Help me get my mind around this
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| Fri, 05-12-2006 - 9:57am |
Bear with me ~ this is long and rambling!
This might sound crazy . . . but the thing I stress about the most regarding our finances is our children's college educations. I know ~ that shouldn't really be on my radar since (1) we are still living on credit; and (2) they are only 4, 3 and 2. But the reality is that it does stress me out. I'm not sure exactly why . . . I know a majority of people don't think it's even necessary to pay for their children's college educations. But for me ~ it is a gift that I want to give my children (DH is definitely on board!) and I will feel like I failed them if I'm not able to do so. They will all 3 be in college at the same time so it will be an extra big burden.
My parents completely paid for my undergrad degree (although they never saved ~ they just paid as I went; same for my sisters) and heavily subsidized my law degree (all living expenses, car, gas, insurance and some textbooks/supplies). DH had full scholarships through undergrad and grad school. We are both very grateful that we didn't have to start out under a huge cloud of debt.
Currently ~ the children each have a very basic savings fund. There's not very much money in them ($75 in the lowest and over $400 in the highest). Because I feel like I have to do something about their savings, I currently put a nominal amount ($10/each unless I can swing more) into their accounts each month. Our spare change (between $10-20/month) as well as survey checks and the occasional $1 also gets deposited into their accounts.
For some reason ~ I don't stress about our retirement $ at all. But maybe that's because we have close to $70,000 already saved? I don't know ~ it's strange.
Here's the thing: first, as I've painfully mentioned several times, we're living on credit so we're not even making ends meet. Second, I just found out that our emergency fund has been depleted more than I thought. DH wasn't hiding anything; I've just chosen to remain very ignorant of our true financial situation.
So ~ should I ignore the children's savings accounts completely and throw the $50 or so/month toward making ends meet and/or our EF? How do I make myself OK with that? And what should I focus on . . . making ends meet or funding the EF? If I focus on the EF, we should be able to have it back to $1000 by the end of the year . . . and probably much earlier if my business continues to be so successful.
Or is it OK to continue to put the $10/month in the children's accounts just for peace of mind?
FWIW ~ I'm pretty sure that we're going to "live within our means" this month and the next 2 months because the children aren't in preschool and aren't involved in any activities. I'm also working on reducing our grocery bill and should be able to reduce it by at least $150/month. So we'll be pretty close to living within our means even when we're paying for school in the fall.
Thank you so much for letting me vent/pick your brains! I really appreciate it!





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Mary-
First of all...I agree that I feel a lot of pressure to provide for my children's college. My husband and I have "ground rules" to pay for it. They have to go community college for 2 years and live at home. We will pay 100%. After that we are going to make them take out loans and we want to see them use those responsibly and AFTER they graduate we will pay them off.
that said...we have nothing to finance that yet and we could prospectively have 3 children in college at the same time(we are supportive of whatever they want to do). Any good financial person would tell you the best thing you can do for your children is take care of yourself first. Also, unless you are locked into a college program that honors todays rates, you are paying more interest on your debt than you would earn on the kids college funds so when you think "the early money makes the money" this isn't the truth. You debt is costing more money!!
You need to pay down your debt FIRST. Once that is done you can pay "catch up" on the college funds. I am sure you have an amount in mind you would like to put away every month. Well, when the time comes start with the oldest and play catch up until you are where you want to be and go down the line.
Loca
I think the steps that Dave Ramsey goes by make a lot of sense. So that would mean to first get your emergency fund back up so that you won't keep living on credit, and you would have that money there if something happens. I know that it is really hard to not touch that money. Gas has qualified as an emergency for me just this morning. Then stop putting into the kids college funds until you get the debt paid off.
