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Robert Farrington: Student Debt, ‘On The Side’ Income & Investing Quickstart

In this episode, you’re going to learn from the Millennial Money Expert and the Founder of The College Investor.

He helps people navigate getting out of student loan debt so they can start investing and building wealth.

His name is Robert Farrington.

What's coming to you is a conversation of what to do with student loan debt along with how to prepare for entering college, so you don't have a bunch of student loan debt at the end of it. We also talk about the 529 Plan and how that can save you money and help you save for college.

We also talk about the transition from working a corporate job and doing something full-time. In addition, we talk about how anyone can make extra money and some ideas how you can generate at least $100 per month, if not more.

We talk about wise money moves and the first thing you might want to consider if you are starting to invest.

With that said, let's get to it.

Dustin
You're sixteen years old and most of that age, at that time, you're focused on the one thing that gives you freedom, driving. You are in luck or so you think, because your mom buys you a big present, a truck. When you open your eyes, you discover it's a beater, $1,000 pick-up truck. Your mother tells you that you now have to get a job and pay for everything. Being the wonderful mom she is, she drives you to the mall, drops you off and says call her when you get a job. Robert, I want to go in the time machine and go back to this point in your life.
Robert
It was such a fun and challenging day. I'm telling you that right now. It's awesome. You’ve got this truck, it was a real piece of crap, with a dent in the door that’s probably two inches deep, didn't close, thick shift but you want to drive. My mom's like, "You’ve got to pay for the gas, the insurance, all this. You’ve got to get a job and make it happen." She dropped me off at the mall. What else are you going to do? You start applying to places. The first place I applied was Starbucks. You’ve got to start somewhere. They’re like, "I don't know. I’ll talk to my manager. We'll give you an application." They’re looking at some sixteen-year-old kid. I worked my way down and at the end of the mall, there was Target. I applied there and they were hiring. They're like, "We'll give you an interview right now if you can wait five minutes." I was like, "Okay." I'm wearing a t-shirt and shorts. This is not going to be good because they're not going to hire me, but they did. That ended up being a career for me for seventeen years. 
Dustin
I’ve got to ask, were you wearing a red T-shirt that day? 
Robert
I was not. I owned a lot of red shirts over time, I will tell you that. I started as a cart attendant there at Target. I worked my way up all the way and I was there for seventeen years as a store manager and a great company to work for. I loved it and it paid for everything I needed with that car. 
Dustin
I want to get into that journey going from working with Target and then going and doing your own thing. I want to go back to the car. For $1,000 on a pick-up truck, how well did this thing run? Were you putting sinking money into this to keep it alive? 
Robert
It was a good find. It was a 1996 Dodge Dakota, stick shift, no extended cab, no nothing. Your bench seat was up against the back window and it worked. It was great. I have no regrets in that truck. I used a shoebox for an armrest because you’ve got to make things work. I have my CDs in there. 
Dustin
How do you feel this has shaped you? The goodwill gesture of your mother to help you out, but also instilling in your responsibility and work ethic. How do you think this has shaped you on your journey? 
Robert
I'm a big fan of working and earning money. It's always been a part of me even before this. The gift is amazing. I'm very blessed. There's definitely some privilege there to get a car. When I was sixteen years old, I was working twenty hours a week at Target. I'd get done with school at 12:30, 1:00, go to work at 2:00, get done at 6:00 and rinse and repeat. I worked eight hours on the weekends. I felt a baller though in high school. I'm not going to lie, I was making $400 a week. For a high school kid, that's minimal expenses, no house expenses. It was fun money and paying for this car. It was great but it also taught me to save. I was also big on saving. I started trying to invest a little and play in the stock market, which is good and bad. I learned some lessons early on there. It built me up for some solid financial success by starting. I'm a huge believer in working because the sooner you work, the more experience you get in things that aren't about the money but communication, business skills and problem-solving. Your boss never wants you to go to him, “How do I solve this?” You learned that at sixteen or you can learn that at 22 when you graduate college. You get a leg up and that helped set me up. 
Dustin
You’ve got two kids and you're a little far removed from it. You're going to try this approach with them when the time is right?
Robert
100% yes. I already am working now in the best way I can. My son is six and my daughter is three. We have them recycling because I want them to understand how to earn money and spend money. They always want to buy stupid things at the store, low bottom shelf, candy bar, little bags of Lego's, whatever that is. My son collects cans and bottles at the house. About once a week, luckily we have a little recycling center, which is a five-minute walk away. We'll walk down there. He'll drop it off, makes $2 to $3 every time he does it. That's his spending and saving money. It's teaching him slowly but surely what it takes to earn. Every now and then, he's like, "Dad, buy the 24 pack of beer. Don't buy the twelve packs. We need more cans." I was like, "Okay." 
Dustin
You took me down memory lane there because my dad had me do that. We had to get in a car and drive far away. I remember filling up that trash can and it yielded $20 to $25, something that at that time, aluminum was sky-high or whatever.
Robert
It's a great thing. I want to teach them how to earn. Spending is more but a challenge now. He loves earning it, but then he wants to buy that thing and I'm like, "You’ve got to pay your own dollar for it." Its tears like, "What do you mean I have to spend my own money?" It's like, "How do you think I feel? I'm trying to get you to not buy this thing."
Dustin
What's this thing about you wanting to do taxes when you were thirteen years old?
