Paying for private school

Tips and tricks for sending your child to private school

The true cost of watching a movie

What is the actual price of a movie? Consider these four costs before  you decide to hit  “play”.

 

Watching a movie has four major components. These are the fixed  cost,  the one time cost, the opportunity cost and the second order effect costs.  Let’s briefly visit each.  You of course cut cable a long time ago – or you are about to do that so lets use the streaming services as our example. 

Fixed Cost

Netflix offers a standard plan for $10.99 a month ,

Lets say you watch one show and three movies in an average month. That is $2.75 per show.

One Time Cost

By MrexcelOwn work, CC BY-SA 4.0, Link

And Amazon Prime offers lots of movies for a low a $2.99 each and sometimes over $10 but you are frugal so the one time cost in this example is about the same as Netflix.

Either way each movie you watch is around $3 bucks. And before you binge a show to get that cost per movie down lets consider the opportunity costs.

Opportunity Cost

More pressing than the movie cost is the opportunity cost of watching the big screen for two hours. For example, yesterday, we changed the headlamp bulbs in our car. This cost $30 in parts but according to online quotes  the service price is between between $100 and $214. I am not clear if that is per bulb or for both but lets assume it’s $150 to replace both bulbs, parts and labor. We saved $130 bucks on that expense in 20 minutes, got to chat while doing so and didn’t have to take off work to take the car to the shop.

Too tired for such efforts? No problem ! Spend 20 minutes praying or meditation. This is a bit lower energy and has numerous benefits.

In both examples you still have lots of left over time to wander around the house (more health benefits).

The Second Order Costs

 

The second order effects are the most expensive. Many movies are action packed thrillers which can use a lot of your emotional energy up. These dynamic natural scenes impact your brain chemistry

and in extremes might reduce both the quality and length of your life.  It’s fun stuff but for the most intense movies you might need a mental break afterwards and changing the bulbs after a movie might be too much – anyway you have so little time after using two hours of to someone else’s script. This time compression is the worst offender and might end up with a dinner out ($40) since there is no time or energy to cook. Plus the world just blew up on the big screen so what’s the big deal with ordering delivery?

 

The True Cost

Lets compare the numbers!

 

The movie abstainers saved $130 bucks and the movie watchers spent $3 on the movie and $40 on take out. That puts the active family ahead by $173 dollars *and* they have a free hour to themselves. Time and money in abundance.

 

The Take Away

I am not against movies –  and they can be made into wonderful family events or a mental break if you are feeling ill. With that said if you work hard during the week to pay for tuition it seems a shame to not know  the full price you are going to pay before you hit play as something to do.

 

“Time is your most important resource. You can do so much in ten minutes. Ten minutes; once gone is gone for good.”

– Ingvar Kamprad (IKEA Founder)

By paying for private school you are funding educational experimentation.

One thing that has consistently surprised me about paying for private school is the unsolicited advice and harsh criticism we regularly receive.

We have heard simple advice such as you are wasting your money to all the way to it is unethical to send our child to private school.

In few other areas of our life have our decisions been reviewed, rated and then commented on so consistently.

There are lots of other easy targets – our home, my really old shoes, food, entertainment and religion are ripe for the picking. They might get a raised eye brow but rarely do we receive a detailed unsolicited analysis of our decisions like we do with our choice of education.

Online it is even worse. Here is a just one of many examples; If you send your kid to private school, you are a bad person.

I consider myself a pretty open person. For each criticism and suggestion I have careful considered the premise. Am I wasting our limited resources? Am I making education worse for other children? Is a school based on religious values wrong – that is- I am alienating religious minorities?

I have spent years considering, and reconsidering, this feedback. And would certainly be nice to have the extra cash or go on fancy vacations or purchase a new car from the modern era.

As a mental exercise I followed Charlie Munger’s advice and I inverted the problem. Come along with me.

Let us imagine there were no private schools at all. That small church school around the corner – gone. Harvard. Gone. Hogwarts. Gone. Evangelical schools. Gone. Homeschooling – illegal.

Have a child with extreme dyslexia who needs a different learning environment? Sorry those schools are gone as well.

Graz Reading Room by Dr. Marcus Gossler - Wiki Commons

Graz Reading Room by Dr. Marcus Gossler –
Wiki Commons

What is left is a pure government monopoly. No competition. No incentive to innovate. No incubators to experiment and fail and try again. Just one system. Legislation over teacher expertise. Scale over specialization. The motor vehicle registration of education.

