Category Archives: Money

When to Start Saving for a Child’s College Education

When to Start Saving for a Child's College EducationChildren are expensive, we have a 1 year old daughter, and diapers, toys, clothes, and daycare add up very quickly. But one of the larger expenses associated with kids is their college education, which means that considering how that will work is imperative. Consider the following points about saving for a child’s college education.

For the 2015-2016 school year, the average in-state on-campus public school costs came in at $19,548 for a four-year public school. That number climbs to $34,031 when a student is attending school out of state. Private schools cost an average of $43,921, while a two-year public commuter school was “just” $11,438.

Realistically, the earlier that you can start saving for your child’s college the better. The longer you allow money sit in a 529 or other investment account, the more interest you can make from it. If you start saving money when your child is just a baby, $5,000 can turn into $19,980 over a period of 18 years. assuming an 8% interest rate. If you started with $5,000 and contributed $100 each month, that account would balloon up to $68,500 by the time your kid is ready for college. But the truth is that the monthly payments are more important than the initial amount, so even if you don’t have $5,000 to stash away now, all hope is not lost. If you had $0 saved now but contribute $100/month for the next 18 years, that would result in a whopping $48,500!

Start Saving as Soon as Possible

The simple answer to the question about when to start saving is to start saving as soon as possible. But in reality, that’s not always possible and there are other priorities in many people’s lives that push saving off until that promotion or raise comes. If you’ve got a child who is 10 years old, you’d need to sock away $350/month for 8 years to hit the $48,500 mark. This just underscores why saving early and often is so important!

Of course, not everyone needs to pay for their children’s college education. I think it’s very important for students to have some “skin in the game” when making college decisions, and it can often lead to your kids taking school more seriously. Hopefully they make smart decisions and go to cheaper schools, but taking out some student loans to cover the cost of education doesn’t need to be avoided at all costs.

But Always Put Yourself First

Most parents would prefer that their kid isn’t entering the job force with debt hanging over their head. As many as 70% of students do end up taking that route. For example I had about $25,000 in student loan debt when graduating. Have your child investigate scholarship opportunities, too!

Keep in mind that your own savings are important to protect as well. You should not be giving up your own retirement account to help pad the college fund. While student loans are always available, the same does not hold true for a retirement fund. Another option is that if you’re in a more secure financial situation when your child has graduated, you can help pay off the student loans.

Should You Sell Your Home When You Retire?

Should You Sell Your Home When You Retire?

Retirement is the gateway to the golden years. Most of us can’t wait to get there and are busy making plans for that exciting time. One question that often comes up during the planning phase is whether to sell your home when retiring. Benefits include lower costs for a smaller home, less maintenance and upkeep to rent rather than own, and reduced taxes and insurance if you buy a smaller place unless the property is more valuable. While the decision is individualized based on personal circumstances, the following may be helpful in considering this important lifestyle step.

Family Size

Much depends on who will be sharing the living space. A spouse, dependent children, or live-in aging parents will need to be considered in the downsizing decision. Even if the kids are grown, you may continue to need plenty of living area if you plan to care for grandchildren. Hosting parties or family gatherings is another consideration. Although you could meet at someone else’s house or at a public venue like a restaurant if your new residence is too small, this is something to think about before deciding whether to move.

Convenience

If your current home has an attached garage, a main floor laundry room, and comfortable living space, you may not want to move to another place that lacks these amenities. Owning your own home with a private yard and parking area is usually preferable to listening to neighbors squabble and competing for the best parking spots in the adjacent lot. Moving to a new neighborhood is an adjustment, as well, especially if you go from rural to suburban, or suburban to urban, and from a farmhouse to a penthouse. Nearby supermarkets and other shopping areas should also be considered. The transition can be made, but it is worth preparing for to do it well.

Health and Safety

Moving to a lower-income area may entail greater risk of becoming a crime victim through assault or robbery. Look for a community that is secure and relatively crime-free. It is also important to consider factors like air pollution or traffic noise, as well as closeness of the housing units, to maintain your personal privacy, comfort, and well-being. If you plan to walk outdoors for exercise in a new area, you will want to find a level walking area that is safe. Find out where the nearest urgent care center and hospital are located in case they are needed.

Socialization

Most of us prefer to live among like-minded individuals, especially as we age. However, it can be socially stimulating to move to a new area where people are different from us and each other. In addition to friends and social activities you already enjoy, check out the neighbors and available social venues to see if there are any of interest. Decide if friends and family will be able to easily drive to your new location for visits and holidays.

Retirement brings many wonderful opportunities to try new things and even embrace a whole new lifestyle. Selling your current home for another one, usually a smaller one due to a change in income following retirement, requires thought and care. Before listing your home on the market, decide whether you can comfortably adjust to the many changes that will come with apartment living or moving to a smaller home possibly in a different community.

Reasons to Keep Your Finances Separate in a Relationship

Reasons to Keep Your Finances Separate in a RelationshipWhen relationships start to get serious the urge is generally to start merging lives completely. While that works in certain aspects, it might not be the smartest option when it comes to finances. The average age of marrying is later than ever, which means that people are used to having some financial independence. Money can be a hot topic. Here are some reasons to consider keeping your finances separate.

In Case things Don’t Work Out

You never want to assume the worst from the start, but the truth is that many relationships don’t last forever. If for some reason yours doesn’t, it will be easier to part ways without having to untangle all the money. Another side to this is the importance of keeping financial independence. When the money is all shared the concept of getting away from a bad relationship might feel overwhelming. It can be a more empowering choice for each person in the relationship to have their independence in that sense so that decisions to stay or go are more clear-cut and not made out of desperation.

The Freedom to Make Your Own Purchases

Couples should consult each other on major purchases and important financial decisions, but at the same time no one wants to feel like their significant other is their parent. Asking for permission to spend money on smaller things like personal maintenance or clothing might feel unnatural after some time spent being comfortable living a life on your own terms. Even if your significant other isn’t pestering you about your spending, you might start to feel guilty for spending anything at all since it always feels like taking from the shared pot.

If you keep your own accounts you will be free to spend little amounts of money here and there without having to explain it when the bank statement comes. This is also beneficial when you’re trying to plan a surprise or buy a gift. It’s almost impossible to keep something like a birthday trip secret from someone when you’re sharing a joint bank account.

Less Fighting

It’s not uncommon for “spenders” and “savers” to come together in a relationship. While neither of those styles is necessarily wrong they sure can feel like it when it’s the opposite of your belief. Having separate bank accounts with your own money in a relationship is going to allow both parties to be themselves without the constant worry of how it’s affecting the household.

But for that to work, it’s best to have three total accounts, the two individual and then one shared. The shared bank account should be for shared expenses and parties should contribute a fair percentage based on their earnings. That way there’s a stable place in the middle with a little more flexibility on the edges.

Remember that keeping separate money is not intended to keep distance in the relationship, it’s intended to keep the peace. It’s still important to be open and honest about finances overall to avoid any financial mishaps, as well as to promote the habit of authentic honesty in a relationship.

Marriage Is Different

These rules are relevant when you’re dating, but when you get married, you may want to reconsider merging your finances. Personally, we have joint bank accounts and it’s worked out great for us (we didn’t merge until we were married). It keeps us accountable to each other, and know where we stand financially. Every relationship is different, but keep these tips in mind as maybe they’re the key to getting there!