Robert
I've always been a financial nerd. I remember some of my earliest memories are watching my dad on his old computer do Quicken. I don't know if you're familiar with personal finance software. He would take his check book register and then enter everything into Quicken. This was in the ‘90s. It was very old school, but he'd do that and he'd be doing his taxes. I ask questions, try to learn it. I'd be on the floor of his room, his office while he's doing this stuff. I was always interested like, "What is that? What does that mean? How do taxes work?" I had my own savings account, so he did taxes for me because I'd earned $120 in interest or whatever. It happened to be on my savings that he'd been putting away. It was fascinating to me. I enjoyed that and I still enjoy doing my taxes to this day. It's a good recap of how I'm doing.
Dustin
I'm 37 and I don't enjoy my taxes, although I'll tell you in the last two years in joining this community, personal finance, I'm getting better. I've learned so much. Readers know that I read my first tax return page by page, not understanding it all. Now, some of the numbers are popping out and making sense and that's mission-critical because we all touch money in life whether you're an entrepreneur, investor or living life. You touch money and you've got to understand how it works. Otherwise, other people's agendas will rule your life and that sucks.
Robert
I don't necessarily want to call it your adult report card, but it's your adult check-in. You need to know that that is the statement of the last year of your money, how much you earned. What other things did you have besides your salary? Did you have investments? Did you have stocks? Did you have dividends? Did you have real estate or a business? It's all laid out for you. It's not necessarily the easiest to read. You've got to know what it is. If you're relying on it professionally, it's an accountant or a tax preparer, you're still the one on the hook when you sign that thing and the IRS doesn't care. You need to know. You can also know if they're leading you the right direction or you can hold your professionals that are in your network accountable. It’s important to have that every year for everybody.
Dustin
I often said that this is what I'm paying this professional for. It's funny because I've coached people in other areas that you want to know enough so that you can direct that person because no one's going to care about your financial life or your life. If you look at it, no one cares but you who are going to care the most.
Robert
Nobody cares more about your money than you, no matter what. 
Dustin
I want to fast forward a little bit. You're in school now and you're working at a young age. You hear some scary advice about money and investing, which would lead to this next part of the conversation that we'll have, The College Investor. First, I want to ask you, what was that scary advice you were hearing at that time?
Robert
I'd always been passionate about money and I wanted to start investing. Almost every college has an investment club. I was like, "I'm going to join my investment club." I'm in college. It makes sense. All these people are doing what I want to do. I go there and it is a penny stock trading club. It's not an investing club. Everyone's like, "You should buy X, Y company,” because penny stocks have five characters, “You should do this." It's trading at $0.05 and it's going to go up if you hit $0.20. It was like, "No, this doesn't make any sense to me. This is not what I'm interested in." Not to say it, there's nothing wrong with it but if you want to gamble and try this out, go for it. When I'm thinking about investing, I want a long-term investor. I like researching the fundamentals of the companies and stuff, but I like to understand what's going on.
I wanted to learn more and I didn't get that there. It was very much about trading and almost gambling. That's where it led me to this path of starting The College Investor. I didn't do it immediately, but I continued reading, learning and doing things on my own. I finally stumbled across a bunch of personal finance blogs. I was like, "There are other people writing about money topics. That's cool." You have to realize that I was also geeky. I was a tech guy. I started as a computer science major. I did not want to stay a computer science major because I hated programming in the basement. I thought that was terrible. I like computers and the idea of it all. All these passions came to a singular point. I know I stumbled across someone's blog at some point in time and it was like, "This is how you start a blog." I follow the directions, started a blog and that's how we started the College Investor.
Dustin
I was so close. I was the same thing. I was a CS major. They made you take physics or crazy math or whatever, not related to coding. I did it for whatever. I went to a coding class. I'm like, "I don't know this." I like the thought of computer, so I went into this other school where it was library science and it was networking. I parlayed all that into building websites and we'd have little fun competitions, but I'd never thought to monetize. I wish I had thought of doing personal finance at that time. I'd be in a much different situation but you're a man after my own heart.
Robert
I remember freshman year, they stick you in the worst computer lab in the basement. They have old Unix Box that I tried to program and it’s like, “This is my life? This does not sound a good life.”
Dustin
Talk about those early days. You're escaping from that basement and you're starting the College Investor. What was that journey like? What did you write about? Were you self-conscious about the information you were putting out? What were you sharing? 
Robert
It was terrible information honestly. Who would take a 21, 22-year-old? Why would I take stock tips from this guy? That's what it was. It was terrible like, “You should buy Microsoft and this is why and just because.” No real research or fundamentals but I start it, I stayed with it. I wrote about three articles a week around all types of personal finance content. I kept at it and it was a hobby. There was no money being made. I didn't make any money on that thing for about a year and a half until I started figuring out what I was supposed to do. I enjoyed financial topics. I enjoyed writing about it. It kept going from there.
Dustin
Did you go in though thinking that there are people doing blogs and you're going to make money or was this like, "I'm going to put this up and see what happens?"
Robert
I like it, I want to see what happens. I want to make money but no pressure. I didn't know how either. Part two, you got to know how to do it. I started there and it was a hobby, then I started figuring it out.
Dustin
I want to ask you this because you're an expert in student loans. Was the start of The College Investor how you became a student loan expert or did you exit college with a bunch of debt and you're looking at this mountain of debt and you're like, "I need to do something about it?”
