Paying for private school

Tips and tricks for sending your child to private school

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Hard work and self-restraint

Paying for a private school is really challenging. And while there are many mental frameworks that help one in particular is required as the basis for the rest; industry and frugality. That is a fancy phrase for the combination of hard work and self-restraint.

This is not a new concept. Benjamin Franklin wrote the following Advice to a Young Tradesman on July 21st, 1748;

“It depends chiefly on two Words, Industry and Frugality; i.e. Waste neither Time nor Money, but make the best Use of both.”4

I urge you to read the full text. What isn’t often stated is how satisfying it is to get stuff done. Checking stuff off the list! Saving tens and sometimes hundreds of dollars in the process! And redirecting those dollars to someone else’s benefit.  “Work is love made visible“. ― Kahlil Gibran

It is ok to not be the best

I am probably the least handy person on the planet. To pay the tuition we regularly apply both industry and frugality.  It started with raking the leaves instead of paying someone to do it. And, slowly, ever so slowly, and with the help of lots of YouTube videos, we added more stuff to the we-do-that list. Last year, I carefully replaced the bathroom faucet. And someone heard I was doing the work myself.

caption2

By JanekpfeiferOwn work, CC BY-SA 3.0, Link

They were quite impressed. My chest puffed out a little further (for about a minute) and it occurred to me it is kind of fun being able to get stuff done. It is even more fun to understand how something was installed so when a problem invariable occurs you can usually understand what is going on and when to call for help – and when to simply tighten a bolt.

There is dignity in work

It is very easy to be a consumer. To wait in lines for stuff and services. To pay for private school (or home school) you are going to have to change you mindset from consumer to producer. It is quite satisfying. I have repeatedly noticed that the few wealthy people I know tend to like to do stuff themselves. It is not for the money. There is dignity in work. Do stuff yourself, however small, instead of standing around watching others do it for you. It’s a lot more fun (well, when you are done) even if you have to do the same job three times in a row to get it right.

Read the Money Mustache article introducing and explaining the Consumer Habit Loop versus The Mustachian Habit Loop. And then read it again. It will take a while to sink in but it a key framework in enabling you to pay for your children education while simultaneously enjoying a more satisfying life.

Roll up your sleeves. Get your hands dirty*.

You can do this.

 

 

*Not really. I go through about 100 Raven Nitrile Power Free Gloves every six months. They enable me to do jobs that normally I would resist from the gross factor alone (this includes all cleaning, car and plumbing work).

 

 

What your child needs and how it connects to education

In the early 1940’s Abraham Maslow published an article entitled A Theory of Human Motivation in n Psychological Review magazine. There he described a hierarchy of needs which include physiological, safety, belonging, esteem and self-actualization. They are a hierarchy because if you don’t have the basics of reliable food sources and safety (the base) in place that will be your focus until they are in an acceptable state.

Balance

It is the highest level, the self-actualization part (morality, creativity, spontaneity, problem solving, critical thinking), where private school can help out. During my own private education I certainly didn’t appreciate the time we spent on faith, spiritual development and intentional creativity.

Don’t over specialize

Later in life I was stunned to meet colleagues who have excellent technical depth in their chosen field but limited development in other areas. Many of them suffer from uncertainly, lack of trust and a feeling of being trapped.

At one work place the lack of civility and empathy became so severe that training was required for all employees. The training has clear guidance on things like “talk straight”.

Think about that for a minute. Talk straight is a nice way of saying “do not lie”. Many of my colleagues struggled to master these new skills and often revert back to old patterns. How horrible it must be to go through life to not be trusted and to know you are not trust worthy. That self-actualization need will be is a very tough rung to reach for some of my colleagues who are their core are good people.

Compass Source, Romary, Wiki Commons

Compass Source, Romary, Wiki Commons

It dawned on me that my 12 years of theology, day after day, week after week, year after year, ever so slowly, gave me a firm foundation. Private schools have the freedom to teach a value system that matches your own.

It’s not about the academics

I have said it before here but I want to re-iterate to those of you considering private school for your child but didn’t attend one yourself; it is not about the academics. Focus on who your child becomes, not the facts and skills they know. Give them that firm foundation.  My child has been at his private school for almost 10 years. I still don’t know the schools relative academic standing to other private schools or the nearby public schools. The academics simply has to be good enough in my opinion.