Well that doesn’t seem desirable.

Let’s invert again – this time there are no public schools. Anywhere. It is all private schools. Can’t afford to pay tuition? Sorry your kid goes to the low cost school mill or comes to work with you for apprentice training. Are you an elementary aged child whose parents who can’t afford to feed, much less educate you? Sorry – you will never learn to read beyond a second grade level.

Old School House Sign - Source: Wiki Commons

Old School House Sign – Source: Wiki Commons

Well, that doesn’t seem desirable either.

 

Perhaps the middle road seems to make sense. A healthy mix of public, private and home schools creates a mutually beneficial ecosystem. The private schools can experiment, innovate, evolve and best practices can be adopted across all systems over time. The public schools can offer a world class low costs education for everyone no matter their financial circumstances. And they provide standardized testing to measure all schools academic performance.

Home schooling fills in the gaps. We know of one very religious family who has four kids and couldn’t afford private school so they home schooled simply so they could integrate their religion into the school day.

Sending your money and your kid or grandkid to a private school? Good for you. Your child is receiving an education that matches your values and you are funding an educational incubator. Perhaps your school, with its freedom to try different things out, will come up with an innovation that will be adopted by schools across the country. More likely the children from your school will bring their education to diversify the mental frameworks of the organizations and community.

You are right to send your child to private school if you are lucky enough to have the opportunity to do so and are willing to make the sacrifices.

Monopolies have consistently been shown to cause complacency over time. Here in the US the Sherman Act was passed in 1890 as a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.” [1]

By paying for private school you are funding educational experimentation. And unfettered competition. Be ok with the criticism. Listen to the unsolicited advice and harsh criticism and carefully consider it. At the end of the day you have to do what is right for your family and your community – even if it is unpopular.

[1] https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws

 

“You have enemies? Good. That means you’ve stood up for something, sometime in your life.”

Winston Churchill

 

 

 

Skip the Tip! Take it to go and eat at home.

This took me many years to discover but it has served us well. Despite being on the frugal track we occasionally eat out (ok, more than occasionally). Sometime as a family sit down dinner or for a special occasion but most often because we go out because it would be fun to go out.

To save 15% at a restaurant, skip the tip by taking the food to go. That will save 15% (or 20%) on the bill because there is no tip. And, after a while, you realize you have drinks at home. And bread. And that is another few dollars saved.

Electrical candlelight!

Instead, set your home up to be a delightful place to eat with a fancy and clutter free table that include  forks that haven’t been in a million people’s mouths (a no cost bonus!). At the Café De Your Place there is never ever a wait. The table is always open, there are just enough seats and it’s the best table in the joint.

Plein Air!

In the summer we eat out on the ‘rustic’ wood table that came with the house. This year we added a coral maple to enhance the view at our fine dining establishment. How many restaurants do you visit have this kind of greenery? Get creative (but low cost) and set up your own ambiance.

G Ruga Coral Maple Tree Photo

Paying for Private School’s  Frizzy Coral Maple Tree of Awesomeness.

If you are like most families where eating out just overtook the grocery sales then you probably spend around $2625 on dining out.

Ha. I know the truth.  If you have the income to consider a private school tuition and live in metropolitan area that number is much higher. It is more like $6000 a year. Lets go with $6000. That is $900 a year in tips if frequent wait in line and then sit down establishments. Toss in another $100 on desserts and drinks over the course of a year and we will make it an even $1000.

Show em’ the sink!

I know some of you are secretly cringing because you spent way more than three or even six thousand on dining out last year. This is a judgement free zone. We are here to help. You just have more opportunity to save! Start with an immediate 15% discount on many (and soon to be rapidly declining) restaurant meals. And enjoy the further benefit from having your children rarely hearing  the phrase “I will be your server for this evening”. They need the gift of responsibility and can get up and get their own water when they need a refill.

This one slight change in behavior nets you $1000 a year and comes with a free side of humility for the entire family. A $1000 here and  there starts to look like a tuition payment and there are lots of easy ways to save big money.

Paying for Private School French Country Kitchen

Paying for Private School French Simulated Country Kitchen- comes with reading materials. How many restaurants do that? Don’t worry, we bought those chairs used.

Share your story!

We here at paying-for-private-school.com are interested in hearing how *you* pay for private school or why you send them. Did you attend private school? What did you think of it?

