Cary Carbonaro CFP® did not get invited to the (debt) party in college

Cary Carbonaro NEW WHITE BORDER Instagram.png

Certified Financial Planner Cary Carbonaro watched enviously from the sidelines as her fellow students splurged on so-called living expenses in college when their student loan checks came due. But for the author of The Money Queen’s guide-For Women who want to build wealth and banish fear-  post-graduation the tables were turned. 

 

In Cary’s money story you will learn:

-The choice Cary’s father gave her in choosing a college

-The criteria Cary used to decide which college to attend

-What Cary had to go to the library to look up

-How that trip to the library informed her attitude towards money and debt

-The one key mistake her college friends were making that put them in a downward financial tradjectory

-The consequences of the mistake and how it made Cary’s financial life so different from many of her peers

In Cary’s lesson you will learn:

-Strategies to lower student debt both in college and after college

-How and why women’s financial needs differ so much from those of men

-The behaviors that drive the money gender gap

-How men and women’s investing strategies differ

In Cary’s money tip you will learn:

-How to leverage your home to earn tax free income

In my take you will learn:

-How to use quirks in our tax code to your advantage

-How the IRS views the sharing economy, and the tax rules about these emerging businesses

-Specific ways to help friends and family who are spending student loan money on things other than education

Episode links

Cary’s website: carycarbonaro.com

Get Cary’s book: The Money Queen’s Guide

Follow Cary!

Twitter @carycarbonaro @moneyqueensguide

Facebook Carycarbonaro @moneyqueensguide

LinkedIn Cary Carbonaro

Places to rent your house that Cary discussed:

Airbnb

VRBO

Tax resources: 

IRS.GOV

IRS Sharing economy tax center https://www.irs.gov/businesses/small-businesses-self-employed/sharing-economy-tax-center

 

Transcription

Cary Carbonaro:
Everybody got checks, and it was a massive party day, and you could take out living expenses. And living expenses could be beer, could be shopping. Whatever. I was so pissed that all these people got all these checks and I didn't get any checks, but they're going to have to pay the piper one day. And guess what? They did.

Bobbi Rebell:
You're listening to Financial Grownup with me, Certified Financial Planner, Bobbi Rebell, author of How to Be a Financial Grownup. But you know what? Being a grownup is really hard. Especially when it comes to money. But it's okay. We're going to get there together. I'm going to bring you one money story from a Financial Grownup, one lesson, and then my take on how you can make it your own. We got this.

Bobbi Rebell:
Hey friends, no one wants to get left out of the party while everyone else is having a great time, but cleaning up the mess can be expensive. Especially when that party was fueled by student debt. Certified Financial Planner Cary Carbonaro, who you may know as the author of The Money Queen's Guide, learned that lesson in college and shared it with me, along with a genius money tip that you need to hear. It's going to make us all a lot of tax-free money. Here is Cary Carbonaro.

Bobbi Rebell:
Cary Carbonaro, you're a Financial Grownup. Welcome to the podcast.

Cary Carbonaro:
Thank you so much for having me, Bobbi.

Bobbi Rebell:
You are also a Certified Financial Planner, and the author of The Money Queen's Guide, which is one of my favorite books, and has been such an inspiration to me. So it's truly a pleasure to have you be part of my new show.

Cary Carbonaro:
So happy to be here, Bobbi.

Bobbi Rebell:
And I'm also excited because you brought with you a great story that has to do with your father and with some big decisions that you made early in your life regarding debt. Tell us what happened, Cary.

Cary Carbonaro:
Sure. So here I am, 18 years old. Every 18 year old has to make the decision where do you want to go to college? Why? How? How you going to pay? All that great stuff. So my dad said to me at age 18, "Cary, I will pay a hundred percent of your college if you go to a state school. I will not pay it a hundred percent if you go to a private school. You will have to take out the difference in loans." Now this was a really long time ago. This was 1986.

Cary Carbonaro:
Honestly at that point, I didn't even know what the word debt was. I mean I sort of did, but I wasn't a hundred percent sure. This is before I could Google it and figure out what it was. I actually had to-

Bobbi Rebell:
This is before the internet, right? 1986 [crosstalk 00:02:46] so-

Cary Carbonaro:
This is before the internet.

Bobbi Rebell:
... so millennials out there, no Googling this.

Cary Carbonaro:
No, I couldn't Google it. I mean can you imagine? I had to go to the library and look up debt.

Bobbi Rebell:
Shouldn't your father have explained that to you when he was giving you this sort of-

Cary Carbonaro:
Well no, no, no. Believe me-

Bobbi Rebell:
... decision?

Cary Carbonaro:
He did. He wanted me to learn it myself. So and then when I went back to him, and he was a credit loan officer for Chemical Bank. JP Morgan Chase. So obviously he knew all about credit and debt, but he wanted me to learn the lesson.