 

 

 

 

 

Sending your kid to private school will save you $1,053,000

Time Magazine reports that private school can save you money by giving you home location flexibility. This in turn can save you $50,000. They are right! Indeed, you can save even *more* money if you take the right steps after moving in.

Small is Beautiful

We live in an OK but not great public school district.  As is typically the case for such school districts, the homes are older and smaller.  Our smaller home costs less to heat and cool. And it costs a lot less to repair. There are less materials needed and they often cost less to replace. Don’t be scared into buying  or renting a brand new place to avoid costs – over time the smaller home will come out way ahead in many ways.

As one of many examples, our current roof cost $3000 to replace back in 2010. For larger homes a roof replacement can be $8,000   to replace with just basic materials. And larger homes are often fancier requiring you to get better materials to fit in. And this leads to the next benefit – keep up with the neighborhood expectations.

Less Pressure To Spend

Keeping up with the Jones is a lot different in our neighborhood. Folks are lot more down to earth. Literally. Hiring a lawn service is considered either 1) a mark of shame or 2) you must be ill and we should step in to help.

People who move here and hire a lawn service seem to eventually shift to mowing it themselves. Every Saturday morning they see countless examples of how do get it done. And the entire street is a tool sharing enterprise. Having auto mechanics and DYI folks as neighbors really helps as well. A a lower cost neighborhood is lower cost on many levels and with more down-home kind of folks we prefer.

The Up Side – More Earnings

And private school raises the odds of your kiddo going to college. You will be used to saving lots of money and shelling out tuition expenses anyway so you are more likely to be set up to pay for it. And that equates to a million an extra income over their career (typically). Start to think across the generations and it starts to get impressive.

And while money isn’t the main driver for a private school it is worth noting that you save a lot more than $53,000 when moving to a lower cost neighborhood and paying for private school.

And lower costs houses are smaller, older and closer to area of employment. Your car costs will go down and with that shorter commute you will be more rested and eventually promoted.

You will save $53,000 on housing expenses and realize $1 million in extra income for each child. That is not a bad deal for providing your children an education that matches your values.

 

How to save $500 in twenty minutes

 

Our storm door locking mechanism failed. People locked in – and out. A new door is $300 and installation presumably more.

Don’t but your way out of a problem

My instinct was to purchase a new door. Instead I went over to StormDoorGuy.com and watched his awesome video.

 

Frugality is environmentalism dressed up in overalls

The offending locked was removed and I am off to replace it.  Instead of an entire storm door going to the dump the only the handle will be replaced.

$500 saved in 20 minutes. Thanks Storm Door Guy!

The truth exposed

The truth about how to pay for private school isn’t very exciting. While good income, low costs, careful spending and regularly saying no to a myriad of worthy spending choices are important they aren’t “it”.

Voluntary Self-Sacrifice

Instead, they are signs of an underlying philosophy that is rare these days but common throughout history. And that is self-sacrifice.  In short, this is giving up something worthwhile for you so someone else can have something even more worthwhile.

This framework may seem familiar to you as it the basis or morality of most religions.

US Currency - Source Wiki Commons

US Currency – Source Wiki Commons

This beautiful concept has a stark reality. Rare vacations. Older cars and furniture. A higher thermostat in summer. A delayed retirement. Smaller living quarters.  On paper this sounds good but the reality is a bit different. For example, my old Subaru leaked gas fumes in the car when the temperatures dropped by 30 degrees (a clip as contracting too far). While not overwhelming it did result in the windows down in January and February.  Freezing winds, icy rain and strange looks penetrating even the fuzziest of ear muffs.*

Voluntary self-sacrifice is how family of limited means pays for private school.

This can make you all stronger

Madeyski Suffering -Source: Wiki Commons

Madeyski Suffering -Source: Wiki Commons

As an extra benefit, these hardships are part of the education process. They build toughness, humility, empathy, resilience and demonstrate to all the ability to focus as a family on higher goals. They teach you to be resourceful and solve difficult problems without simply purchasing your way out of every discomfort. It helps prevent a family with extra resources spoiling their child. By definition they will have less materials goods, entertainment and goods as a result.