I worry about this a LOT too. I am a single mom with one daughter who is 8. I stress about putting her through college, and that it just one child so I can't imagine how much it would stress me out with three. Also, I do have a 529 account going for her that I started a few years ago. My grandfather, who passed away in 12/03 had given my brother and me $5000 for each of our kids (my 1, his 2 at the time) to start college funds for them. That was huge. I put another $600 or so into it over the years, and now it has grown to around $9000. I am still tempted to add more to that, but I know that right now I have to pay off the debt first. Try to think of paying off the debt as helping you to be able to pay for their college later when you won't be making those payments to the creditors anymore.
Heather
Sincerely, student.
Thanks Student . . . I agree with investing in mutual funds and would like to put the money in a 529 eventually BUT . . . all of the funds I have looked into (before we had all of this debt) involved fees or at least minimums above what we're able to put into them. And the fees would eat up the little amount that we have for them. Does anybody know of a better 529 deal ~ I keep meaning to call our old financial planner and ask him since he does still manage my IRA and I'm sure would be more than helpful.
For some reason ~ I have it in my mind that I won't be able to do anything better with this money until each account makes it to $1000. How off am I in this thinking?
"Once we discover how to appreciate the timeless values in our daily experiences, we can enjoy the best things in life."
Harry Hepner
I think its wonderful that you are so proactive in this. Maybe you could take out some loans if needed when the time comes to help your children through school and they can take some out as well at low interest rates? I took loans and worked through school and it made me truly appreciate my education and feel like I was also responsible for it.
I am no money expert, but I would think paying off debt and living on cash instead of credit then investing will compound your investments quicker and get you in a much better position to help your children later. When I was in school my Dad was unemployed and they were barely making ends meet, i know I could not ask them for money because they would find a way even if it hurt their situation even more, so I struggled through daily living expenses on my own and used water instead of milk for cereral and to this day that breaks my mom's heart. Having the college itself paid for is one thing, but doing well now and being in a good financial position when your children are in school will let them know that when they are broke, you will have the cash to help them. :) Good luck - you are already miles ahead of so many since you are planning!
Thanks for the advice Loca! This really hit home:
". . . unless you are locked into a college program that honors todays rates, you are paying more interest on your debt than you would earn on the kids college funds so when you think "the early money makes the money" this isn't the truth. You debt is costing more money!!"
I was just discussing this with MIL last week (secretly hoping they would decide to invest some money in my children's college education! LOL!) and lamenting the fact that I wasn't going to be able to take advantage of compounding interest. You're totally right though ~ our debt is costing us WAY more money and needs to be paid first. Thanks for the reality check!
"Once we discover how to appreciate the timeless values in our daily experiences, we can enjoy the best things in life."
Harry Hepner
Your FAMILY is in a bad place right now.
Thanks for the reminder about DR's baby steps! We've been through FP but have somewhat abandoned the system because of our crushing medical expenses and debts. I just pulled out the book and checked out Total Money Makeover from the library yesterday.
I'm going to pull out all of our class forms, etc. and try to convince DH to sit down and redo our budget. He seems somewhat resistant . . . I'm not sure why although I think it has aot to do with the fact that he's in charge of the finances and might feel like I'm encroaching on his territory? I'm working on it though and I think he sees how serious I am about all of this.
"Once we discover how to appreciate the timeless values in our daily experiences, we can enjoy the best things in life."
Harry Hepner
Thanks for your advice! (((HUGS))) re. your finances while in school ~ but you're amazing for staying strong and staying with it.
I really appreciate the encouragement. : )
"Once we discover how to appreciate the timeless values in our daily experiences, we can enjoy the best things in life."
Harry Hepner
There aren't grants or scholarships to pay for your debt or to finance your retirement so paying off your debt and then saving for your retirement are the best things you can do. I hope you can work out a budget that helps you pay for all of your expenses and put a bit towards your debt each month. The spare change and survey checks will work great towards paying on the debt. Ask the grandparents if they can't give a financial gift at the holidays along with a small gift for the kids to open. If they are like my son, they really don't need more toys anyway.
Good luck, it is hard but so worth it!!!!
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