Willing to share? Post a comment below with your email address (which will not be published) and I will provide details on how you can share you wisdom, lessons learned, what to do and what not to do with the broader community. And thank you!

Don’t complain. Build.

In November of 2016 Mr. Money Mustache (required reading) retweeted a post by Elon Musk that said “Don’t complain. Build”.

Create, design, join or invent a way to make your situation better. Is your local school system mediocre and you can’t afford private school? Get involved and improve it.

Us amateurs work really hard to create something pretty mediocre only to have to do it again. And again. I had to install the disposal in our kitchen three times before I got it right. This is 30 minutes of work for an average plumber. It took me two weekends. I don’t care.  Honey badger doesn’t care either. It works, it has been there 5 years and I saved $300 in labor. Plus, I prevented a plumber from having to do something basic. And I *really* know a lot about disposals now. When it had a problem last month I was able to fix it really quickly

caption2

By JanekpfeiferOwn work, CC BY-SA 3.0, Link

without a reference manual. I even remembered where the stupid screw that came loose was located. How could I not after spending 20 hours under the sink looking at something with only 3 parts?

Critical thought is an important skill. Identifying what is wrong and how things could be better is important as well. But this must be followed up by action. Repeated attempts, slow progress actions is the grit of making stuff go. Posting a complaint hidden as a comment revealing how insightful you are doesn’t actually do anything.

Don’t complain.

Build.

Did you know you can get paid $5000 for wearing a pair of sandals?

Your feet are powerful tools of awesomeness.  Many folks know that walking and biking are ways to save stacks of cash.  There is a second foot power that is equally as impressive.

Unleash the Feet

Did you know the human foot has over 125,000 sweat glands? This is the highest concentration anywhere on your body. This is often described as a defect or problem. You dear reader are frugal and efficient so you already know why they are there- it’s the only part of the body that moves in a hot sunny day or inside a hot home with no breeze at all. Your do-it-yourself movement creates the  do-it-yourself cooling breeze.

feet in sandals to pay for private school

Sandals

Of course this is because the foot is mean to be bare and out there. And a great way to stay cool in summer is to get a pair of sandals and wear them around all the time. By doing so ourselves we found (after a two week adjustment period) we were just as comfortable with the air conditioning set at 82 (27 Celsius) degrees as we were with shoes on at 72 degrees (22 Celsius).

Apply Your New Found Super Power

One can save 3% on your AC bill for each degree you crank it up. That is 30% savings on your bill in the summer months! We have found it’s better – the AC didn’t turn on at all – often for an entire week with our newly discovered foot cooling super power.

In Santa Clara this is about $500 bucks over the course of the summer. Think you can make a set of sandals for the family last ten years? Good. It will net you in $5000 in actual savings. And this will be about $7500 in income you won’t have to earn over that time.

The Trick

For this to work there is a trick that took as while to figure out. And this is to wear sandals outside all the time. If you don’t your closed shoes will be puddles of discomfort and your core body temperature will rise. And tossing the shoes off at the end of the day in a fairly warm house is of little relief as it is too late. The trick is to stay cool *all* day by using your super powerful and amazing feet and then rake in the savings.

$200 bucks in sandals yields $5000 in ten years that can go towards tuition. That is 25 fold return on investment or an annual return of 90%. Try to do that in the stock market!

Bonus

As an added bonus you sandaled feet will now take you, in comfort, to other locations. You can turn off the AC and not start the car. You can walk to these things! And while Tesla’s are great, a pair of strap on sandals can make you an instant environmentalist with little upfront investment and increase your health as you work your system. Go you hippie!

And this is not new technology. For further reading check out the 22 verses about sandals in the good book.

And for next winter? No problem – just put an UGG on it!

Install a Power Plant

Did you own a home and regularly mulch flower and tree beds? Five hundred square feet in mulch will cost over $500 installed (apartment dwellers have wisely skipped this expense). Over ten years that is $5000! Of course you would do that yourself. Still, it is a lot of money. And you could do all that stuff. *Or* you can install a power plant one time.

Behold the powerful and lovely pachysandra plant.  In the first year after planting it sleeps, the second year it creeps and by the third year it leaps.

 

It grows in value

A small tray of this  green ground cover will run you about $20 at a landscape store. And that is all you need to start.