A better quality of life

You will invariably become an environmentalist as well as produce more and consume less. You will make mistakes, adjust and move on. It might not work. But you will take the leap. Some will praise you but most will criticize you. Be ok with people being upset with you because they think you are wasting money or choice is seen as undermining the public school system. It is ok not to have every one agree with you. Indeed, it is desirable.

.* The Subaru was eventually replaced by a 10 year old Volvo station wagon – a low cost way to get a top IIHS safety rating on the cheap. The second week I had it the passenger window fell into the well. Forever open. Instead of rushing to the dealer I checked the weather (no rain for a week!) and after a lot of research and $19 later the window opens and closes again.  It’s not perfect, but it works.

Volvo Wagon - New to us!

Used Volvo Wagon – New to us!

 

 

Should I get a loan?

No, you should not get a loan to pay for private school elementary or high school.

A loan means you don’t have the money

A loan means you don’t have enough money to pay for the school. A loan means you would spend more than you have, every month. That is not sustainable for the long haul of tuition for private school which can go on for decades.

Debt has specific uses

caption2

By Sander van der Wel from Netherlands – Depressed, CC BY-SA 2.0, Link

Debt is appropriate for a business venture where you can reasonably expect to recoup it and then some – such as a highly employable four year college degree or a medical emergency. Or for a house where the deductible interest usually (depending on interest rates) makes the loan cost less than paying cash outright.

Everything else is a pants on fire debt emergency. Don’t add to it.

Here are your options

  • Cut expenses
  • Increase income
  • Choose a lower cost school
  • Choose a public school

What!

Public school?

Yup, public school is an excellent option. Seriously consider it. It is ok to not go to private school. It is not ok to destroy your family life and health in the pursuit of this singular goal.

Confront reality, and then adjust

Confront reality, whatever that may be – don’t put yourself in bondage and mortgage your future time just because you wished things were different.

Instead, you can send your kids to public school and pick up a  tutors and religious education on the side to augment the education. That is an acceptable and perfectly fine version of private education. So is home schooling. Remember the goal: an education for your child that results in a balanced, centered, inquisitive and knowledgeable adult with an internal morale compass. There are lots of paths to get to the end result without selling your future on this  one way of achieving your goals.

Half priced cars ! On sale now! And every day!

An introduction to mispricing

Use the economic concept of mispricing.  to reduce your costs and free up more money for tuition.

Mispricing occurs where sellers out number interested buyers for a particular item and where the item is able to be repriced lower based on that demand imbalance.

The example usually comes up in relation to financial assets such as stocks, bonds, real estate and so on but applies to consumables as well.

An Example: Mispricing in the stock market

Charlie Munger executed this perfectly in the 2009 financial panic as described in an article in Bloomberg News.

“By diving into stocks amid the market panic of 2009, Munger reaped millions in paper profits for Daily Journal. The investment gains, applauded by Buffett at Berkshire Hathaway’s annual meeting in May, have helped triple Daily Journal’s own share price. While Munger’s specific picks remain a mystery, a bet on Wells Fargo probably fueled the gains, according to shareholders who have heard Munger, 89, discuss the investments at the company’s annual meetings. “Here’s a guy who’s in his mid-80s at the time, sitting around with cash at the Daily Journal for a decade, and all of a sudden hits the bottom perfect,” says Steve Check, an investment manager based in Costa Mesa, Calif., who has attended the publisher’s meetings since 2004.

The stock market profits were first disclosed in a May 2009 Daily Journal regulatory filing under the heading, “Liquidity and Capital Resources.” The section outlined how the publisher was sitting on about $9 million in gains after spending $15.5 million buying common shares over six months through March 31 of that year. The results kept getting better. By the end of September 2009, they had appreciated to almost $48 million.

[1]

The five steps to benefit from mispricing

To execute a mispricing purchase you first must recognize one and then be able to act on it. This requires a number of elements to be in play at the same time:

  1. Patience
  2. Cash
  3. Analysis
  4. Flexibility
  5. Willingness to purchase an unpopular item in scale

We use the mispricing approach for our own benefit on vehicle purchases.

Early on we were striving to get the “best” instead of “good enough”.

