades and has been able to get into his state's flagship public university, but has no scholarships. He's not sure what he wants in a career.

Dick wants to be a teacher. In order to save some money, he's going to start at a small community college for two years and then decide where he wants to transfer.

Harry isn't particularly interested in school, but he likes working and he's good with money. He goes to work for a landscaping business.

A few years later....

Tom switched majors once and graduated with a degree in sociology after five years. He got some basic state aid grants and borrowed on student loans to make up the rest, including his living expenses on-campus. He has $80,000 in student-loan debt and will be making $30,000/year as a social worker. He has no assets or savings. He will be making the minimum payments on his student loans for 25 years, and with interest he will end up paying $150,000 for his college education. He's started saving for retirement five years later, and he will already have to work five extra years to pay off those student loans.

Dick worked part-time to off-set the price of community college, and then went to a small state school with a reputation for its decent education program and an affordable tuition rate (huzzah Eastern Illinois University!). Dick finished in four years and had only $6,000 in student loan debt, and will be making $30,000/year as a teacher now, living his dream.

Harry worked hard lived frugally and saved 30% of his income for four years in a bank account with a two-percent interest rate (not much, but he's pretty cautious). He's been promoted to field supervisor at work, making $30,000 year. He has $25,000 in savings already and no debt at all. He doesn't love his job, but he has money and time to pursue some fun hobbies. With his savings, he's looking at putting the down payment on a modest house and starting a small side business that he hopes could grow. He's at least five years, probably more, closer to retirement than either Tom or Dick.

Yes, these are contrived examples, but it shows how much our college choices can affect our future down here in the ordinary bachelor degrees.

So what factors should you consider?

How much help will you be getting to pay for college?

If you have scholarships or your parents can help pay for it, college begins to make a lot more financial sense.

Where do you want to go to school?

If you would be happy living at home and going to a community college for two years, college will be significantly more affordable than it will be for someone who wants to get away from it all and go to school across the country.

Do you want to work to live, or live to work?

Having a dream job, doing what you love, is very important to some people. For many others, they just want to punch a clock from 9 to 5 and live their lives on evenings and weekends.

Are you entrepreneurial?

Are you willing and able to put time, effort and risk into your own business, or do you just want to cash a paycheck working for someone else?

Do you know what you want to major in, and can you trust yourself to be a good student?

Prolonging college by switching majors (or just not being focused enough) is just throwing money away, and in most cases it's throwing a lot of money away.

Have you crunched the numbers?

Make a spreadsheet. Calculate the cost of college and the increased salary you might be getting vs. the money you could be saving and the interest it would be compounding. But this is important: Be realistic with your numbers. Don't just assume the best-case scenario. The same is true for deciding how in-demand your major will be when you graduate.

In the end, like all simplicity decisions, it's about understanding what's best for you after you've thought the decision through. Only you know what is really best for you and your life.

Can you do without... cable TV?

We're going to pick some low-hanging fruit here.

Cable TV has always been a bit of a luxury. Growing up, my sister and I could sort of tell when things were going well financially and when they weren't, just by whether we had cable.

But with the world of entertainment choices right at our fingertips these days, it's becoming an even more marginal choice.

How much does it really cost?

"There's 70 channels and nothing on!" We've all heard that sentiment expressed at some point.

Paying for TV channels is entertainment. There's nothing wrong with spending money on entertainment. But are you getting the best bang for your buck?

First, consider what percentage of your budget should be going to entertainment. That should come after shelter (rent or mortgage), food, debt repayment, transportation, utilities, and even basic savings. For most families, what's left for entertainment is going be somewhere between 5 and 10% of their budget. How much of that is cable eating up? Would you rather go to an extra movie or two each month? Have a nice meal out?

Can you afford it at all?

Almost half of Americans still live paycheck-to-paycheck. Cutting out cable TV is an oft-cited way of beginning to save.

Take a savings account with an initial balance of $1 and a meager 1% interest rate. Depositing $50 each month into it would yield the following balances at the end of each year:

Year Balance

1 $603.77

2 $1,212.59

3 $1,827.53

4 $2,448.65

5 $3,076.00

A couple years without cable and you're well on your way to basic savings.

What are some alternative?