Cary Carbonaro:
So after I came back to him, I just said, "You know, it's really bad. Just why would anybody want to be in debt? Why would you want to have to owe money when you get out of college? Why would you want to have this hanging over your head?" And he said to me, "I totally agree. I wanted you to have the option." Because we were looking at Cornell or Cortland, and they were both near each other. Both C's, both upstate New York. And a big difference in price. So I said, "I am gonna take the non-debt route."

Cary Carbonaro:
And then it was interesting, because I would say nine out of 10 people in my college took on debt. Even though it was a state school. And when debt day came, or when the checks came, everybody got checks, and it was a massive party day whenever they came. The bars were filled-

Bobbi Rebell:
Wait, wait, wait. So they would get these student loan checks, where they're borrowing money, and instead of using it directly, depositing it to pay their tuition, they were using it for things that were not tuition.

Cary Carbonaro:
Well, some of them you could take out living expenses.

Bobbi Rebell:
And living can be broadly defined.

Cary Carbonaro:
Yes. And living expenses could be beer, could be shopping, could be clothes, could be pizza, wings, whatever. And I remember thinking, I was so pissed that all these people got all these checks and I didn't get any checks. I was like, "This is so unfair."

Cary Carbonaro:
But then I was like, "You know what? I know what I'm doing is right. They're gonna have to pay the piper one day." And guess what? They did. And I never did. And let me tell you, that is a real life lesson. And I wish that people would understand what they were doing at age 18.

Bobbi Rebell:
But they don't usually tell people how that works. Well, I think people understand as a general concept that it has to be paid back, but not the reality of it. Did you have conversations with those friends when they started having to pay it back?

Cary Carbonaro:
Yes. Well so I'm still friends with almost everybody from college. And yes, I saw them go through crazy, crazy, crazy paying back debt. And also, we were lucky because we were at a state school, which was less expensive than the private schools because obviously that debt is much more.

Cary Carbonaro:
One of my girlfriends in my sorority was married to a doctor, and he had not only his regular undergraduate college debt, but he also had his medical school debt. And when we were talking about, she moved to Long Island for the first time, and we had a house and she didn't have a house. And she said, "We won't be able to buy a house for another like 10 years." And I said, "Why not?" And she said, "Because of his medical debt and because of his E & O insurance." Which is his medical-

Bobbi Rebell:
Right. which you can't control as much.

Cary Carbonaro:
Right. And so she said, "You know, it's like having two mortgages without even having a house."

Bobbi Rebell:
I mean I think I kind of know where you're going here, but what is the lesson for our listeners? And especially because you've been such and advocate for women taking control of their finances. So maybe put it in that context. What's the lesson for our listeners here?

Cary Carbonaro:
Women have a lot of strikes against them coming into their financial life. I'm just going to name the high level ones and why, I think they're so important. Especially related to this lesson. Right? Women make less because of the pay wage gap. Women work less because they're out caregiving for children and other family members. Women don't negotiate for raises, so that's another reason why they make less. The most important one is that women live longer. The longevity is the biggest issue. Women need more money than men, not less.

Cary Carbonaro:
Also, women are more conservative, which means they are less likely to invest their money. They like to hold onto it and horde cash rather than putting it in the stock market, which is going to grow and beat inflation. And again, they need more money, not less. So if you're funding a retirement from age 60 to 100, you potentially could be funding retirement for longer than you actually worked. Because let's say you're out in your 20's and work til your 60's and you may have worked less than 40 years, and you're living for 40 years after you're retired.

Cary Carbonaro:
With all that said, why would you start out in your 20's with debt on your balance sheet? If there's any way to avoid debt at a young age, you will be starting out ahead of the curve. You'll be able to save for your retirement. You'll be able to save for your emergency fund. You'll be able to hopefully increase your credit score because you don't have the debt load of the student loan at age 22 on your balance sheet.

Cary Carbonaro:
And I'm not saying that everybody should just go to a state school. I think it's a combination of looking at what you want to do, and then what the most cost efficient way is. If you've got your heart set on NYU, go to NYU. But figure out ways to pay for it while you're in college. Do a work-study. Try to lower your bills. This is not free money that you're living on in your 20's or in your college years. Somebody's paying for it, so hopefully, it's not you through debt.

Bobbi Rebell:
And by the way Cary, I don't know if you know this, I think you mentioned NYU because it's I think one of the most expensive schools in the country. You know that my stepson is going-

Cary Carbonaro:
I do.

Bobbi Rebell:
... to be attending NYU in the fall. [crosstalk 00:08:33]. We're going to make it happen for him. We're going to help Bradley graduate debt-free. And that's our pleasure as parents, but I hear you. I saw that little dig in there, Cary.