Flexibility

So we went with a popular vehicle at the time, a Toyota 4runner. These were popular and expensive and we used the only mispricing technique we knew about at the time which was flexibility. We purchased a new 4Runner from the left over trucks from the previous model year. The $45,000 vehicle only cost us $40,000. We didn’t get the color or exact features we wanted but we saved $5000. Woot! And that popularity was not unfounded. We had the car 14 years and it is still on the road today.

Product is Currently Unpopular

For the next vehicle we got a little better at finding mispricing. The SUV boom was well under way and hatchbacks were unpopular and considered no longer cool. When we actually looked at the features they delivered enough mass and safety features to be safe, better gas mileage and all the functions of a full size SUV (that we needed). They were simply unpopular compared to the monster truck models of the day.

We combined the unpopular feature with the late model technique and got a Subaru Forester for $20,000. This was half the cost of the previous car purchase. Woot! $20,000 saved! These cars have since become popular again as more and more folks figured out the many benefits of these mid sized sport utility vehicles so mispricing affect is largely gone (on this model).  We were in style again, at least for a while.

Cash, Analysis and Patience

For our most recent purchase we added analysis and patience to the mix and to further benefit from mispricing. Many cars are rated by reliability. And they if aren’t rated top tier for reliability they really suffer in the used car market. People don’t want to own something that wasn’t best for reliability when purchasing something used. But when you do the analysis a middle tier rated car is actually more reliable than cars of the past.

We saved $30,000

We combined flexibility, our reliability analysis and the unpopular status of middle tier to watch, wait for and eventually obtain a used Volvo wagon for $12,000 dollars with very low miles. Woot! $30,000 saved! The battle wagon doesn’t have a lot of advertisments 

 

In summary

The market (us buyers and sellers) occasionally misprices goods and servies and assigns artificially high prices to the best and artificially low prices to the runner ups. You can discover and use this mispricing if you conduct the analysis, are flexible, patient and willing to select something currently unpopular (not easy as it sounds) that meets your particular needs. Just do your homework to make sure it is actually mispriced and not low cost for a reason you care about.

What about you? Have you benefited from temporary mispricing conditions?

[1] https://www.bloomberg.com/news/articles/2013-07-25/berkshire-hathaways-charlie-munger-shows-a-golden-touch

Why not improve your local school instead of sending your children to private school?

In an article over at LearnVest a parent graciously describes the details  and sacrifices of why they send their children to private school  to help educate us and share their story.

The comments in response to the article were filled with criticisms.

One comment stood out;

“I love the “we had no choice” but to put our kid in private [school] argument.  Why not put your kid in the public school and spend some energy improving the school? “

I honor and respect those who sacrifice by staying in a difficult environment to make things better.  They reject better choices for their family for the good of the community.

So lets extend this persons line of thinking to explore the principal behind it. Couldn’t the family take public transportation every where and become vocal advocates? Or move to a food desert and use their earning power and ability to problem solve to help the entire community have access to fruit and vegetables?

What I don’t understand is the willingness to put someone else (in this case, their children) in an environment that needs improvement on multiple levels that are unlikely to be solved in the time they are there.

Another alternative is to send your child to a private school that teaches social activism and key life skills. Thinking longer term, an adult who  will spend a life time thinking about how to help others and will have the tools and financial means to do is another valid way to help both the family and the broader community.

Is it wrong to go to private school?

In a conversation with friends, they made the case that it is wrong for parents to not send their children to public schools.

Are they right?

It is wrong and elitist to send your child to private school?

The argument proposed has a similar stance to that of insurance or immunization – we all have to do it for the overall system to be effective.

Their line of thinking was this: the diversity of income, education and perspectives creates a better situation for all.

For example, the mechanic can provide both material support and assess the conditions of the shop class. The lawyer can monitor what is expected, and, if needed, use the legal system to ensure the children are getting the resources needed. Meanwhile the single parent who is working three jobs benefits from the extra set of eyes and benefiting from the diversity of the community. The worse the school district the better the benefit.

Public Domain, https://commons.wikimedia.org/w/index.php?curid=700891

High Court Bench – Source Wiki Commons

This is a compelling argument. So let’s take it further. If we seek to optimize this benefit it would make sense that we all live in public housing. Clearly, it is unethical to pick a house based on your preference. Surely a well heeled lawyer could do wonders to improve the community. And a police officer and their family would be a welcome presence to thwart malfeasance. Along this line of thinking if you are an involved parent you can make the most difference if you send your child to the *worst* possible school available. Certainly your child will suffer as a result because of the time it takes to reform a school but it is for the greater good. Right?

