Paying for College

Archive for the ‘Paying for College’ Category

Is There a General Debt-to-Income Ratio Related to Tuition Costs?

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Q: My Daughter’s Private School at Our Church is Closing this Year. To Keep her in Private School We Will Need to Pay Double the Tuition Costs We are Currently Paying. I am Not Comfortable With This as We are Trying to Become Debt-Free and This Will Hinder That Process. Is There a General Debt-to-Income Ratio Related to Tuition Costs That Might Aid My Decision?

A: No, there’s no general rule of thumb regarding how much school-related debt a parent should take on relative to his or her income. But frankly, you don’t need broad guidelines or even specific rules of thumb to decide what’s best here from an economic standpoint. Private school is already relatively costly, certainly compared to getting a free public education. If you had to pay twice the amount for a new private school that would no doubt crimp your budget and set your family back in numerous ways.

Think honestly about what you’ve already said: namely that you’re in debt, trying earnestly to get out of your financial bind, and that paying double what you’re accustomed to for your daughter’s schooling would be a financial hardship that would derail your efforts to become debt-free. I applaud you, of course, for wanting the best possible education for your child. As parents, we all want that. But sometimes you have to make tough choices because it’s in the entire family’s long-term best interest. It sounds like you’re grappling essentially with the decision to sacrifice an awful lot of money by sending your child to private school versus sending her to public school. Obviously, I can’t make that decision for you. But I can share with you my own story, because I’ve dealt with this very issue.

To make a long story short, I had my two older children in private school – at a time when I was in debt, as you are – at a cost of about $20,000 per year. This was when my kids were only 3 and 5 years old, mind you. Ultimately, I made the choice to take them out of that school. They transferred into a different private school that was about 1/3rd of the cost. They continued to do outstanding in school. And now, for the past couple of years, they’ve been in public school. My kids remain pretty much straight-A students and they are thriving in public school — doing far better than I’d imagined they would through these two transitions. Thank God that everything actually went very smoothly.

I say all this because so often as parents we worry about all the “what if” scenarios and think that we might be “harming” our children by “not giving them the very best.” In my case, I ultimately came to the conclusion that I had to “get real” about my finances, and that the “best” that I could offer my kids was to be honest about what our family could realistically afford. Also, by not spending so much money on private school now, our family is able to better save for my kids’ college education, which we all know will be outrageously expensive. My older two children are now 12 and 10 and again, they’re doing very well. I also have a four-year-old who will start public school in the fall.

So generally speaking, I’d recommend that you not over-extend yourself by sending your daughter to a new private school when you know that financially, you simply can’t afford it at this time. There’s no shame in that. And that decision certainly wouldn’t preclude you from letting your child do extra curricular activities, having academic tutors, etc., if you felt it was necessary. But again, the decision is best left to you and your family after you carefully consider all your options, as well as the short and long-term impact that private or public school would have on everyone involved. Good luck!

How to Lower Your Child’s College Tuition: Free Event (askthemoneycoach.com)

Where Can I Invest My Daughter’s Money That She Receives for Birthdays and Holidays?

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Author: The Money Coach

Q: I Would Like to Save My Daughter’s Money That She Receives for Birthdays and Holidays. Where is the Best Place to Put It?

A: It’s great that you are thinking of your daughter’s financial future. That shows that you are a conscientious and loving mom – two traits I’m sure your child will appreciate (if not now, then certainly down the road). Why not use that gift money wisely by putting it into a college savings account to help pay for future educational expenses? Open a 529 Plan in order to reduce the amount of cash you’ll have to pay later toward tuition, room and board and other college costs. A 529 Plan is a state-sponsored college savings program. It’s a great ways to save for college because the money is put into mutual funds that grow over time. What’s more, you can get tax deductions for contributing to a 529 Plan in some states. That money your daughter gets for her birthdays and holidays will also help reduce the need to take out college loans. Learn everything you need to know about 529 Plans at http://www.SavingforCollege.com.

I have so many bills I can’t afford to save any money. What should I do?

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Author: The Money Coach

Q: I’m a College Student and My Soon-to-Be Husband Just Purchased Our First Home. Last Year I Bought a Car and I’m Paying for College out of Pocket. With So Many Bills, How Can I Save? I Do Have a 401(k) But I’m Tired of Living Check to Check.

A: Congratulations on your upcoming wedding and on you and your fiancé getting that home. To get out of the cycle of living paycheck to paycheck you really are going to have to take a hard look at your budget. I know you have a lot of bills to pay, but to get ahead financially – and stop being cash-strapped all the time – you absolutely must get your spending in alignment with your actual income. In a nutshell, you can not spend more than you earn. In fact, your spending should not be anywhere near your earnings, and you should be putting aside 10% of your income into savings. To get yourself on the right path, look at every area of your life where you’re spending money, and create a proper, realistic budget. Read on for more tips to do just that.

Two Easy Steps to Creating a Budget You Can Live With

I know that most people loathe the thought of being on a budget. The word “budget” alone conjures up images of deprivation – making us think about every thing we can’t have, can’t do, or can’t buy. But creating a budget – and living with it – doesn’t have to be so restrictive and it certainly need not be a painful process.

