Monthly Archives: July 2015

How Much of Your Child’s College Tuition Can You Cover?

If you have children who are under 18 years of age, then at some point you may have thought about paying for college tuition. But how much of your child’s educational expenses do you want to cover, and can you afford it?

College Building - Pay for Tuition

By 2033, which is 18 years from now, the average four-year college tuition and fees for a public university is expected to reach $94,800, up from $39,400 in today’s dollar. The cost is even more dramatic for private colleges, which is expected to reach a jaw-dropping $323,900, up from $134,600 today1.

According to The College Board®, these figures reflect an annual rate of increase of approximately 5 percent – higher than the general inflation rate1.

Still interested in paying for college?

While you may want to give your child more than what you had growing up, you still have your own financial goals to realize. Here are a few thoughts on saving for college and other, equally important milestones:

  •      Consider retirement first, college second. There are many student loans, scholarships, and financial aid programs that may be available to help pay for college tuition. You know what there aren’t loans for? Retirement. Saving for the day you retire can be the single most important financial goal. You can possibly use some of your remaining income to fund a college savings plan.
  •      Consider borrowing as part of the plan. There is nothing wrong with taking advantage of student financial aid or loans to help pay for college. In fact, many students find these programs extremely easy to pay back after college, as the terms are more flexible and the interest rates can be significantly lower than other lines of credit.
  •      Consider a partial payment. You may want to foot the entire bill for your child’s education, but it may not be realistic financially. If it’s not, then you may want to consider paying a part of the tuition and leaving the rest for loans.

All these ideas considered, we are not saying that it is a bad idea to pay for your child’s college tuition. This is a wonderful gift to offer your children. Just make sure that you are able to save enough money for your own future needs before you make a commitment to students who have the ability to work and pay off loans after college days are over.

1 http://www.savingforcollege.com/tutorial101/the_real_cost_of_higher_education.php

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Millennials’ Basic Guide to Creating a Budget

Creating and maintaining a budget can be a challenge at any age, but for millennials it sometimes carries a distinct set of challenges: modest income, student loan debt, credit card bills, and perhaps even rent.

Of course, every situation is unique, so if you are a millennial then you may be making more money than your average 18-34 year old or maybe you never opened a credit card account. You might live at home or have zero student loans if your parents were able to cover the cost of tuition.

Either way, now can be a good time to starting looking at the big financial picture to see where you stand and what it will take to get where you want to go in life.

Here is a brief guide to helping you create and maintain a budget:

Millennial 3 Steps to Create a Budget

Income

Add up all sources of income from employment, including any odd jobs or freelance work. If you receive alimony or money from an inheritance, add that to your total monthly income. You want to have an idea of what you are working with each month, before you decide where to allocate funds.

Expenses

Add up all your monthly expenses next: student loan or credit card debt, monthly dues, rent, utilities, transportation, food, entertainment, meals out, and gas if you have a vehicle. To make sure you don’t forget anything, you can track expenses with a budget worksheet1.

Savings

Once you subtract expenses from income, you can see how much money is left. This surplus can go to an emergency savings account, investment account, or to fund future purchases such as a new car or down payment for a house. To figure out a plan for the future, you can always talk to a financial advisor.

Millennials are in a great position to take charge of their financial futures. By starting at an earlier age, you can have more time to save money for events that may come later, such as starting a family, buying a home, and saving for retirement. Creating and maintaining a budget now may help ensure you can take those next steps when you are ready, rather than having to postpone the milestones that make life exciting and special.

1Consumer.gov Budget Worksheet

Financial Planning by Decades: What to Expect in Your 60s

By the time you reach your 60s, you are likely staring retirement in the face. Here are some key areas of financial planning you may want to revisit before leaving the workforce.

Financial Plans – Checklist for Your 60s

Whether you are a few years into a financial plan or have spent (what seems like) a lifetime on it, you certainly realize its importance by the time you enter the sixth decade.

For most individuals, this is because retirement is looming. Be it a couple years out or another decade, there is an urgency to ensure finances have the stamina to carry you through the rest of your life.

To prepare for this decade and beyond, check out these key areas where you may want to focus your attention:

Future Budget

Once you retire and forfeit that source of income, you likely have to depend on social security, retirement accounts, and investments to cover expenses. Knowing what those expenses are before you get there can go a long way in helping you maintain the type of lifestyle you desire. For example, if you plan on staying in your primary residence past retirement, then consider how much you typically spend on repairs and maintenance every year. If you have large purchases to make – air conditioner, roofing, remodeling – consider doing them while you still have a salary instead of when you are on a fixed income.

You may also want to think about where you plan to live during retirement. Will you stay in the same home or will you downsize and move to another area? Factor in these changes, as well as required minimum distributions (RMDs), so you have a better idea of what is coming in and going out each month.

The State of Retirement Accounts

Now that you are a 60-something, you may have a few different retirement accounts in your name. Individual retirement account (IRA), 401k, and similar retirement programs carry separate administrative fees, which can really add up over time. To cut down on costs and streamline your savings, you may want to consider consolidating your retirement accounts.

Your 60s is also a good time to ensure the asset allocation makes sense for your retirement timeline. Are funds in a position to help you cover expenses in retirement, or do you need to make adjustments? While you are at it, do you need to check that your beneficiaries are still valid? Relationships can change over time, and there may be someone else who is better suited for this role.

Finally, unless you need to make withdrawals from your IRAs (you can start doing so without penalty at age 59-1/2), then you may want to keep your money in the account where it can continue its potential growth tax-deferred until you need to take RMDs at age 70. Continuing to make contributions to the accounts is another consideration, including catch up contributions.

Update Wills and Estate Plans

Every 4 to 5 years, think about revisiting your legal documents and estate plans to see if any changes need to be made. Do you want the same person in charge of your health care decisions? How about your financial decisions? Again, relationships evolve, so it can be in your best interest to confirm your choices.

Prepare for Medicare

Once you turn age 65, you only have a few months to enroll in Medicare (it’s mandatory). Understanding the ins and outs of this healthcare program can help you shape financial decisions going into retirement. For example, do you know you may need to purchase supplemental insurance even though you are enrolled in Medicare? It can be helpful to know what to expect before it starts impacting finances.

The next few years are crucial to achieving the type of retirement you desire. By evaluating expenses ahead of time, you can focus on what level of saving, spending and reallocating it will take to ensure your later years can be comfortable and fulfilling.