What if going back to school hurts budget?

Dear Dave: My wife and I are in our early 20s, and we bought a house about six months after we were married, putting $10,000 down on a $100,000 mortgage. We each have two years of college left and would like to go back and finish. Currently, I make $45,000 a year and she makes about $18,000. I could finish my degree over the Internet, but she would have to physically go to college because her teaching program is not offered online. This means cutting back on her hours at work.

If we do this I’m afraid we’ll really be strapped financially. Our parents have even suggested we sell our house, and move into a cheap apartment. Apart from the home, we have no other debts and our house payment is $750 monthly. — Ben

Dear Ben: I’m all for going to college. Education is a great thing, but be careful not to confuse college with a meal ticket!

The truth is that if you’re making $45,000 in your early 20s, your career is going pretty darn well. And here’s a secret for you. The saying that goes “I’ll never make more money without a degree” is a lie. You’re barely getting started at this thing called life. Don’t limit yourself!

But as far as selling your house goes, don’t do it. With your income you can handle your expenses — especially because you have no other debts. I like the idea of you taking classes online and still working during the day. It would be a lot more flexible and allow you to maintain a good income. It will also get you guys accustomed to what it’s like to be married, working and in school.

Then, after you’re finished, you could even work a part-time job a few nights a week to bring in extra cash while your wife finishes her degree.

Trust me, with a little creativity and some hard work you can make this happen without having to sell your home! — Dave

12% return on investment

Dear Dave: I read some time ago where you advised someone to invest $2,000 per month at an average of 12 percent interest. What planet are you on? If you can get 12 percent, then show-and-tell and I’ll be your friend. — Robert

Dear Robert: I love making new friends. And it looks like you’re about to become my new best buddy!

Over its lifetime the stock market has averaged an 11.8 percent rate of return. In addition, according to Lipper Analytical, 96 percent of the growth stock mutual funds have averaged over 12 percent in the past 20 years.

When I talk about an average 12 percent rate of return, I’m not talking about “quick money.” Don’t look at what you invested two years ago. Look at what you invested 10 years ago — or longer. That’s where you’ll see the average working out.

Mutual funds — like any other investment — go up and down. If you look at what you invested a couple of years ago, the numbers may very well be down. But you’ve got to keep in mind that I advocate crock-pot cooking, not a microwave approach.

Keep money in there for the long haul. Even at only 10 years, you’ll see a steady average of 12 percent.

And remember to diversify, spreading your investments evenly over the following types of funds: growth, growth and income, aggressive growth and international. — Dave

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