The Rewards of Financial Planning

Often times people focus only on the stresses, the sacrifices, and the long-term goals that will be achieved some where in the distance from budgeting, learning different financial habits, and choosing to make choices now to have more options in the future. It is important to note the small successes and ample rewards that start to emerge on the journey.

At first, all you notice is the intense focus it takes to remember everything that needs to change. Being more disciplined requires more organization and for us it required more tools to support our new habits. However, as time moves along it becomes less labor intensive, the plan, more self sustaining. While we’d always had a casual plan of monthly action, the formal plan did take time to organize and negotiate to account for every penny, every month. Now however, it is a matter of opening a template, plugging in the month’s numbers and evaluating the situation based on that month’s needs that are different from the previous month’s allocations. There really is no more money than there was before there just is less stress about where it went. It’s clearly documented.

What is fun is noticing the money you can find to do things without any guilt attached to it. You can have cash to go out if you want it which was always something that was paid the following month. We have the money to pay for a family outing with extended family, with cash, another item that would have been paid with next month’s money. When these outings are over, there will be no reminder in the mail to twinge our guilt strings. These are guilt free moments, paid, enjoyed, and stored away.

That’s not to say I’m not still plugging away at long-term goals. Along with throwing larger payments at the principle on our car and house, we’ve started a plan to balance our checkbook to an even balance and save all our loose change to throw at the house. By today’s count I’m over $4.00 towards my house savings in change for the month. It sounds like a small amount but combined with my extra principal amount that we have been working hard to increase each month, we are whittling away at the balance. Considering the difference I’d earn on putting the change in the bank vs. sending it to pay down my house, I still winning the game paying off the house and continuing to stay ahead of the ever falling mortgage market. There is something satisfying in watching balances drop. It inspires us to keep paying more of it off.

So there need to be short term achievable goals and successes and you have to keep your eye on the larger things you need to finish. Along the way you gift yourself celebrating the victories.

Choosing a College: Affordability vs. the Dream College

As I've been reading more and more about students struggling with overwhelming college loan debt, I keep finding myself wondering if anyone out there ever bothers to sit with students and parents and discuss financial realities and employment goals with perspective college freshman. It is a great honor and privilege to gain acceptance at our nation's top colleges and it is hard to turn down something you've worked so hard to attain. However, financial feasibility has for far too long been ignored as a key cornerstone to thinking about where to go to college. Students and parents do need to do some long term planning to determine if it is financially realistic to attend a college no matter how great the honor or reputation.

Now for those who get accepted to college and get a free ride, or have parents who can pay the tab, I'm not in any way arguing about attending the best institution possible. In fact, I make the same argument for all students, you should attend the best college that your financial aide package and personal financial situation allows you to do. The problem is that for many, the financial aide and personal finances, when measured against the tuition bill that comes each semester, leaves a sizeable gap that can only be bridged with loans. Those loans are are still crushing many people into their late thirties and even forties as they deal with what they sacrificed in their youth that now needs to be paid off.

One question few students are asked and few can answer is what income they will have when they graduate that justifies the debt they are going to incur. Many have grand dreams of having a job that provides a company car, full benefits, and of course a large salary, and expense account. Those of us on the other side of the college education game know that far too often it is challenging to even find a job in your field and with the current economic situation; it could even be more challenging. So how does liberal arts major with four years of Ivy League education debt even begin to think about paying it off? Well many aren't and are getting deeper and deeper in debt.

This is why the time for the conversation isn't after graduation but about the time a child is a freshman in high school. If a child is going to be depending on scholarships, merit, and a wide portfolio of experiences to garner scholarship assistance, he/she needs to understand if the goal is beyond his/her parents to reach, then he/she is going to have to bridge the gap by meeting criteria beyond traditional need based financial aide. They are going to have to be eligible for scholarships. This means learning about what qualifications one needs to get scholarships and how one applies. The student will have to focus not just on getting accepted but on finding the additional aide to pay.

The other reality that the child is going to need to face is that if the money isn't there that he/she may want to research schools that offer similar programs but are within the range of the budget that he/she can meet and still eat after they graduate. Often times students do get hung up on the reputation of a school, the offerings, the ability to say they are accepted and going to a specific school. However, while the programs may be better, if you end up dropping out because your aide package isn't sufficient to cover you in year two, you haven't achieved the full benefit of attending the superior institution. For some students they still have the option of transferring to the less expensive school, for others this poses some challenges.

There are those that argue that the superior contacts made are worth any post graduate challenges. I suspect that is true for a few. However, it comes back to what can reasonably be expected in your major, or from the contacts you made while there. If being there provides you with superior contacts or work experience that you wouldn't get attending another college, there are some who argue the debt is justified. If having been John Smith's assistant is something that will follow you for the rest of your life, making your resume always jump to the top, getting you answers on the phone that others can't get than perhaps it is worth it.

However, for most students this just isn't the case. While their education is superior, they didn't make the social contacts that landed them a job that will more than cover their burdensome loans. They aren't in a field in which having had Jane Smith for a professor insures them a special spot in every interview they go out on for the rest of their lives. If they haven't made the most of their experience to get those contacts and meet those named people, what they have is fairly similar job experience and training as thousands of other applicants who are competing for the same job. While the school might get them in the door and even get them the job, the pay is the same as it would have been for the State University graduate and it comes no where near paying the loans, let alone feeding the person.

That is why we do need to start speaking honestly and openly to students about the cost of education. We have sold them a false promise that taking out crushing loans is something that is a short term problem. Instead for many it’s become a life time one that often hasn't shown the return on the investment they were promised. Our mortgage broker was open and honest with us when we bought our first house. She sat down and showed us a breakdown of what the payments looked like over thirty years on interest and principal and how long it took before the principal started to make headway. In many respects as adults we owe it to our students to do the same. They need to see what these loans look like over time and how long they will owe this money.