Similar arguments have been made for public transit and even employment sharing. And on paper it sounds good.

The role of self interest and competition

The observed reality is a bit different.

In a resource constrained environment a lawyer will understandably use their limited time to focus on the needs of *their* child which they understand best and have a prime interest in. Other children might lose attention as a result. After all, the squeaky wheel gets the grease. And that wheel might sue. And the police officer in a dangerous public housing project will want to protect *their* family. Why should they have to patrol their own neighborhood after a long overnight shift after already doing that somewhere else? Should they have to work for free after a long day? Isn’t that a shared responsibility of everyone in the neighborhood?

Instead, grade the schools

An alternate model is one where schools competes to serve the needs of all the attending children. Those that fail too many for too long shut down. Those that do well can grow their system and benefit from economies of scale. This free market approach does require regulation (and for education, lots of it) but in aggregate it is a pretty good system in other areas. That is today’s private school system.  And home schooling. And the public school charter school system.

Indeed, the reason we send our child to a private school has nothing to do with academics and everything to do with the school naturally working faith and reverence into each day. That is important to us. For others it might be a school with a world class music program.

We donate beyond the required tuition and will likely send money long after our child has graduated because we want to see the religious framework of that school continue. Many of the children attend for free based on economic need. And you should see the children who graduate. They are concerned about social justice, have a sense of right and wrong internalized and have the academic framework to be able to make a difference. And that is good for everyone.

 

 

Getting in to a private elementary school

One of the advantageous of a private school is the alignment of values, approach and focus with that of the family’s interest and needs.

This is a two way street

Many prospective parents are surprised to find this go both ways. Quickly dispel the notion that you paying gobs of money means you are a customer. Incorrect. You are paying for part of the expenses for a community you are joining (and ideally, have been long part of). And this means it goes both ways.

Many private schools often don’t have enough openings. Others have certain entrance criteria (this doesn’t mean academic) and will not diverge from that criteria, even if it means leaving seats empty or shutting down. That is what makes them special – the ability to focus on their particular mission.

In short, this means your family must earn and keep a spot in a private school. That means not only selecting a school that is a fit for you but the school selecting you.

Where does your family fit in compared to other applicants?

To do this we will examine existing models constructed from the research at (where else) a private education institution – in this case Harvard University  – where Michael Porter describes the five competitive forces that should be considered in shaping strategy[1]. These forces include rivalry, threat of new entrants, threat of substitutes, bargaining power of buyers and suppliers.

In your own situation what is your value to the school community?  If you were the school would you select your family as compared to others? Why? And why not?

Remember financial aide is often managed through a blind trust so the ‘I can pay the tuition’ might not be a factor. Or it might be. Depends on the school. And for grade schools, academic excellence doesn’t exist. And for college it might be one of those necessary but not sufficient items.

In our own situation we are members of the religious community where our child goes to school so we offer continuity and shared values.

Our differentiation

Additionally, we enrolled during the last large economic downturn when interest in private education waned because of financial challenges for many families. For us the religious framework was more important than the bank account.

What about you?

What about you? Is a new school forming that needs students and aligns with your vision of a school? Or is the school almost entirely families from one part of town/culture/group and you family can introduce much needed diversity in the classroom?

Investigate and understand. We have seen a class with 85% boys in the class turn away more boys because they wanted a higher mix of girls. Your value proposition can be as simple as having a daughter who is interested in the school.

Lay aside your tendency to fighting for what you think is the right school for your child – you might be wrong

You might be thinking that school ‘over there’ would be perfect for your child. And that might be the case but more than likely the school ‘right here’ is the ideal fit and will seem all to familiar. It might even be your local public school.

The point here is to find out instead of blindly applying to what you think is the ideal or best private school. And consider your families relative position in the five forces competitive model.

And finally, do your research

Do your research. I assure you that is it much better to find out your situation is not a match before your child joins the school rather than focusing on getting in no matter what.

[1]“The Five Competitive Forces That Shape Strategy.” Harvard Business Review. August 13, 2008.

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