Robert
All of it. I have $43,000 in student loan debt when I graduated. I started writing a little bit about it on The College Investor. One of the first articles that went viral relatively was my battle with my loan servicer. They had not applied for my payments correctly to my student loans and I had to do this whole rigmarole and call them and send them letters and fight for it. It was annoying and they were trying to say I was late on my loan payments and I wasn't. I was worried about my credit score and all that stuff. I wrote this whole long article and it was one of the first ones where I started getting comments. People were sharing it and they were saying, "I've had the same problem. My loan servicer does that to me too." I was like, "There's a lot here."
Nothing in that last year and a half has gotten anything like this. People are figuring out. I started writing a little more about student loans and layering it in more and it continued to resonate. I started learning more, researching more, understanding how it all worked and I started to realize why. It is a real mess. There are so many options and problems with the system. It's everything that nobody wants to talk about. Student loan debt is government taxes, potentially family relationships. All these things hit up into one ball. It's what everyone says, "Don't talk to your relatives about that at Thanksgiving dinner. That's what student loan debt entails."
Dustin
I never thought about that way but you're right, it is all those categories lumped into one, which is it makes sense now why. We're plagued by these big debts and misinformation is floating out there and no one wants to talk about it. 
Robert
That's what you start seeing. You see scam companies out there prying on people because what do you do? You don't know where you can turn. You have this debt lingering over you, you're worried you can get your wages garnished or something like that. These companies swoop in with an ad and they're like, "You pay us $1,000 and we'll resolve your debt." No, it doesn't work that. That's where people become victims. They don't seek help again because they're worried, they don't trust any help. It's a tough cycle. As we've written more and learn more about it, it becomes one of our things that we talk a lot about. 
Dustin
I know this is a big conversation. I want to invest some time here because a lot of people have this. I had been talking about this, doing interviews and in learning more about blew me away. As I mentioned before, I was very fortunate to not go through student loans with help and hustling and all sorts of stuff. For those that have existing student loan debt, starting there in a similar spot, $40,000. I know some people have $100,000. What's the biggest you've seen? 
Robert
The biggest I've seen is about $800,000. There are about 100 or something borrowers in the US and they have over $1 million. Chiropractors for some reason, It’s because their education costs a lot. There are pilots, same thing. They pay for flight training and stuff. They don't take a military career path. They do a private education fun day. It adds up. It's brutal. 
Dustin
What do you recommend? Let's say $800,000 but that seems extreme but a $100,000 or $50,000. What do we need to know to think through tackling that debt? 
Robert
The first thing you’ve got to do is getting organized. I can tell you that 99.9% of people that are struggling with it that come to us don't even know what they have. It's like a blank statement. "How many loans do you have?" "I don't know." "What are you paying on your loans?" "I don't know." "What's your end date of paying off your debt?" "I don't know." If you don't have all your loans laid out, you've got to get organized. The thing is, most people have about five student loans when they graduate. You think about it, freshman, and sophomore, junior and senior year. Some people take a fifth year or summer semester and you’ve got to make sure that your loan servicers have your information. You had this loan from freshman year, nobody lives where they live freshman year.
If you’ve got a statement in the mail, is it going to the right place? That's where people get into trouble. They don't know what they have. They miss something. They're not making payments on a loan because the loan servicer and they're like, "I never got a statement." You also moved since you got the loan and the loan servicer try. It's a mess. You have to get organized and you have to lay it out. That can be any way that works for you whether that's pen and paper, a notebook, an Excel spread sheet, a software tool, whatever. We're all different but find a system that works for you and start getting organized. That applies to your whole budget too, not just your loan.
Dustin
Especially when I was in a lot of debt, over six figures in debt, I had my head in the sand until I'm like, "I've got to pay this back." That's what I did. I’ve got to organize. Step one; you’ve got to get organized. Get your information in there, don't hide from it, and don’t bury your head in the sand. It will catch up with you at some point. What's the next step?
Robert
Step two is to figure out the payment plan that you can afford. For some people, that might be an income-driven repayment plan. These are repayment plans that base your monthly payment as a percentage of your discretionary income. That's 10% or 15%, but unless you can afford your full monthly payment, this is the place that you start. It doesn't mean you do this forever, but the worst thing you can do with your student loans is not make payments or hide from them because your loan balances will grow. They will come after you, garnish your wages, take your tax returns, and take your social security if you kick this all the way down the road to retirement. Don't skip your payments; get an income-driven repayment plan. What most people don't realize is that the first bill you get, you graduated six months down the road and you get your first statement. That is the standard ten-year repayment plan, which is the highest monthly dollar amount. That's what freaks a lot of people out because if you get this bill, it takes your breath away. You're like, "I can't afford that." That bill is also the most expensive one. There's a lot of options out there. Find one that you can afford and start making payments. 
Dustin
Its snowball and avalanche. I'm starting to come to these terms. Is there a strategy you prefer paying the highest one because they all have different rates, right? 
Robert
First, I pay the minimum of everything. That's step three because once you're organized and making the minimum payments, we can decide what we want to do, we can make an educated decision as adults whether that is a snowball. I like the snowball. It's psychologically the best one. 
Dustin
Can you break it down, the snowball?