Cable TV has always been the grab-bag of entertainment. You pay for a lot of stuff you don't want. There's been some movement toward forcing companies to offer channels a-la-carte, but it doesn't seem to be getting anywhere. Why not focus your entertainment dollar a little more on what you truly find entertaining?

1) Free, over-the-air TV

This got a little trickier with the transition to digital broadcasting, but it's still a perfectly legit alternative for people who just want to watch a little TV and keep up on the news.

2) Free, online alternatives

Hulu.com is the most famous. It's a place where you can keep up with most popular TV shows and some interesting blasts from the past. You can watch episodes of currently running shows at your leisure, and you can plow through entire seasons of older shows as you see fit.

3) Paid online subscriptions

For sports fans, giving up cable can be difficult. If you just have to have a broad array of sports on-hand at any time, then maybe giving up cable isn't for you. But if you are a big fan of one sport, there's often a good option online for you. MLB.com and NHL.com each have excellent online subscription services for watching games, and you get a much broader set of choices of what to watch.

4) Mail-based subscriptions

Netflix.com , I must admit, I thought would be a flash-in-the-pan. But it's growing in popularity quickly. It's a subscription service which mails you DVDs from your selections of a broad choice of movies and TV shows. You keep each selection as long as you like, then when you mail it back, they send you another choice from your list. Plans range in price depending on how many DVDs you can have out at a time, as low as $8.99. Subscription also gives you access to their growing "on-demand" service to watch shows and movies via the internet.

5) Go without TV.

Never mind, this is probably crazy talk. I'll move along...

Why you might not want to do without it?

1) You can afford it. If there's plenty of room in the budget and you are saving well, there's no need to give up something you really enjoy.

2) You are under a contract that would involve significant termination fees if you cancelled.

3) TV really is your best and primary source of entertainment. If you just really enjoy watching a lot of television, that's okay too. The best thing about being an adult is you get to prioritize according to what *you* like.

4) If you get it bundled with internet and/or phone service and it's not going to save you money to drop it. Some people get a package deal where it's virtually the same cost, or even more, to have just one of these services as it would be to get two.

As always, it's a personal decision. But it needs to be just that, a decision, and not just a knee-jerk assumption that you have to have cable. Think it out, consider what you can afford and whether it's a strong use of your money.

Can you do without ... extra cell-phone minutes?

(note: This is intended to be the first in an on-going series for this blog, asking people to think about whether they can do without something. The answer will be different for everyone, it may well be that you can't. And that's okay. But consider it).

Even after a year of being one of those annoying frugality acolytes, it still shocks me how much waste I can find in my budget.

I've been eyeing the cell phone on the budget for months. I hate spending $100/month, when we could get a landline for $30. My wife insists that it's important to her, and I can respect that, but it nagged at me.

Its been many years since my wife and I got a cell-phone plan. At the time, I'd heard some horror stories about overusage charges. I also am loathe to appear cheap and always try to avoid buying the least expensive option. So I ended up signing us up for a much larger usage plan than we actually needed. How much larger?

I went over a year's worth of bills today online, and we'd never used 1/3rd of the minutes we were paying for, or even 1/5th of the text messages.

I also found out that I had the option of slimming down to a much smaller plan in exchange for extending the contract, which doesn't bother me because we've had the same plan for so long and I like the company and service.

Total savings: $40/month.

Multiply that by the number of months since we got the cell phone, and you arrive at a number that is awfully close to equal to three paychecks. I spent six weeks of work just paying the phone company for something I never once used!

Bottom line: If someone like me, who is a budget nerd, can find $500/year still there for the taking with just a few minutes effort, how much can someone who has never really thought about it find? Could you give yourself a $1,000/year "raise" by lowering expenses that much without losing anything? $5,000? You'll never know until you look.

Most cell-phone plans are complicated, and that's intentional. They want to scare you into buying more than you need. But given that most plans come with free nights and weekends standard, as well as calls to people using the same company, it'd be hard to use up a lot of minutes for most ordinary users. If you use the phone a lot for business purposes during the day, it might be a different story.

But if you just don't feel comfortable planning it out at the startup, don't be afraid to go over your bills and check out how much you are actually using. That should be the true test. The only caveat is to be careful: Overage charges really can be awful. Don't go overboard and cost yourself more money in the long run.