Money expert Dave Ramsey likes to say that personal finance is... well, personal. And he should know. He's lived success as a personal money management expert, popular nationally syndicated radio host, and best-selling author.
And he's lived failure. As someone, who in his 20s, made and lost his first million, his message hit home for students at Maryville College in Tennessee.
"I'm just a regular guy who messed up a whole bunch of times," he said while speaking at the college. "We started with nothing and so we ended up with all of this real estate, but I borrowed too much money. So I built a house of cards."
Ramsey recalled that the Bible says, "He who hastens to be rich will not go unpunished."
"Get rich quick. It'll kill you man! It's bad news," he added.
Ramsey's problem was real estate, but for today's kids, it starts in college. Visit any campus and you'll hear a similar story; too much debt.
College Debt Trap
According to one financial aid source, two-thirds of all undergraduates leave college in the hole financially. Graduate students can be saddled with more than $100,000 in debt before they ever start their careers or even think about buying a house.
Jason Brooks, a senior at Belmont University in Tennessee understands.
"It's always in the back of my mind. I always think about it. The graduation date is always there," he said. "I'm going to graduate and then all of the payments are coming. So it's in the back of my mind pretty much all the time."
Crystal Jones, who graduated from college in 2005 added that it has been difficult.
"It's been tough to come out and feel like, 'Wow this is something I've gotten myself into!' But I believe, in the long run, it's going to be worth it," she said.
Or is it?
"So many times I meet folks who've spent $100,000 to get a PhD in German polka history or something," Ramsey said. "Oh, my gosh, where are they going to get this money back?"
College Finance 101
Okay, class, time for some College Finance 101, with a couple of tips you probably didn't get in the classroom; starting with you kids who are just now planning for college.
Ramsey said you don't have to go into debt to get an education. Instead consider a school you can actually afford.
"We've got to break the mindset that in order to be a student, you have to have a student loan," he said. "Instead, let's go back to the old fashioned way of paying for it. You actually can do that. It's difficult, but you can do it. It's called work."
It's also called scholarships and grants. Sources of funding that won't put you in the hole financially.
Courtney Norman, also a senior at Belmont University said a big concern is the preparation going into college.
Preparation for College
"Just learning about grants and financial aid that you won't have to pay back," she said.
Ramsey said you have to apply for scholarships.
"There are lots of them out there. You've got to take classes on how to take your SAT and ACTs so that your scores come up, which qualifies you for more scholarships," he said. "And then you get grants. I grant you the right to work, while you're in school. W-O-R-K has not killed anybody."
But what will kill students financially is the mindset of entitlement.
"I think a lot of the kids come in to college automatically saying, 'Oh, I need to get a credit card, a brand new car, not an old used one. I need to get loans to pay for school,'" Ramsey said.
"I had a guy call me from Michigan on my talk show and my son told me that he's going to this expensive school. What do I do about that? Well, there's the problem. My 17-year-old doesn't tell me anything. Let's adjust that to start with. I'm going to tell him how life works, and especially if it's with my money," he added.
Parents, "no" is a wonderful word along with learning to get your own financial house in order, a great lesson to teach kids outside of the classroom.
Credit Card No-No's
Now, for you students who are in college. Don't put any of the extras on credit cards, like pizza and parties.
"One interesting thing I was reading in state schools the other day is that the average college student graduating this last year had $27,900 in student loan debt," he said. "That's about what they spent over four years to live off campus, in an apartment, to eat out, and to attend social functions associated with college. So really those dollars that drove them into debt were not education dollars, they were lifestyle dollars."
Ramsey suggests living on campus to save money. All four years! And no, dorm food won't kill you.
Now, for students and graduates who are already buried in debt, here's your financial plan for the next few years.
"The first thing is don't go buy a new car. Because when they graduate and they have $90,000 in debt, they say, 'Oh I'm always going to have this debt, so I might as well get that car I've been waiting to get when I get out of college and it just piles on,'" he said. "You need the car payment money to pay off the debt with. So drive a beater. Live in a one bedroom apartment. Live like a college student. And work like an animal."
And consider getting a second job just to pay for your debt. Don't try to get out of it or put it off until later.
"But what happens is the intellect kicks in and we go 'Oh, it's a low interest rate. It's a small payment. I'm going to push it over here to the side and not think about it. Then I wake up and I'm 32 and I want to quit my job and go home and be with my two new babies, and I can't because I'm trapped.' Because the borrower is slave to the lender. You lose your choices," Ramsey said.
The truth hurts, I know. But on the other side of truth is hope.
"The truth is that it's going to take time," Ramsey concludes. "It's a process, it's not an event. And if you let it unfold over time, then you can start to get your hope back. You can start to get your sense of dignity back. You start to realize that the light at the end of the tunnel is not an oncoming train."
*Originally aired July 7, 2009