Robert
Snowball is you pay the smallest debt first, whatever it is. It’s a $500 credit card or it's a loan that's $2,500, you start on the smallest one. The reason is you get a quick win early on and you feel good and that propels you to your next loan payments because now you knock off that $500 debt and you can take that monthly payment and put it to your next smallest one. You can see the snowball starting right here, but it feels good too. You get the early wins. The avalanche is the mathematically better approach and that's where you pay your highest interest debt first. Here's the thing that most people don't realize is that if you had any kind of debt, the difference between the two approaches is a few hundred to a few thousand dollars. If you're going to stick with one, you are an analytical guy, then do the analytical. Most of us went the psychology. They want the one that's going to make us feel we're winners, so do the snowball. 
Dustin
I see this as optimization, whether that's for you personally or mathematically. That's step three.
Robert
I was to say that you can also add in things. When you have your whole picture of your budget, you're organized, what your income is, what your expenses are, you could start asking yourself. I'm a big believer in the side hustles, the earning more money stuff, so that's not you, it's budgeting. You have this organized template of your spending and your income. If I could put an extra $100 to my loans, where would that come from? Maybe I cut Netflix out and some other things and don't get coffee. That could be it. You cut spending or I take on a side hustle, I drive for Uber or Lyft or do something else to earn $100. I can put that into the pot to start paying down my debt or achieve other financial goals. 
Dustin
It does force you to take a look at like do you need seventeen subscription services? Probably not.
Robert
Exactly or everything else. The average person is spending $800 a month on a vehicle in this country. Do you need that kind of vehicle or could you go buy the $1,000 truck that I started with? It's not sexy, it doesn't feel good, but it's cheap and effective and it still gets me from point A to point B. That's it. 
Dustin
I want to ask you about refinancing. That is an option for people. They get calls, they get letters in the mail. Let's consolidate these down. That way you do not pay in the five, your freshman, your sophomore or whatever. Psychologically that's a win because you're paying one person. Talk a little bit about that. 
Robert
Don’t mix the two, consolidation and refinancing, in the same sentence. That's where these companies get you. Student loan consolidation, first off, is a government program. It's free and just like it sounds, you consolidate all your federal loans into one loan. It makes sense, it makes it easy. Most people shouldn't do it because what happens is when you consolidate your loans; you get a new loan that replaces all your old loans. If you are on the path for loan forgiveness or something like that, you reset the clock. That would suck. I see it happen too much. You don't need to. The thing that it is, it does make it easier, but it doesn't change any of the fundamentals of your loans. Let's say you have four loans and they have all these different interest rates. Your new loan is a consolidation loan, which is the average weighted balance of all those original interest rates. Nothing changes. It's just you have one instead of four, but you could jeopardize potential loan forgiveness or cause yourself other problems. Most people shouldn't consolidate. Refinancing, on the other hand, is a private bank or a private lender that replaces your existing loans. It could be federal or private loans with a new loan. Refinancing makes sense for maybe 5% of all student loan borrowers. That's even pushing it.
Dustin
What are those 5% look like? 
Robert
Those 5% are people that are high earners. If you already have a private loan, refinance away because you're not getting any benefits. If you have federal loans, you lose all your benefits when you go private, you lose loan forgiveness. You lose those income-driven repayment plans we spoke about. Refinancing makes sense for people that are high earners; great credit score and they're going to pay off the loan within five years because you can get a great rate from 3 to 5 years if you refinance your loan. It's not a bad thing, but you're giving up a lot. You have to be certain on your path for 3 to 5 years because if you start doing a refi for 10 or 20 years, the savings and interest on that versus losing the government protections and benefits doesn't make sense. 
Dustin
I'm going to throw a fun one. My wife told me about this one. She had a friend or something or she read that information and it was this idea, if you go work for a nonprofit for ten years, they're going to wipe your debt clear. 
Robert
Public service loan forgiveness, the best student loan forgiveness program that exists. It is real. It's not a myth. Everyone that's been rejected is a financial fool and here's why. You work for ten years in a non-profit or the government or 120 payments is the actual requirement because you can take a break. It doesn't have to be ten straight years. Its 120 payments, which equals to ten years, but maybe you have a baby and go on maternity leave or something, but you could still get back on track. You have to have a direct student loan. A direct student loan is any loan after October 2007. If you were a borrower before October 2007, you don't qualify. This is why people were getting rejected because they didn't read the rules. This is what makes me mad. We can talk about this.
The third qualification is having the correct repayment plan. You have to be on one of the income-driven repayment plans to qualify. You do that for ten years and you get your loans forgiven. The thing that you see is this headline that was in the news that 99% of people getting rejected for it. It drives me nuts because here's why. Once again, you had to start in 2007. To start in 2007, the first month that would have qualified would have been November 2007. In order to do it, you would have had to be this person that watched Congress, knew when they signed the law, started on month one and then continued for ten years to get to November of 2017, ten years later.
The GAO, the Government Accountability Office or whatever national budget office did a study. Only 115 people in the entire country could have qualified. When you see 30,000 people apply to get rejected when the government already knew that there were only 100 people, it hurts my heart. They’re financial fools for this reason. It's a ten-year program. The rules are clear as day. There's a bunch of websites out there like mine that tell you the rules too, if you don't trust the government and you don't trust your loan servicer, you could Google it and find out, no one's going to care more about your money than you. If you were counting on $50,000, I was going to give you $50,000 and I said you had to do three things for ten years, would you make sure you did the right three things for ten years? That's why when I see these people getting rejected, I was like, "Don't you have any accountability?" 
