Tuesday, March 29, 2011

Double Take

I just published this post on the sisters' blog, but I want my little book review and comments on here too.  By the way, check out the sister blog!  www.fivesistersfivefamilies.blogspot.com.  If you are looking for recipes, menus, desserts, birthday cake idea, or tidbits of financial advice, check it out!

March Madness is almost over, but the madness at our house will continue on with cutting back on groceries. The New Year pay check came with a slight inflation raise and a cut on Social Security/Medicaid taxes, giving us another little chunk of money each money. The hopes of spending more on groceries was the plan, but so were other financial goals--one being the kids' college funds. The goals won.

We opened up our eldest son's college fund just two weeks ago.  Cutting back in groceries has freed up money to help us reach this goal.  We have four more kids to open funds for, but at least the oldest has somewhat of a start.  In 2009 our budgeted money for groceries was about $350 per month and at times I would spend upwards of $400.  (To this day I am still working on staying in budget!) But now that we're spending less money on groceries (which I DO want to increase someday), about $200 to $225, that frees up about $100 to $150 extra a month to put towards goals....like a college fund!

I recently finished this book by Zac Bissonnette.  This is my first book I've read about kids and college.  Clark is only 7, but after hearing about this book on the Dave Ramsey show I wanted to read it.  I am glad I did.  I could probably fit all I liked about this book into one, short chapter.  But, I would recommend reading the whole thing. 

                                      Image from Amazon.com
Lee and I were really blessed and our parents were able to help some financially with our schooling.  They didn't pay everything--we definitely had to work--but we were both blessed by their help. We'd like to do the same for our children.  Possibly a we'll-pay-tuition-and-books-and-you-pay-housing-and-food type of deal. The old addage Time is Money applies to me right now.  I have time on my side and should put it to use and have interest as a partner--not enemy.There were a couple of things I leaned in this book that I had never thought of (not too hard for me though!). My favorite was this:

Anyone...who says the current levels of student loan debt won't have a material impact on people's ability to build wealth is full of it...

...How would student loan debt have impacted your financial life? The average graduate will spend about $200 per month on student loan debt for twenty years before she's finally free. Were you rolling in dough to the extent that you could have done that when you were in your twenties and thirties?  Given that more than half of Americans don't have enough in savings for retirement, the answer is most likely no. Let's add some numbers to the mix to make this more (or less) fun.  Student 1 graduates with the national average in student loan debt.  He spends the next twenty years dutifully sending in $200 per month.  He does no saving.  Student 2 graduates with no student loan debt and spends the next twenty years dutifully saving $200 per month and investing it at 11 percent per year.  He does no other saving.

After twenty years Student 1 will have achieved a net worth of zero. Congratulations! After twenty years, Student 2 will have $173,126.61.  At this point, let's say that both graduates are forty-one years old, and have another twenty-four years until they reach retirement.  Student 2 lets his savings ride and contributes nothing more. By the time he reaches retirement, he will have $2,397,069.89.  All because he didn't have to make a couple hundred bucks a month in student loan payments. That's the average. If your child's monthly payments are $400 a month, double all those numbers.  And, of course, life can intervene with the ability to make payments.  If your child misses a payment or two for whatever reason, fees and charges can turn it into a real mess. 

A woman recently e-mailed me to say that she and her husband have a combined $60,000 in student loan debt and refer to it as the little ski lodge in Wisconsin that they'll never actually have.  

 Wow.  I had never though of student loans like that--as being able to reduce my ability to build wealth.  If Lee and I had come out of school with no loans, how awesome would it have been to have invested $38,000 right out of school?! We were extremely blessed though, and paid off our loans in one year.  And truthfully, I don't know how we would have done school otherwise.  

Now we are working hard to have future funds available to our kids when they go to college. This way once kids start college we won't have to use any (or hopefully hardly any) of our income at that future time. And when college rolls around my husband and I can buy a BMW instead of paying college tuition. 

So next time I am eating ramen, I just need to remind myself of the future good we're accomplishing. (Which for the record, we only eat once or twice a month.)


                                              Image from ednewscolorado.org


Lisa and company said...

I hope this question doesn't offend but do you find that you are sacrificing health in order to meet financial goals? I just don't think I could ever even buy Ramen because it is so awful nutrionally wise. I would like to cut back on our grocery budget but I just haven't been able to figure out how to do it and eat a nutrionally sound diet.

The Letterman's said...

Thanks for the recommendation! Did you start a 429 (might just be UT number?) but I've been thinking about college funds alot the past few months and was gonna start them all at once but I'm liking the idea of one at a time! I'll have to get this book. My folks helped with tuition through one semester and I remember being sooo grateful. Other then that somehow I was able to graduate without debt-could of been the fact that tuition was alot less then (graduated 99 before my mission) but I worked almost full time and was single so that of course is alot easier then when you're married (oh and had a scholarship my first year). I love the idea of being to help a little cause having to work is always a good idea-nothing like old fashioned hard work! But can you imagine what tuition will be when our kids are in school! ahh scary!!

Lee-Ruth-Clark-Cal-Shanna-Haley-Elden said...

No, it is not an offensive question. I am not a health food fanatic for sure, so I don't mind eating what we do. Eating healthy would require a bigger budget for sure. We don't eat a lot of processed foods (I guess "processed" can take on lots of different meanings), so I am okay with our current diet. Things like pop/soda, chicken nuggets, hot dogs, pop-tarts, chips...are incredibly rare at our house. I do not even like hotdogs and haven't eaten one in years. I try to make sure we get some fruit and veggies each day, and I know we definitely should be eating even more. My kids loves apples, applesauce, broccoli and peas (Shanna doesn't care too much for peas) and those are everyday foods for us. I am excited about this summer because Lee will be planting green beans, green peppers, cucumbers, zucchini and tomatoes. I actually can't handle eating Ramen very often....once or twice a month is plenty for me. This coming month I plan to not have it on the menu at all. My sisters are actually better at doing more healthy things. They use wheat flour in lots of things. Also, one of my sisters is lucky to live in the south where she can almost grow things year round in her garden. If you do figure out some tips for eating healthy and cutting your grocery bill, please, let me know!

Lee-Ruth-Clark-Cal-Shanna-Haley-Elden said...


We opened a 529 plan. I looked a tiny bit into the Utah one and it seems like a good one. That is so great you graduated from school debt free! How awesome! I think it's great when students are going to school AND working. This guy gives stats on people working and the type of grades they get. I think he wrote that people who work full-time in college get the same grades on average at people who don't work at all. His writing isn't my favorite, but there were some things that I did like in his book. My parents helped out the first two years with my schooling and then I started working and going to school. I finished my bachelor's with no debt, but by the time Lee was in his last year for his bachelor's we took out our first loan. SO glad they're gone!!!