5 Debt-Free Ways to Pay for College (and Still Save for Retirement)

5 Debt-Free Ways to Pay for College (and Still Save for Retirement)

If you have kids who will start college soon, it’s no surprise to you that three out of four parents in your shoes say they are concerned about having enough money to help their kids pay for school. Many want to help, but they have their own financial challenges to overcome. How can they get their kids through school and still pay off debt or save for retirement? Four years ago, Ron and Paula R. from Eagle, ID, found themselves facing that situation. Their son, David, was headed to college and their daughter, Debbie, was set to start the next year—but they had zero college savings. They tried to solve the problem like millions of parents do every year. They signed up for thousands of dollars in student loans for David’s first year of college. And not just any college—an expensive, out-of-state, private college. That loan brought their total debt up to around $80,000, and they still owed on their home. It seemed their only option was to put their own financial future at stake and fund David and Debbie’s college education solely with student loans. In Search of a Better Way A few months after David started college, Ron, Paula and Debbie attended Financial Peace University together. There they learned about the mistakes they’d made, but, even better, they discovered that they did have options—debt-free options—that would allow them to get their kids through college without sacrificing their own financial future. They immediately decided to cash-flow David’s tuition, and he picked up a part-time job to help with the costs. And what about that expensive private school? “It was gone as soon...
Retirement or College Funding: Which Comes First?

Retirement or College Funding: Which Comes First?

Blog Post Originally From DaveRamsey.com If you’re working your way out of debt, one of the most difficult issues you might face is how to prioritize college savings and retirement. If you’re like most parents, you’ll phrase the question this way: What is more important—my own security at retirement or my child’s education and future? There’s a lot of emotion wrapped up in that question, which makes it easy to come to the wrong conclusion. Lately, a lot of parents have done just that by deciding college savings should come first, and they’re dipping into their retirement savings to cover the costs. Stealing From Your Future According to a recent Sallie Mae and Gallup study, 7% of parents took money out of their retirement accounts to pay for their kids’ college in 2014, which is up from 5% in 2013. And that’s not the only upward trend. The average amount withdrawn grew from $2,700 in 2013 to nearly $9,000 last year! It’s an alarming development—one based on fear and guilt. Listen, we get it. The amount of money you’ve managed to save for your kids’ college is no measure of your desire to see them graduate from the school of their dreams. But no matter how much you want to help your kids financially during their college years, you need to be realistic about how you’ll do that and save for your own future needs.   Why Retirement Comes First In the Baby Steps, Dave gives retirement priority over college savings for a reason. You’ll depend on your retirement savings to live, eat, and pay for shelter—the basics. If...
Three Ways Managing Money Changes in Your 30s

Three Ways Managing Money Changes in Your 30s

Blog Post Originally From DaveRamsey.com If you’re a fan of the show Friends, you’ve probably seen the episode titled, “The One Where They All Turn 30.” Rachel is the last of the group to celebrate the big 3-0, and she has a major meltdown about the goals she hasn’t accomplished yet. But when it comes to facing our 30s in real life, we find ourselves agreeing with the (for once) level-headed Ross who tries to reassure them all that turning 30 “isn’t that bad.” In fact, there’s plenty to be pumped about in your 30s—like marriage, kids and career growth, just to name a few! With so many large, important changes in your life, handling money the right way becomes even more important. You’ll not only face these exciting changes and challenges with confidence, you will also set yourself up for a more secure future. 1. Move Past Basic Budgeting and Set Some Big Goals Most folks in their 20s are on a rice-and-beans budget. Entry-level jobs and student loans mean there’s not much room for luxury. But as you enter your 30s and start earning more, you can start setting—and meeting —important money goals. Don’t fall for the trap that a higher income means you “deserve” a new car or an expensive new wardrobe. Use your income to pay off all loans and credit cards and get rid of debt for good. Next, save up an emergency fund of three to six months of expenses. Once you’re debt-free and have a cushion of savings, you’ll have a financial foundation most folks twice your age can only wish they...
Baby Makes Three…

Baby Makes Three…

Blog Post Originally From DaveRamsey.com So you’re going to have or adopt a baby. Congratulations! Parenthood may be one of the most rewarding experiences you’ll ever have. As you prepare for life with your baby, here are a few things you should think about. Reassess your budget You’ll have to buy a lot of things before (or soon after) your baby arrives. Buying a new crib, stroller, car seat, and other items you’ll need could cost you well over $1,000. But if you do your homework, you can save money without sacrificing quality and safety. Discount stores or Internet retailers may offer some items at lower prices than you’ll find elsewhere. If you don’t mind used items, poke around for bargains at yard sales and flea markets. Finally, you’ll probably get hand-me-downs and shower gifts from family and friends, so some items will be free. Buying all of the gear you need is pretty much a one-shot deal, but you’ll also have many ongoing expenses that will affect your monthly budget. These may include baby formula and food, diapers, clothing, child care (day care and/or baby-sitters), medical costs not covered by insurance (such as co-payments for doctor’s visits), and increased housing costs (if you move to accommodate your larger family, for example). Redo your budget to figure out how much your total monthly expenses will increase after the birth of your baby. If you’ve never created a budget before, now’s the time to start. Chances are, you’ll be spending at least an extra few hundred dollars a month. If it looks like the added expenses will strain your budget,...
The ABC’s of 529 Plans

The ABC’s of 529 Plans

If you’re already saving for college, you’ve probably heard about 529 plans. 529 plans are revolutionizing the way parents and grandparents save for college, similar to the way 401(k) plans revolutionized retirement savings. Americans are pouring billions of dollars into 529 plans, and contributions are expected to increase dramatically in the coming decade. Where did these plans come from, and what makes them so attractive? The history of 529 plans Congress created Section 529 plans in 1996 in a piece of legislation that had little to do with saving for college–the Small Business Job Protection Act. The law on 529 plans was later refined in 1997 by the Taxpayer Relief Act, in 2001 by the Economic Growth and Tax Relief Reconciliation Act, and in 2006 by the Pension Protection Act. In this short period, 529 plans have emerged as one of the top ways to save for college. Section 529 plans are officially known as qualified tuition programs under federal law. The reason “529 plan” is commonly used is because 529 is the section of the Internal Revenue Code that governs their operation. What exactly is a 529 plan? A 529 plan is a college savings vehicle that has federal tax advantages. There are two types of 529 plans: college savings plans and prepaid tuition plans. Though college savings plans and prepaid tuition plans share the same federal tax advantages, there are important differences between them. College savings plans College savings plans let you save money for college in an individual investment account. These plans are run by the states, which typically designate an experienced financial institution to manage...