The loan servicers, their servicing problems, I get it that you might call your loan servicer and they might not tell you the right thing, but it's on you. If you check your monthly statements, it will tell you how many eligible payments you have. In ten years, you never once looked at a loan statement for your loan. What is this like? It drives me bonkers. Here's the cool thing though. We're recording this in early 2020, and the number of people getting approved is dramatically increasing. There are a million people on track for this. It's going to be in 2024 that you start seeing about 100,000 people a year getting loan forgiveness. That makes sense. You have to back the clock up to 2014. More people have known about the program or loans qualify. If you were in college in 2007, when are you graduating? 2011 or 2012. You make ten years of payments. Its math but it drives me nuts. 
Dustin
I love your passion for it. I might have been one of those people to bury my head in the sand and not look at that loan statement.
Robert
To me, I get it. It's fun to yell about Sallie Mae. Don't get me wrong, they're a big punching bag and they do a lot of things that are not great. Let’s be honest. On the same time, we all need to have a little personal accountability with our money and you can't blame them when you didn't read the directions over ten years. 
Dustin
What I love about this job is sometimes I get to ask the floating questions that are out there. I had thought I had heard something about people gaming, I don't know if that's the right word, where they're like, "I can't make X amount of dollars." Is this based off on this income repayment thing? Some people were purposely not taking raises or not being motivated to get a promotion because of this. How does that play into this?
Robert
It’s income-based repayment plans that you have that. Let's be honest, I don't necessarily call it gaming the system. I use the Warren Buffett quote, “I might disagree with our tax system, but I'm going to follow the rules.” You might disagree that this system exists but like your congressmen, don't blame people for following the rules. The rules with public service loan forgiveness are it's an income-driven repayment plan and that's based on your AGI, your Adjusted Gross Income. You can gain your adjusted gross income to keep your payments low. That might mean maxing out your 401(k), putting in a traditional IRA and doing a health savings account, which is all pre-tax money. It lowers your AGI and that way, you can maximize your loan forgiveness at the ten-year mark and you're also saving for yourself and investing for yourself as you go along. If you're going to get loan forgiveness and you're on the track and following the plan, you should maximize it. You should not pay more on your loans.
Dustin
I want to make sure I got this clear. At the end of the ten years, whatever is unpaid is forgiven. 
Robert
Tax-free. 
Dustin
I thought there was a tax bomb.
Robert
Not on Public Service Loan Forgiveness. It is tax-free loan forgiveness. There are tax bombs on most of the other types of loan forgiveness because you're technically called student loan discharges. If you make it 25 years on income-based repayment, any remaining balance in your loan is forgiven, but that's a taxable debt. Even with the tax bomb, it has overblown as well because there's a thing called insolvency. We had put our tax hats. If you have more debt being discharged and you have assets, you don't pay any tax on the debt being discharged. Let's think about this logically, if you had been on a low payment for 25 years, do you think they've saved a lot of money? That's the hard part. We wish they would have, but chances are they're not going to have enough assets that they're going to end up paying tax on. There are some people gaming it, they had a business and they're trying to play games with it, then they needed to work that out with themselves. Most people don't need to worry about the tax bomb.
Dustin
We’ve invested quite a bit of time and I know we can go more and there are resources for folks to go check that out on The College Investor. We'll talk about loan buddy here. I want to talk about the ones being a little more proactive, something I'd like to think that I do better now these days. What about the people now entering college, knowing they're going to have some debt walking out? What can they do to reduce that and get some financial aid? You talked about plans and things like that.
Robert
I'm a big believer of you have to figure out your individual ROI, Return On Investment of education. Educations and investment. There's going to be someone that's going to tell me after this podcast that investment and educations are a good thing. It's holistic. Education as itself is a great thing, but you could get the best education in the world for free. You can go to Cornell.edu, Harvard.edu and the best world-class professors put their videos online for free. If you want to learn something, learn it. You're not going to college just for the education and it's not free, you're paying for it. You have to view as you would view any other investment, what am I spending? What is my net return on the investment after I graduate? One of the rules of thumbs I like to use for people is never borrow more than what you expect to make in the first year after you graduate. Simple works. You can always say there are nuances, but that's the case with any rule. Let's think about it. If you're going to be a teacher, you're going to make $40,000 in year one after you graduate. You shouldn't borrow more than that because if you start borrowing too much, you're going to struggle financially. If you're going to be an engineer though, your starting salary is going to be $65,000.
You could borrow more because after graduation, your starting salary can maintain that loan and handle that for you. That's the rule of thumb I use. If you're coming up short and you have some gaps in that, we need to assess what am I doing? Should I go to community college and then transfer? Knock out. No one cares where you took English 101. Maybe you need to get some scholarships. I'm a big fan of scholarships. They are the most underutilized source of money. I run a scholarship on my site and this is what makes me even more annoyed with scholarships. I'll tell you. We'd give away a $2,500 to entrepreneurial high school students and college students. If you're reading this, you know someone have applied. I love it because I love these stories and what I ask them to do is write an essay, 1,000 words on how you're an entrepreneurial student. That's it. Give me your name, give me a headshot and give me some other basics. Do you know how many people follow the rules? 20%. We'll get about 100 to 120 applications but on day one after it closes, I eliminate 100 of them. You're only in competition with twenty people for $2,500. 
