Paying for private school

Tips and tricks for sending your child to private school

Tag: money for school (page 1 of 3)

Should I Raid My 529 to Pay for Private Elementary School?

About 529 Plans

 A 529 plan “is a tax-advantaged savings plan designed to encourage saving for future college costs.” [1]

New Tax Law Expands 529 Use

The recent tax overhaul bill expands parents funding options to pay for private elementary and high school tuition.

Specifically, the new bill enables one to dip into a 529 plan to pay for any private school [1] – not just colleges. For example, if you have a large stash of cash in a 529 saved for college but the realities are that your youngster is struggling at school  this might be worth exploring. After all, if college is at risk because of present challenges a private school might be able to help.

Should I Raid My 529?

Raiding college savings funds to pay for lower school tuition isn’t something to be done lightly. However, it is an option now and one being worth aware of if you are considering private school for your child.

Before doing so it is worth stepping back and considering three things.

  1.  First, carefully monitor and learn about your expenses for a month. Observe your actual expenses not what you think they should be in the future. Can you still save for college or pay for some colleges based on your current situation or with some viable adjustments? And what will happen if the tax law changes again in a few year? Will you still be able to pay?
  2.  Second, with our kids it is easy to panic. Get rationale. Can some less drastic changes at school or at home help with the issues? Are charter schools or other public schools (yes, you have to move) an option? What is the full spectrum of options – and which qualify as good enough?
  3.  And finally, after the the rational exploration in steps one and two (and some meditation), follow your heart. Specifically, what do think you  wish you had did 20 years from now?  Do that and make it work by being the grown up.

If your family determines that private school is for you and you are going to raid the 529 plans to make it happen, immediately become a reader of this blog (paying-for-private-school.com) and the many other excellent financial management blogs out there. We can help.

References

  1. “An Introduction to 529 Plans.” SEC Emblem. December 04, 2017. Accessed December 30, 2017. https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html.
  2.  Hobbs, Tawnell D. “Losing Students, Private Schools Try to Change.” The Wall Street Journal. December 29, 2017. Accessed December 30, 2017. https://www.wsj.com/articles/losing-students-private-schools-try-to-change-1514557437.

Boundaries

Fancy terms are tossed around for those who reach some impressive goal. Will-power, strength, perseverance, forcefulness and might. Awesomeness!

Super Heros

These are good and make for excellent attributes of world leaders and super heroes.

Jedi Knights

What you need to save money is more along the lines of a monk (or Jedi knights); patience, flexibility, willingness to compromise, teamwork and collaboration.

Set Boundaries and Win

But above all you need boundaries. The ability to say no to others and yourself.

Boundaries are the super power of paying for private school.

Indeed, the best way to save money for a higher purpose is to not spend it on a million other valuable things. To resist the impulses bouncing around in your 3 lb. brain driving you to get this (I might need it), visit that (it would be a great experience) or eat those (I need the energy).

Become comfortable with not having the best of everythingGive your self permission to being disliked. You will find life much less stressful as a side benefit.

Get this Book

Get this book: Boundaries: When to Say Yes, How to Say No, to Take Control of Your Life – Slightly Imperfect.

Fair warning it has a slightly religious tilt (which I like).

Did you catch what just happened?

Wait A Minute

If you are new to this this whole frugality thing you probably thought “I need this now!”  and were tempted to click on the link to purchase it. Slow down. Go pick it up at the library or at least purchase a used copy.

Slow down. Let it stew. You didn’t know about it a minute ago. Meditate.

And while you are at the library or borrowing books from Amazon pick  up The Psychology of Persuasion so you know how to catch yourself next time someone presents their problem (I need to sell books)  as yours (you need to buy this book).

There you go – together we just saved $40 in under 60 seconds.

Was that so hard?

Better put an UGG on it

Consider UGG boots for the family as one of your four holiday gifts  (something to need, want, read and wear). They will be appreciated (or will be soon enough) and yield dividends.

Fight the cold

Winter floors can get really cold. Putting on socks – or even house shoes – is too much of a hassle. Cold feet lead to the heat creeping up. UGGs are slip on house boots that have wool in them. They keep your feat toasty warm. Wearing them on even a mild day can be uncomfortable because they are the perfect winter house shoe.