In fact, having a good budget offers a host of benefits. A well-made budget:

•   Gives you power and control over your finances
•   Keeps you from living paycheck to paycheck
•   Allows you to save for future goals and dreams
•   Helps you avoid going into debt

Here is my simple, two-step system you can use to create a livable budget that will help you achieve peace of mind and eliminate worries about your money.

Step 1: Make a list of your expenses
Begin by itemizing all the different areas of your life in which you spend money. Some common categories are:

•   Food
•   Housing
•   Entertainment
•   Transportation
•   Debts
•   Utilities
•   Educational Costs
•   Childcare
•   Insurance
•   Miscellaneous

When you make your list, take a moment to think about how you really live your life on a daily and monthly basis. Do you have kids for whom you regularly buy gifts? If so, include a gifts category for things like birthdays, holidays, graduations, or other special occasions. Or maybe you’re an avid reader, so you should add a category for monthly magazine subscriptions or books you routinely purchase. Your list can be handwritten, or entered on a computer spreadsheet.

Step 2: Adjust to avoid budget-busters
If your expenses exceed your income, you’ll have to cut back on areas that aren’t necessities. Also, to avoid blowing your budget, remember that unexpected events and emergencies always arise. That’s life. You can minimize the impact of these occurrences by adjusting your budget according to the principle of LIFE. LIFE is an acronym that describes the four ways that your budget gets out of whack – forcing you to spend more than you planned for the month, or causing you to live from paycheck to paycheck. The features of the LIFE formula are described below:

• Listed items are under-calculated
The “L” in LIFE stands for expenses that are “listed” items in your budget, but the numbers you used are actually very inaccurate. For example, if your credit card bills show that you spend $250 a month on clothes, don’t put $100 into the clothing category. Don’t underestimate your spending. Enter a realistic number.

• Impulse purchases seduce you
The “I” in LIFE refers to the “impulse” purchases that everyone makes now and again. Make sure you’re not buying things on a whim week after week, month after month. That’s a sure-fire way to kill your budget. Whenever you make an unplanned purchase – whether you’re shopping online, buying something from a street vendor, or getting something from the mall when you were supposed to be “just window shopping” – that’s considered an impulse purchase. Keep those to a minimum.

• Forgotten bills surface
The “F” in LIFE is for those “forgotten” bills that pop up when you least expect them. Some bills get paid annually or perhaps twice a year – like your membership to the gym or perhaps your auto insurance. If you’re not mindful of these expenses, you can forget them and then when the bills come due you’ll be short of cash. To avoid this pitfall, do not omit them from your budget. Just factor them into your monthly budget on a prorated basis and put the money aside. For instance, if your auto insurance is $1,200 a year and it’s due in December, enter $100 in your monthly budget for this expense. Then put $100 cash aside each month for 12 months – instead of trying to come up with all of the money at the end of the year.

• Emergency or unexpected events occur
The “E” in LIFE stands for “emergencies.” There are obviously times when emergencies – like a burst boiler unit – can ruin a budget. Try to minimize these events with preventative measures, such as regularly servicing your boiler, having routine maintenance done on your car to avoid breakdowns, and making periodic visits to the doctor to stave off serious medical conditions.

Once you realize that LIFE happens to everyone, you can take some steps to safeguard your finances and create a realistic, workable budget. For most of us, that’s the first step to having fewer money problems and achieving financial freedom.

I am broke and in college. Where can I get money to finish my degree?

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Author: The Money Coach

Q: I Just Completed 6 ½ Years of School But Maxed Out My Subsidized and Unsubsidized Loans. I Have One Class to Take to Get My Degree, But I Have an Overdue Amount and Late Fees on My School Account. I Don’t Work and Don’t Have the Money to Pay the Fees or Pay for the One Last Class I Need for My Degree. I Also Do Not Have Good Enough Credit to Get a Loan from a Bank. Do You Have Any Advice How I Can Pay For These Fees and This Class?

A: Without a job, and with poor credit and a host of outstanding educational fees remaining, your options for paying for this last class are indeed limited. Obviously you can’t get a bank loan, and it’s clear that you lack the income to pay for the final class you hope to take. Here are three options to consider:
•   borrow money from family and friends
•   sell stuff you don’t want or need in order to raise the money
•   try using a peer to peer lending site, such as Prosper.com., where people loan money to others

As a alternative, instead of worrying yourself crazy over this “one last class,” I think you would be better served at this time focusing on trying to secure paid employment. Yes, I know that jobs market is tough and that jobs are more plentiful to those with college degrees. And I’m sure that’s one of the reasons you want to get that college diploma. But don’t let be the single thing that determines your success or failure in the job market – or in life. Plenty of successful people (think Bill Gates) didn’t graduate from college. If you find a job, your employer may be willing to pay your tuition. Plus you’ll have income of your own to repay the overdue educational costs.

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Archive for the ‘Paying for College’ Category

Is There a General Debt-to-Income Ratio Related to Tuition Costs?

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Archive for the ‘Paying for College’ Category

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