Dustin
I'm glad you shared that because I know that behind the scenes, people don't follow directions. When you tell people to apply for a job or something that, I'm glad you shared that because not a lot of people know that on the other side of that fence. 
Robert
It becomes a math game and it's worked, don't get me wrong. If you're sixteen years old, going to get a job is what you prefer. If you apply to 50 scholarships, that's a lot of work, finding, applying, writing the essays. If you view it as a job, if you do an expected value of equation, I bet you could pay for a good chunk of your college by doing that work, but its work. You can't dismiss that. 
Dustin
Podcasting was the thing at its very early ages. If a parent is listening and wants to put this in the bug in the ear of their kid, this wouldn't be a bad thing to do. 
Robert
It wouldn't. Working, scholarships, there are a lot of ways to pay for school. The one thing I would challenge, we have parents listening. Don't borrow to pay for your kid's school. We hear that thing on the airplane, put an oxygen mask on yourself first before you take care of your kid. Parents need to take care of themselves first because the other problem I see is that parents start retiring. They borrowed all this money for their kids' future and now they're begging their kids to help them, whether it's with the loans or with their life because they didn't save. If you fast-forwarded back to this time of their life, they made their kids pay for their own school and then they save for themselves. Their kid might struggle through college, which is good for them, and then the parents can have a successful retirement. When their child gets to the prime of their lives, they're 20s, 30s, 40s starting a family; the parents won't necessarily be birding them financially or asking like, "We're out of money because we paid for your school." I see that story way too often.
Dustin
What someone could say to you is now more than it could be the boo-hoers that kids are drowning in debt and the caveat to this is like, "Let's get educated. Let's do this, let's get you educated parents. Let's get the kids educated because you don't have to go to this traditional system and acquire all this debt and be upside down when you leave school."
Robert
Community college right now in about half the States is free. Even in the States, it is not free, it's very cheap. People that go to community college and transfer to a four-year school have the highest graduation rate of anybody that goes in because if you've made the commitment to go from here to college to there, you're going to do it. It’s a mind-set thing but it's also very cost-effective. Go to a free community college, go to a state school. You can be out in less than $10,000 with a business degree or a teaching credential or anything. That's not drowning. That's a reasonable cost to pay. People don't make that choice as often as they should though.
Dustin
They often say that people that immigrate here that become entrepreneurs or whatever; they're more likely because it was way worse than the other. It tales that mind-set. It’s the hunger, you're working for it and it’s the mind-set. I want to ask you about this 529 plan. What's that about? 
Robert
529 plans is a vehicle that allows families to save for college. It's a great tool. Some states, about half of them, have a tax deduction to contribute to them. Money grows inside the 529 plan tax-free. If you pull it out for qualifying education expenses, it's tax-free money when it comes out too. Congress has also been passing a bunch of rules lately to get you more ways to get your money out of a 529 plan. They passed an Act where you can pull out $10,000 to pay off student loan debt from a 529 plan. I don't necessarily recommend it. It doesn't make sense for most families, but I could see some people that game the system. Upper-income earners that have a state tax deduction could put pre-tax money into a 529 plan and then use pre-tax money to pay down student loans for their children. There's some tax planning potential with a 529 plan. For most people, if you want to save for your kid's college, start at 529 plans. The way I like to use it is gifts. 529 plans are great for gifts. You start at 529 plans when your child's a baby or one-year old for their birthday. You ask everybody and you put it on the invite, “No gifts, please. If you'd like to donate to the college, send it. Here's the link.”
There are tools like College Backer, I'm an investor in them but they allow gifting. You get a URL CollegeBacker.com/Joeschmokid, with your name, and then they can click the link and they can donate to a 529 plan. It's so much better because kids get way too much junk these days. Every birthday, every Christmas, it's 40 gifts. Mom and dad will still give him a gift. I promise extended family or siblings will still give them a gift. Extended family, instead of spending $25 on something from Target, why don't you send that $25 to help them pay for college much better? The family will be happier. I know it's not as fun for you because you don't get to see him open your thing. I promise you after the party's over, they never looked at your thing again anyway. If that makes you feel better, gifting to a 529 plan is a solid way to go. 
Dustin
Are you allowed to say, “Don't spend money at Target,” instead of the $25 gift?
Robert
I do a lot of Amazon. 
Dustin
I know you've got that Target blood.
Robert
That's their business.
Dustin
What are the things that you're also big on? We have been talking about debt. You said it earlier, your big on the trendy word is a side hustle. Some people call it side income. You've publicly said anybody nowadays in this day and age can earn $100 an extra minimum a month. For those that are living under a rock and don't see us Uber, they don't have a car. Uber and Lyft are not available or whatever ride sharing. What are some other side income strategies to make $100 or more?
Robert
I was a big fan of selling stuff on eBay. All the way back, I used to buy things at estate sales, garage sales and flip them and sell them. It started with me selling my old stuff. I had an old super Nintendo with 100 games and I started selling that. I was like, "I was making so much money." Once I sold all my own stuff that I didn't want anymore, I started looking for other stuff. My sister-in-law makes stuff and sells it on Etsy, so she's a crafter. She makes these elaborate stationery wedding things and this is great for her. She gets home, she turns on Netflix, watches shows and is crafting at her coffee table. She's selling this stuff on Etsy to the tune of a couple of hundred bucks a month. There are so many ways out there. You could still deliver, you could drive places. People like pop-poo on that. They say, "I only made $2 an hour." It's also where else in the history of the world could you pull out your phone at 2:00 in the morning with no boss and no commitments or anything and make money randomly. There are many ways. I know it may not be amazing life-changing money, but if you're trying to achieve a financial goal of gas student loan debt, $100 a month can be very game-changing money. If it takes you driving 10 to 15 hours to net that, that helps you achieve your goal that much faster. 