Cary Carbonaro:
No, actually I meant it as a compliment. Like if the choice is there. It's interesting, with my stepson, we gave him the same choice that we would pay for a public school and that private school he had to take out loans. He was not liking it at all, and he pretty much said to us, "Well, if I get into the school, you should pay for whatever school I get into." So it's again, from an 18 year old's perspective, you gotta realize that there's pros and cons, and cost to this.

Bobbi Rebell:
Yes. Yes. It is not a bottomless bucket of money. All right. But ways to earn money, I am so excited. I was giddy when we were talking about this before we started recording because your money tip is so genius.

Cary Carbonaro:
I love this one.

Bobbi Rebell:
This is the best one.

Cary Carbonaro:
Everybody who owns your own home, or even if you don't own your home, even if you have a house that you lease, you are allowed to rent it out tax-free for 14 days a year. This is pretty awesome because it's literally free money. Let's say for example you have an apartment-

Bobbi Rebell:
Meaning you mean you are not paying tax on this income.

Cary Carbonaro:
Correct. I mean literally tax-free. 14 days a year. So for example, you have a place in Manhattan, and you are going on vacation for two weeks. You can put your place, of course providing ... Wait a minute, I shouldn't say New York City because there might be some rules with New York City. So let's change it to Florida. Florida doesn't have the rules.

Cary Carbonaro:
I have a place in Florida. I'm going away for two weeks, I'm going to be in New York, I can rent out my house on either Airbnb or VBRO, which is Vacation Rental By Owner, for 14 days a year, income tax free. So it's easy, you put it on, put pictures up, and say charge $500 a night, that's $7,000 tax-free.

Bobbi Rebell:
Nice. Cary, where can people find you?

Cary Carbonaro:
Sure. So I'm easy to find. My website is carycarbonaro.com. My firm website is unitedcp.com. You can find me on social media, @carycarbonaro on Twitter, @carycarbonaro on Facebook, @carycarbonaro on LinkedIn, and also Money Queen Guide on Twitter and Facebook.

Bobbi Rebell:
Hey friends, wasn't that money tip from Cary awesome? It should get us all thinking about the quirks in our tax code. Especially since this is tax time for most of us. Don't forget to file an extension if you're not ready to actually file the return. And there is no extension, by the way, on what you owe.

Bobbi Rebell:
All right. So Financial Grownup tip number one, take the time to learn how the sharing economy impacts your taxes. As Cary said, you can rent out your home, and it does not have to be an investment property, by the way, for up to 14 days a year, and the income is tax-free.

Bobbi Rebell:
The sharing economy has become such a mainstream part of our economy, that the IRS even has a page called the Sharing Economy Tax Center. Right on irs.gov. They also have tips for other kinds of sharing economy businesses, like ride sharing, aka Uber, Lyft, and so on. I will put a link to that page in the show notes.

Bobbi Rebell:
Financial Grownup tip number two. Let's look out for our friends and the people we care about when it comes to spending borrowed money, like student debt. For example, if you are in college, and you see your friends that you know are taking on debt and spending more than they should in college, find an appropriate way, and it's delicate, be sensitive, but try to help them understand the consequences of taking on so much debt that is not directly related to their education.

Bobbi Rebell:
Be supportive of a leaner lifestyle. Maybe go out of your way to just happen to choose lower priced restaurants when you go out. Or even host gatherings at home so that they're not spending money that they feel they need to spend to keep up with you or to have a good time. You can help there.

Bobbi Rebell:
Parent, relatives, mentors, teachers, anyone with ties to students, do the same thing in terms of helping them out. As I said, be sensitive, don't be judgy, but let's talk more about only taking out the smallest amount of debt and using it only for the right things. A smaller student debt bill is going to be really good for starting out in life. And you won't have situations like the one that Cary talked about where her friends can't buy a house for a decade because of medical school debt. That just stinks. And as Cary said so well, "This is not free money."

Bobbi Rebell:
If you enjoyed this episode, please subscribe and consider rating us and writing a review on Apple Podcasts, aka iTunes. It helps the show get discovered, so we can share more money stories and lucrative money tips. Be in touch as well. On Twitter, I'm @BobbiRebell, on Instagram @BobbiRebell1, and Bobbi Rebell on my Facebook author page.

Bobbi Rebell:
To learn more about the program, and get on our mailing list for bonus content and more, go to bobbirebell.com/financialgrownuppodcast. I hope you enjoyed this episode with Cary Carbonaro, and that we all got a little bit closer to being Financial Grownups.

Bobbi Rebell:
Financial Grownup with Bobbi Rebell is edited and produced by Steve Stewart, and is a BRK Media production.