Happy New Year!

by Warren on December 31, 2011

Well 2012 is upon us…

This time of year has always been a time of reflection and motivation for me. I started this year with several goals that I wanted to accomplish and although I did a pretty good job of sticking to my plans, not all of my targets got hit.  It always seems that either long work hours or just the everyday obligations of life have a tendency to get us off track.  And while I realize that time spent in these areas is critical,   I hope that 2012 will be a year in which I can have balance in my life,  spend more time with family, and also have laser focus on the actions that are going to add value to my life and the lives of my family.

That being said, I pray that everyone out there has a safe and prosperous new year. I hope that you take the time to reflect on all the blessings in your life, and that you are inspired and motivated to achieve all your desires in this new year.

- Warren

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Wanted: debt-free children

by Warren on October 12, 2011

Students in Reading Room © by Penn State Law

We all want the best things in life for our kids when they grow up,  including a college education.  My parents helped me pay for college and only asked that in return,  I do the same for my children.  I am committed to this goal,  but in addition want to provide something of far more value.  I want to ensure that my children know how to effectively manage their money and moreover,  recognize the perils of taking on unhealthy debt.

Planning for higher education

With two young boys to provide for (a toddler and infant),  my wife and I just recently started planning for our children’s college fund.  However,  most parents we’ve talked to tell us the same thing: “we have not yet started saving for our kid’s college education.”  Some have even told my wife and I not to open any kind of account in the children’s name as it would make it more difficult for them to get financial aid.   It seems that these parents are part of a growing trend.  According to surveys noted on FinAid.org,  approximately 56 % of parents with children under 18 have $5,000 or less saved for college.  And almost 60% of those,  have not saved a dime.  Of those that have started savings,  only about 13% are utilizing a 529 plan or other tax-advantaged vehicle.

Our college fund of choice is the 529 plan.  Basically it’s an education savings plan, operated by a state or educational institution,  that provides special tax benefits when used for college.  When used properly, some of the benefits include:

  • Federal tax benefits – although contributions are not deductible,  the investment grows tax-deferred and distributions for college costs come out federally tax-free.
  • State tax benefits – again,  although contributions are taxable,  qualified distributions for college are generally tax exempt.
  • Donor control  – as the donor you are in control of the account.  You decide when withdraws are taken and for what purposes.
  • Low initial investment – in California you can open a 529 plan with as little as $50.
  • Low ongoing contributions – the minimum subsequent investment can be as low as $25 for a one time contribution or $15 for automatic contributions.
  • Large accumulations allowed – the total amount you are allowed to contribute overall is substantial,  exceeding $300,000 in many state plans.

Teaching kids about money

So while we have started the long process of building a college fund for our kids,  the lessons about prudent money management have not quite sunk in yet.  My children still prefer shinny coins over dollar bills and would gladly trade both to get their hands on my debit card.  I try to talk to them about debt but they just run around in circles.  Perhaps I am the only one who finds these discussions interesting.  In any case,  we will continue to educate our boys and hope that one day the lessons sink in.  Nothing would be more pleasing to me as a father than to see both my boys graduate college with job offers in hand,  substantial savings in their bank accounts and absolutely no student debt.

Next steps:

If you have kids you should seriously consider the benefits of a 529 plan or other tax friendly savings vehicle.  Make a commitment to get educated and start your children off on the right foot:

  1. Do some research and learn about the various choices for college savings
  2. Decide what amount you can set aside on a regular basis to build the account
  3. Make a commitment to fund an account,  even if its with $50 to start
  4. Start as soon as possible and utilize the magic of compounding interest to grow the investment over time
  5. Teach you children about the value of a good education as well as proper money management (tell them about this site!)
  6. Don’t worry if you cannot afford the entire tuition, there no harm in kids working to pay for part of their education
  7. Avoid over priced tuition unless the return on investment makes sense
  8. Understand the potential consequences of saddling your kids with debt before they even earn a dime
  9. Post questions or comments below…

 

Degrees Degrees
Methodology
Annual pay for Bachelors graduates without higher degrees. Typical starting graduates have 2 years of experience; mid-career have 15 years. See full methodology for more.

 

Remember, decide and take action today!

- Warren

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If you hang around this site long enough,  you’ll learn that I’m always trying to improve areas of my life and business.

road work sign.jpg © by Jo Naylor

That being said,  you may have noticed some updates to the site over the last few days.  I have uploaded a new banner and added some Amazon Affiliate links.  Hopefully you will like the enhancements…I’m sure there will be more to come.

With regard to the affiliate links,  I do not intend to bombard this site with advertisements in the hope of riches.  The links are only for items that I can honestly say I recommend.  I believe that educating yourself with the skills to manage your money and make wise personal finance decisions is paramount.  But to be honest,  I would prefer you to go to your local library to borrow these books before you shell out any money.  I simply cannot advocate spending money when you don’t have to.  Moreover,  frugality is one of the main themes of this site!

But,  if you decide that these resources are worth your hard earned money,  then please feel free to purchase through my links.  I will receive a small referral fee and it would be nice to offset some of my costs.  In the meantime,  make sure you library card is active.  Make a list of truly informative personal finance books and commit to actually reading them.  A few of my favorites are in the sidebar…feel free to comment on any must have’s that I should include.

 

Remember,  decide and take action today!

- Warren

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A penny saved is worth more than a penny earned

by Warren on September 30, 2011

Money © by Images_of_Money

I recently came across an interesting concept while reading The Wealthy Barber, by David Chilton.  In this book,  Chilton  makes the point that it would take you $2 of additional income to equal every $1 of eliminated expense.  Or put another way,  every $1 that you cut out of your spending would equate to a $2 raise in pay.  How is this possible?  Well,  the thought process,  albeit simplistic,  goes like this:

[Continue reading…]

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