I’m the primary breadwinner. My job situation and industry are incredibley stable. I will retire from my company. I’ve been here 25 years. They pay 100% of my healthcare costs. I have profit sharing and a healthy employer 401k match. Our combined retirement funds, if we didn’t contribute another dime, should grow to a point in the next 20+ years that we’d be fine. I still intend to contribute even if paying loans from the beginning.
If I become disabled…we’d be in trouble…but we’d be in trouble anyway. If I die, everything would be paid for.
My wife works part time currently and intends to go full time. The potential full time job would come with a pension, which would be gravy at retirement time.
As for our current spending, we have plenty of facets of our lives that could be trimmed back. I guess it’s a matter of what we’re willing to give up to help our kids. We pay A LOT for a fancy health club. Unnecessary. I have a pretty substantial watch collection…and I only wear one watch at a time…so I could cover at least a semester if I sold most. Do we need to go out to nice dinners as frequently as we do? Of course not. We have a $650 car payment on my wife’s truck. It will be paid off in a couple years…and then she drives it until it falls apart. Do I need every cable channel known to man? Nope. We currently spend $15k+ per year on club soccer for the youngest. I can bring that cost down to sub-$5k if necessary. The money will save without the oldest under our roof will go towards college. I’m willing to significantly alter my lifestyle for an extended period of time to make this work. It will be a balancing act.
We have a HELOC we could access, but my house is on track to be paid off completely by the time son #1 graduates. I’d prefer to have no true mortgage payment and make my new mortgage payment to “college #1” and then “college #2” when the youngest is there.
The Mercedes comment made me laugh out loud. I used BMW with my son, and as an explanation to the guys at work who I’m prodding to start saving more for their newborn children’s college education.
I want him to understand what the potential long term implications for the family are. He’s a very thoughtful and practical kid, so he may say he’ll go to our $30k top state school. His original plan was to go the ROTC route but was thrown a curveball (as were we) and is medically disqaulified from service. It’s nothing major at all. He’s strong as an ox and a distance runner.
I’m not entering into this lightly. I didn’t want this to be about family choices, just about an excel table. I really appreciate everyone’s concern. The next 10+ years will be tough.
You have a LOT more faith in future potential pensions that a LOT of people have. Very solvent companies around here, as well as municipal employers, have changed or even removed pensions as an option…and yes…this includes for current employees.
You really have NO idea what your pension will be until you actually get it. It COULD change. So add that to your excel sheet.
Same with health insurance costs. You could find yourself picking up a larger portion of your premiums…or even all of them. Add that to your excel sheet.
It’s probably just my personal financial sensibility talking, but I’m really surprised that given the lifestyle your family is living, one of your first solutions to that extra money needed for your oldest child’s college bills is apparently borrowing by the parents.
Is your wife fully on board with all of the cuts that will need to be made in order to handle the costs of college? Sit down with her, and slash through the current expenses. Make that your first Excel spreadsheet. If the truck truly is necessary, then find a cheaper health club and toss the health club dues at the truck payment so you get rid of that expense sooner.
So one piece of advice based on what you’ve said above…get disability insurance. I recently got a quote for about 70 a month to increase my disability from the 65% I get from work to 100% - as the primary breadwinner. It may be worth that security to buy the insurance at least through the college years. You may only need a 10 year term.
PM me with an email and I’ll be happy to send you a spreadsheet that will work for you to calculate payments however you need to, changing the monthly amounts, etc.
It’s not ten years. Eg, if Child 2 is two years younger, PP loans for him/her have their own ten year clock. Now you’re talking 12 years of repayments/belt tightening. Etc.
And if you die, the PP loans aren’t truly wiped out. They can be cancelled, but the amount is reported on a 1099R and taxable. Please check this. Of course, you could up your life insurance to cover that.
PP loans are taken by an individual parent. Not both.
This may work out. Sure, maybe he picks the most truly affordable option (and the family is genuinely happy for him, no lingering chat about ‘too bad x wasn’t in our cost range.’) Or maybe some great merit aid comes through.
But real planning includes frank awareness of What Ifs. Put those in your spreadsheet, too. And awareness of a past and present tendency to self indulge. (No offense intended.) What happens down the road when you’re itching for an expensive family vacation, you need a car and find yourself thinking why a Ford won’t do, or whatever, but you’re x years into loans, possibly paying $1000/mo on loans? Or more, as kid 3 reaches college.
So really, rather than simply seeing this as the ultimate gift to a child, no matter the costs, yes, you can have solid conversations with the kids.
And ya know, Dave Ramsey would say sell the truck, buy used, put the 650 into these college costs.
Why not start frugalizing now, so that you can see what frugalization is realistic in your life? Plus, you will start saving money now instead of later.
Cancel the fancy health club. Perhaps sign up for a low cost gym if you go regularly, or look for low cost alternatives (e.g. a pullup bar that you can put in a doorway).
Sell the expensive watches.
Look for lower cost dinner options.
Sell the expensive vehicle(s). Replace with less expensive ones if necessary (including consideration of fuel, maintenance, insurance costs).
Cancel the cable television. Or switch to a lower cost plan if available.