We bought ours of someone who had a big  patch of it for $4. We got it in wet newspaper and promptly planted  just a few stems in various places. I have been transplanting seedlings ever since slowly filling in the beds. Each year I have needed less and less mulch as this plant serves as a living mulch. And each spring  we enjoy lovely white flowers and fresh air produced by the plants. And last year a frog moved into to the shady refuge these plants provide.

And unlike mulch which is a drain on the budget, a pachysandra plant is a flowering ground cover that produces more value each year. We now have thousands of these plants worth thousands of dollars.

Many options

And if you don’t like this particular plant no problem – there are lots of ground covers to choose from that spread on their own.  English Ivy and Vinca are good choices but require a bit of care. Once those are in add some flowers and enjoy the beautiful savings

It’s easy being green.

Increase your food expenses!

Food is  a big portion of household spending. You probably think you want me to cut expenses drastically here as well. Nope.

You have enough income to consider private school so most likely you have a two income household where everyone works in competitive and draining jobs. And now I am asking you to think about cutting costs and to take regularly repeated actions. This takes a lot of energy and a clear mind.

Going for the pancakes instead of an egg white omelet with mushrooms and peppers because the pancakes are a fraction of the cost makes sense right?

Not always. Paying for private school means developing your children to their full potential. And that applies to you as well. Some things make sense to pay more for and actually ending up costing less in the long run.

Pancakes, for example, can cause a temporary spike, and insulin rush, a crash and then a fuzzy fog hours later. We need you to have steady and calm energy all day and then in the evenings, after a long commute, feeling like you could be productive. That way you will have enough energy to do some money saving record keeping after a full day at work. Slow and steady wins this race. Eat whole foods.

You will find your food costs might go up a little but your energy levels become a steady fire once you drop the spikes associated with sugar and ultra refined flours. Soon enough, after a ten hour work day followed up by dinner and dishes, more work will be quite simple and enjoyable. This is an investment in yourself, just like private school is an investment,  and will soon pay for itself many times over as your steady energy enables you to do more.

Don’t worry. You come from a long line of people who worked from dawn until dusk six days a week.  All you need to do is eat like them. Don’t eat anything your great

grandmother didn’t eat. If the dish appears to be traditional eat that – most likely it is mostly vegetables with a protein mixed in and sometimes a whole grain. Do this for a week for each meal and prepared to be amazed.

And when you are outside your dwelling some evening because there is something you need to do to save money and because you eat well you will have the energy to do so. You will invariable notice the soft glow in the windows nearby just sitting around being passively entertained. At first this will be alarming. Eventually you will realize you are playing a game where only a few are even showing up to participate.

 

 

Reasons people send their children to private school

Recently on a message board I occasionally read, a parent was wondering if they should send their child to private school. So she asked the parents of other private school children if her child would feel poor compared to other families and feel bad about themselves as a result.

One respondent decided to inform the original poster on the real reason they were considering private school:

If it were truly “education” that you care about, your kid would be in a high performing public school. Private school parents care more about the “experience” which is code for “rubbing shoulders with rich people to learn their values and customs and not hard working immigrant values.”

Angry person art

By SmurfyOwn work, Public Domain, Link

Wow, I am glad that respondent cleared it up for them – I bet the parent didn’t even know they were against education!

This kind of shaming response is quite common and the main reason for this web site. Those kind of knee jerk responses assumes that parents send their kids to private school to “rub shoulders with the rich people and learn their customs”.

I attended private schools for 12 years and have paid for a child to attend one nearly as long.

Not once in this time have I seen or heard anyone doing some sort of anthropological study of the ways of the wealthy. Indeed, all the kids attend all the same classes and, at many schools, are required to wear the same clothing (uniforms) to avoid status from being an issue.

Here are the reasons I have actually heard from parents sending their children to private or independent charter schools, as well as home schooling.

  • School matches the families religion
  • Alignment with the family values
  • Specialized learning environment where the private school focused on particular area such as
    • Special needs
    • College preparation
    • Military career preparation schools
    • The arts (dance, theater etc.)
    • An international based education where the child learns the language of their culture (very good for diplomats who will need to return to their country at the end of service)
    • Greek tradition (sports and academic having equal weight)
  • Smaller class size enabling better learning outcomes
  • Additional learning resources are available in some of the private schools – one I know of has Ipads, the other offers horseback riding for kids (apparently it calms the kids who have sensory issues).