Dustin
You said eBay flipping, Robert, I'm going to officially double the mind-set flipper. That's what you're great at. You’ve got to change your mind-set and where else in the world could you do that? It has never been before in history. 
Robert
I know there are all these laws and rules, but even you go back years ago, it wasn't a thing. Now, I can go deliver food for somebody on an app at midnight because I have some free time and I can't sleep, and I made $20. That's cool however you slice it.
Dustin
One thing I want to add into this is that we're talking $20, $100 even a couple hundred bucks to some people, this was the mind-set I used to. I was always looking for to quick hit like, "If I could get a client or if I could do this sale or promotion and get $10,000." The thing is when you truly run the numbers and you look at spread sheets, I know not everyone loves this. Doing that extra $100 payment over the life of the debt or over the life of your savings. If you get into investing, it's compounding. It's catastrophic in a positive way. I want people to think about that because they hear $100 and they're like, "What's $100 going to do for me?"
Robert
It doesn't feel sexy but it's working out at the gym or anything else you do physically. Month one, that sucked. It wasn't great. Month three, I'm starting to see a little something but I still hate this. By the time you're at a year mark or two years, you'll be like, "This is cool. I'm achieving some goals now. I'm getting things done. I built some momentum." That's where people also have to give themselves a little grace and a little time to build a plan, make it happen and work it out a little bit before they start saying this is a terrible thing.
Dustin
We're closely aligned in brand messaging and even personally, because I was an eBayer back in school and had some fun with that. We're big on paying down bad debt, boosting active income and then the last part of this equation is putting that money to work for you. Once you've got that system up and going, investing. For me, the stock investing, I feel like a dunce there and I know I should invest. What do you recommend for the new guy or girl that knows they need to do it but they're like, "Robert, what do I do?" 
Robert
You keep it simple. If you want to do it yourself, you go to one of the free investing apps. Everyone's free these days. Fidelity, Vanguard, TD Ameritrade, Schwab, whatever you choose. Invest in a broad-based index fund. VTS AIX or something like that. It's not sexy. It's not fun. What you get with that is a total stock market fund that owns everything. The only way you lose money over the long run is if the whole world economy collapses forever because you own a small piece of every company in the world or at least the biggest 5,000 companies. That's the only way that fails. Where a lot of people fail with stock investing is that they pick individual stocks and run. It goes under. It's a great example. It's a very easy one, people know it. If you pick that one stock and it fails, you've lost your money. Enron was a part of all of these index funds, but it was 0.0005% of it. When it failed, the index fund, the total value might have lost 1% that day. The next day is the fund manager moved company 5,001 rights into its spot. You still have the biggest 5,000 companies. I'm a big fan of low-cost index fund investing. 
It's cheap to do. I also recommend to people starting out to take advantage of what's already out there for you. Most people have a 401(k) or 403(b). Free money, employers will contribute to matching contribution. Put it in an index fund in your 401(k), let it ride. IRA, a health savings account, all these different tools out there that you have the potential to invest in. The IRA doesn't get free money, but the health savings accounts now, a lot of employers are offering. If you get physical, they'll give you $500 into your health savings account. It's not even using your own money. If you can get your employer's money into your health savings account for getting your annual physical, that's a no-brainer but people aren't doing it. Only about 60% of people are taking advantage of their HSA free money.
Dustin
That's huge. I didn't even know. I haven't traditionally come from that walk of life, but if that's available, why not?
Robert
It's free money. When you're dealing with this challenge of paying down debt you're getting started, I don't have a lot to commit. Most of us have some type of free money that we can also commit and get that going. When you start in a 401(k) at 22 in your first job, you're dealing with your student loans. You're making those minimum payments, but you're investing too and at 22, that money is going to compound and grow for you. When you're in your 50s and 60s, you're going to be so glad you started at 22 instead of 35.
Dustin
I speak for a lot of people here at WealthFit. We love the entrepreneurial journey. If you look at us, a lot of us involved in this are entrepreneurs. We love that story. You transition from seventeen years with Target at some form or fashion. You were doing the side hustle thing, you had the College Investor running and then one day you said, "I'm done, I'm good." I'm going to do full-time Thee College Investor.” A lot of people have that dream one day to do that passion project or to run that business. You did it. What's your advice? What was that journey like for you? 
Robert
You have to remember it was an eight-year side hustle before I pulled the ripcord and left. It was a struggle. I started The College Investor and it was a hobby. If you go back and listen to me on a podcast, I remember because I've told people I don't think I'm ever going to leave. I'm going to keep this as a great side hustle, college ambassadors because you have to realize Target was great. It's a great company to work for. I did it for so long. I feel like I was good at my job. I was a store manager, so my boss was remote above me. No one was there to talk to me every day. It was just my shift. It was a great thing. I was working 36 to 40 hours a week, but since I worked online, I was able to do that in the middle of the night or whenever I was feeling doing the college semester and it was working. The money was great. What happened were kids. My son was born and in the first couple of years, it was fine to juggle both. Once my son hit about three or four, he started to do soccer. He's starting to do things. The only drawback of retail that I see is nights and weekends. You have to work at night and you have to work on weekends and the holidays too could be challenging. As my kids were getting older, I had no reason. I was making more outside of my day job than I was at my day job. Its like, "Why am I still doing this?" There's no monetary reason for me to do it, but it was comfortable. This is where I get my health insurance.