Cut what you see are the unnecessary extra $10,000 on the kid's club soccer. Is this due to traveling luxuriously rather than frugally?
Go to the library and read Stanley/Danko *The Millionaire Next Door*, Stanley *Stop Acting Rich*, etc..
To your point, these discussions in the household have already begun. I’m looking at a bit of a rolling trend to these cuts.
Son #1 is a competitive tennis player so the healthclub can’t get “clipped” until he gets through the Winter months. Tennis lessons and court time fees will go away once he gets to college as well, which will help.
I’ve already started looking at fair market value of some of the watches to add them to the spreadsheet.
The dinner part will be easy. It’s a non-essential luxury.
The vehicle has low miles and has an excellent reliability record so we’ll definitely look to pay it down and ride it until it dies.
Basic cable is in our future. I’ve researched unplugging completely and using Firestick/Roku/Playstation to get t.v. but it seems far too labor intensive.
Yes, the $10k is largely travel related, both domestic and international. I’ve reached out to alternate clubs already for the 2018/19 season. This child has some potential, which affords us some leverage with coaches that we have yet to tap into.
I will most definitely read the book.
At this point I’ve gone into 1000% more detail than I ever intended. Thanks for all your recommendations and concern. I may end up poor. The whole college process is truly discouraging.
All good points. We made the mistake(if you can call it that) of focusing on retirement savings first. Now we need to have the types of discussions we had hoped to avoid.
Is this expensive club essential for tennis lessons and court access? If not (i.e. just used for the weight room and other typical gym facilities), could he switch to a less expensive one? If others in the family are using the expensive club, could they switch to a less expensive one?
Very interesting thread. I have a question of my own that is why started a new thread on tax deferral accounts and it’s implications on need based aid.
The mistake may not be in focusing on retirement savings; it may have been allowing your lifestyle to become expensive enough that it prevented saving for both retirement and kids’ college.
Saving for retirement is very rarely a mistake, and in most cases it should take a higher priority than saving for the kids’ college. You can always borrow for college (if necessary), but nobody will loan you money to live your retirement.
The greater gift we can give our kids is being max prepared for our retirement. Not going into hock now and trapping them to take care of our later financial needs. Don’t assume they will be able to, that their careers, family needs and spouses will make it feasible.
And if you become the cranky sort of elder some of us discuss on threads, you can make your dependence nearly unbearable. So yes, stash money in retirement plans.
We all get a bit starry eyed about college choices. The savvy still keep the right perspective.
Yes. This. Our financial planner suggested we maximize retirement contributions and we did. He said that t was worth it to have a nice nest egg there to continue earning interest IF we needed to reduce those contributions to pay college costs. As it happens, we didn’t need to do that… but we saved for retirement…not college.
Then again…both of us works FULL TIME. Anyone who has read my past posts knows that we used MY take home pay to pay for college…and DH’s paid the rest of our bills. But this onkynworked because I had sufficient income to PAY the college bills out of my current earnings.
Here is what I see in your posts…your oldest kid is going off to college. And NOW…just NOW you are starting to look at how the finances will affect you and your family. Your wife hasn’t yet gotten that full time job. You are willing to cut back significantly on your lifestyle and spending…honestly…your whole family will be affected by this. How will your younger kids feel as this takes place. No more nice expensive vacations, no new cars, no expensive club memberships, etc. it’s a lifestyle change for your whole family…and IMHO, you are looking at this at the 11th hour…after the applications were sent in.
If you are taking these loans…it’s a parent issue. If your total lifestyle is going to need to change…it’s a family issue…and you need to consider the impact this will have on the whole family.
Yes, if over the years, the family, including the kids, has gotten used to a luxurious expensive lifestyle, a sudden shift to frugality may be difficult. Will college be the first time in your (the OP’s) kids’ lives that they will have to consider cost constraints on their choices?
I don’t understand why just paying out of pocket is a problem if the family is so apparently wealthy? Why are you talking loans at all? Why are there car payments (650 is a big payment, I assume you got 0% financing but that is not free money, if that money is being shuffled into your brokerage, that is good math, but I don’t think that is the case as you just refer to retirement funds) and HELOC loans now, before kid is in uni, if the finances are so rosy?
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Right, which is confusing to me. You are poorer than you think. JMO. Did you say how much is in the 529? What kind of job is as safe as you think yours is? is it govt?
This should have been done a solid year ago, OP. This is not the time to be pondering the choices of basic cable vs Fire Stick vs Roku (setup of which, btw, is incredibly easy - much easier than crunching spreadsheets on how to afford college).
Sell the truck now when you can get a lot of $ for it. A $650/month payment for two years is $15,600. Good grief. It’s half a year of college. Drive your wife to her job. Or get a thousand-dollar beater. And yeah, you’re probably upside down on the loan, because new trucks are an absolute boondoggle, but at least you’ll be out from under that payment.
Look, either you have the money in savings, or the income to cash flow any college your kid wants to go to, or you don’t. If you don’t, allowing your kids to apply to any college that strikes their fancy is irresponsible.
Please don’t make the same mistake with your younger kid(s).
Thanks for all your recommendations and concern. I may end up poor. The whole college process is truly discouraging.