I am sure I am missing some. And I would love to hear from any parent that sends their kids to private school to study the culture and norms of wealthy people to learn their ways!

And for everyone else – I do want to assure you that selecting a private school means you are focused on providing a good education for your child. And an educated child becomes an educated adult which benefits all of society. Keep up the great work and sacrifice and thank you.

 

Stock pick of the month: General Electric

If you have been following the tips on this and other financial blogs you will become a producer instead of a consumer. And you will find joy in the simple life. And eventually, ever so slowly, even with a gigantic tuition, you will have some money to put aside. For me that goes into dividend stocks that are high quality and that align with my values.

This month’s stock pick is General Electric.

This company has really declined dropping almost 60% quoted value in the last year compared to an almost 12% rise in market quoted value during that same period.

General Electric Trailing 12 Month Valuation April 2018

General Electric Trailing 12 Month Valuation April 2018

[1]

 

 

What happened?

It has become apparent that some of GE’s businesses aren’t doing well. More importantly the reported numbers appeared to be subject to what is called performance theater and very positive views of the business were presented in past years that might have been too optimistic.

This uncertainty combined with a stark new reality including billions of unexpected charges and, just this past week, a plan to restate all the previous numbers has folks repricing the company.

Institutional investors understandably don’t want to put other’s people money into something that can’t even assess since the reported earnings and projections both appear to have been incorrect. The company suffered from a very rapid repricing and then was followed by a market imbalance where lots of folks wanted to sell and not so many wanted to purchase. That market imbalance causes the price to automatically adjust downwards (sometimes rapidly) until a new balance is found. This might very well continue down from here.

 

The business

This isn’t the GE you might know from your home. They don’t even own the GE appliance brand anymore – they sold it and the name. Much of their business is industrial services. They create and service the leading air craft engine, medical imaging equipment locomotives and electrical generation plants. These are tough business to get into from a standing start so they have a fairly defendable position built up through the hard work of previous GE teams over the last 100 years. They debt load is astronomical (over 100 billion) and, depending on their terms and the direction of rates in coming years could be very damaging for many years. However, their revenue generation is huge – $122 billion last year (well, something along those lines – we shall see after they restate it) making in the top 20 of all companies![2]

 

With those kinds of numbers and excellent margins in many of their business a batch of cost cutting should enable them to improve their financial condition substantially.

 

The valuation

Looking ahead even this new price of $12 a share, down from $30 last year isn’t as cheap as you would think. Based on the company’s own revised estimates of earning a dollar a share that is still a PE of 12 or, if you pretend it’s a bank account, a earnings yield of 8% (some of which is paid out in dividends. I can get the maker of Sharpie pens for less, even in today’s elevated market.

As is often the case, that isn’t’ the entire story. Some folks are saying that $1 estimate is too high and earnings will be half that  or just 50 cents per share this year.  And they might be right.  Suddenly this company doesn’t look so cheap – even with it’s share price cut in half.

 

The long view

However, the company is cutting costs and selling assets. Just a few years back they reported earnings of over $2 a share – and assuming that is reasonably close to the restated earnings – that is pretty good. Indeed, should succeed in rationalizing the business they might even return to that number within a decade.

And if they do that today’s price looks a lot better. What you are looking at today is the pricing in the trough of their earnings and dividends (which they recently cut in half).

In our imagined future of returning to $2 a share of earnings the PE ratio based on today’s market quotation is 6 and the earnings yield is 16%. And while the dividend yield is unlikely to return to previous levels anytime soon there may be upside there as well.

 

The assessment

For the really patient and risk tolerant investor with a long horizon this is an interesting offering. And should the company return to its previous earnings –it’s historical price to earnings ratio is about 17 placing the future price around $34 a share and the annual return at just under 11% in market value increase plus the dividend of 3% for an annual return of 14% over a ten year period which would be excellent.

Of course they could also default which means you must make your own assessment and this post is not intended as a recommendation or financial advice.

Full disclosure

Many years ago my grandmother owned general electric stock and the proceeds from its sale helped pay for some of my education. I have a very favorable view of the company, am happy to have this opportunity and might have a lot more patience than other investors for that reason.

 

[1] “GE Interactive Stock Chart | General Electric Company Stock.” Yahoo! Finance. Accessed April 12, 2018.

 

[2] “General Electric.” Fortune. Accessed April 12, 2018. http://fortune.com/fortune500/general-electric/.

 

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