I know what to expect every day. You skip these fundamental things in time. There's a quote that I've heard and I never know who to attribute it to but it's, “Show me your money and show me your time and I'll show you what you value.” When you're looking at that, and I say I value my family and that something that's important to me, but then if you look at my money and my time, I'm not spending as much there as I should. I'm working on a weekend when my son is playing soccer or I'm working the holiday season and they're starting to remember Christmas is now. That was the catalyst for it. I agonized over this for almost two years, thinking of my leaving and I gave a three-month notice. I gave myself the goal of, at the beginning of the year I said I'm going to leave in September before the holiday season because I don't enough time to transition. I gave two months’ notice ahead of that too to make sure there was plenty of time and I left on very good terms. I agonized over that decision for so long because it's so comfortable. That's what I knew. Even though there was no monetary reason for you to do it that was my life career-wise until that point which shapes people. You don't realize how much your career becomes your identity in a lot of ways.
Dustin
Do you believe different strokes for different people meaning save for the exit, it's not eight years but does your thing on the side or do you think some people benefit from burn the bridges?
Robert
Different strokes for different people but everyone has a different season of life too. If you are younger, no family, it's cool to try to go 100% at 22 when you have no commitments. If it fails, there's nothing on you. If you're married and you have a family that depends on you, you might want to plan out that exit a little more because there's more on the table than you. I always think that if this failed, I can go live on peanut butter and jellies sleep on my friend's couch. When you're married with two kids, that's not going to work anymore. There are different seasons of life and different paths for different people.
Dustin
It resonates with me. I want to talk about Loan Buddy. This is one of your full-time gigs now. Let's talk a little bit about what it is and what the future looks like? 
Robert
We already had this giant conversation for student loans. The biggest problem with student loans is it's confusing, it's hard. There are a lot of options out there, a lot of jargon. We wanted to create a tool that doesn't scam people. It gives people the answer to student loan debt. That's what Loan Buddy is. It is a tool that you can go to for free. You enter all your information about your loans, your income, and I'll tell you the best thing that you should do with your loans for free. You can take that information and you could go and do it yourself. We also have upsells where we know people want to have the paperwork done whether they want to make sure it's done right and they want to track their loans and they don't trust their loan servicers, “Should I refinance or not? Which loans should I refinance if I have private and federal?” Loan Buddy handles all that for you and the paid version. The free versions will at least tell you or give you a validation check if you have student loans right now and you want to know what's the best plan you do validation and check yourself for free and see if you are on the best plan for you based on your income whether you're married, how many kids you have, all that kind of stuff. 
Dustin
The world is evolving to where you can get a lot of information for free. To me, the real value is the time quote, the money or the time is the value is you're going to give them the goods for free. To go do the work or to do that paperwork, which is not the fun part at least for a guy like me, that's where the value is and that's how you monetize that way. 
Robert
The tool is transparent because at The College Investor side, I hated seeing these scam companies pop up. I don't know if you've gotten these telemarketer ads, I get these calls and its like, "You can pay us $800 to consolidate your loans and all this stuff." I'm like, "Loan consolidation is free. You can do it." These companies are charging you $800 and then in turn, if they do it, they go on the website and do it for free but some of them don't even do it. If you can do it for free and you want to, more power to you. I know there are people out there, it's busy, if people want to make sure they're accurate, we talked about public service loan forgiveness, we do that paperwork as well and we make sure it's accurately filled out, so that you're not one of the 30% of borrowers that get their applications rejected for inaccurately filled out paperwork, things that. We'll check there for you and if you want to use it, go for it.
Dustin
Robert, I appreciate you big time for the passion you bring to this. As you said, not a lot of people want to want to talk about it for the various different sectors of taboo topics entering this conversation. You're easy to talk to and you make it fun and easy. I am excited for Loan Buddy here because it's one thing to give people information but to give them a tool where they can see things in lifetime. It makes it real. I encourage readers to go check out Loan Buddy and run the numbers on themselves. If you feel taking that next step, that's great, but at least you have that knowledge. Step one is you've got to get organized. You’ve got to know what those numbers are, so then you can come up with that plan. 
Robert
If you don't know where you stand, we can't even make an informed decision about anything in your life. Should you earn more, should you cut, should you be on a different repayment plan? Lay it all out for yourself and whatever system works for you. I want to see you financially successful.
Dustin
TheCollegeInvestor.com, for readers that want to check out investing information, personal finance, student loan, a conversation. What about Loan Buddy?
Dustin
Robert, thank you big time for being on the show. Do you want to drop any social media handles or is that the best way for readers to reach you?
Robert
College Investor, LoanBuddy.us. If you'd to listen to our content, The College Investor Audio Show. We take all of our blog posts and turn them into a short format, 6 to 10-minute audio and people can listen to that on their commute. 
Dustin
I like that. We might have to experiment with that. People like to make content hack. I love that. Robert, thank you big time for being on the show. Even more importantly, thank you for paying it forward and putting this powerful information out into the world.
Robert
Thanks for having me. This has been fun. 

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