Without financial training, we all too often use the standard for- mulas to get through life, such as to work hard, save, bor- row and pay excessive taxes. Today we need better information. I use the following story as a final example of a finan- cial problem that confronts many young families today. How do you afford a good education for your children and provide for your own retirement? It is an example of using financial intelligence instead of hard work to achieve the same goal. A friend of mine was griping one day about how hard it was to save money for his four children's college educa- tion. He was putting $300 away in a mutual fund each month and had so far accumulated about $12,000. He esti- mated he needed $400,000 to get four children through college. He had 12 years to save for it, since his oldest child was then 6 years of age. The year was 1991, and the real estate market in Phoenix was terrible. People were giving houses away. I suggested to my classmate that he buy a house with some of the money in his mutual fund. The idea intrigued him and we began to discuss the possibility. His primary con- cern was that he did not have the credit with the bank to buy another house, since he was so overextended. I as- sured him that there were other ways to finance a property other than through the bank. We looked for a house for two weeks, a house that would fit all the criteria we were looking for. There were a lot to choose from, so the shopping was kind of fun. Finally, we found a 3-bedroom 2-bath home in a prime neighborhood. The owner had been down- sized and needed to sell that day because he and his family were moving to California where another job waited. He wanted $102,000, but we offered only $79,000. He took it immediately. The home had on it what is called a non-qualifying loan, which means even a bum without a job could buy it without a banker's approval. The owner owed $72,000 so all my friend had to come up with was $7,000, the difference in price between what was owed College Education for $7,000 253 and what it sold for. As soon as the owner moved, my friend put the house up for rent. After all expenses were paid, including the mortgage, he put about $125 in his pocket each month. His plan was to keep the house for 12 years and let the mortgage get paid down faster, by applying the extra $125 to the principle each month. We figured that in 12 years, a large portion of the mortgage would be paid off and he could possibly be clearing $800 a month by the time his first child went to college. He could also sell the house if it had appreciated in value. In 1994, the real estate market suddenly changed in Phoenix and he was offered $156,000 for the same house by the tenant who lived in it and loved it. Again, he asked me what I thought, and I naturally said sell, on a 1031 tax- deferred exchange. Suddenly, he had nearly $80,000 to operate with.