Be an environmentalist *and* save money

Don’t turn up the heat up to walk around the house. Put an UGG on it! We keep our house at 62 degrees Fahrenheit (16 Celsius) in the winter and everyone has a pair of UGGs.

With a onetime investment you are able to keep the heat down for years. This in turn enables us to increase our available cash for tuition payments.

Combined with a down blanket we lowered our heat from 72 degrees Fahrenheit (22 Celsius) at night to 62 degrees (16 Celsius) with no loss in comfort. Saving 3% on our bill for every degree we lower our heat means we dropped our bill by about thirty percent. And this applies for every month of the winter. Every year. On a $200 heating bill (it’s cold where we live) that is $60 bucks each month that can be sent to the school to pay for tuition. And it reduces are carbon emissions.

Keep going!

Your job is to find five of these kinds of savings. And then, once you have that done try to find more. To start off, turn down the heat and put an UGG on it.

A simple approach to the holidays

There is constant pressure to buy lots and lots of gifts to wow the children with great big piles of loot. But there are limits to available resources.

How about this time tested approach instead? Consider just 4 items for each child for the holidays.

  • Something they want
  • Something they need
  • Something to wear
  • Something to read

Give them the benefits of a frugal Christmas. This in turn may allow for higher quality items to be purchased while creating less waste.

Expect complaints. And comparisons to what other kids received. Be ok with that. Instead give your kids a great education and the tools, later in life, to buy stacks of material goods if they so choose.

A Financial Super Power You Can Use: The Snowball Effect

Paying for private school is a challenge but there is a secret super power available to you to help called the snow ball effect. The idea is that small changes start to build upon each other,  much like a rolling snowball,  to have an out sized total result in a surprisingly short amount of time. Usually this is associated with compound interest over many decades enabling a comfortable retirement.

However, unlike early retirees who strive to benefit from decades of compound interest we don’t have the luxury of waiting. We need the money right now! I first read about the more near term concept in the Tightwad Gazette and recommend you get a copy (from the library, of course) if you haven’t read it.

The Snowball Effect In Practice

Earlier I spoke of the power of moving to a decent, but not the best, school district as a savings enhancer. A small house, with its smaller mortgage or rent has other financial benefits – lower utilities being one of them. And this includes the peer pressure effect of self-reliance in the blue collar neighborhoods you will now likely reside. Wastefulness is correctly seen as a source of shame and embarrassment.

Small Differences Add Up Over Time

In such a neighborhood you feel pressured to do simple chores (like raking the leaves) yourself. This social pressure changes your outlook in a most valuable way and is the true turbo boost benefit from a smaller house in a decent, but not the best, school district.

An Example

Here is a real life financial snow ball example.

When we moved here the 30 year old home did not have cable. It *never* had cable. Ever. To get it installed would have meant drilling, installing and all sorts of mysterious things. So we skipped it and learned most folks on the street do the same. Fast forward ten years. That one decision to avoid a $120 a month extra expensive saved us many hours of time, protected us from adds to purchase stuff we don’t even know about and netted $14,4000*, tax free.

Our house comes with a free car every ten years.

All because the home wasn’t wired for cable and folks around here simply don’t do that sort of thing.

Now Roll It!

Later, we sold an old Subaru for $4000 and replaces it with a used station wagon for $12,000. I couldn’t help but notice the net cost of the car ($8000) was more than covered by the cable savings.

The savings on cable ($14,000) paid for the used car.  The used  the car was $45,000 new so that saved us  and additional $33,000.  Those very simple moves added up to a lot of savings we would have otherwise spent which went towards tuition expenses.

With some of those savings we paid the tuition and we bought a coffee machine which saves another $1000 a year.

In ten years we $12,000 saved on cable. We used those savings to pay for a gently used car and saved another $33,000. Those savings then funded a coffee machine which saves us another $10,000 over ten years. That is $55,000 in savings with three simple and repeatable steps that take less time and effort than the alternate steps. No need to tune into the latest shows (we can’t), nor to get our used car detailed (why would we do that) or drive to the coffee shop (we have it here).

What About The Extra Time

The savings go to the tuition payments. The extra time? We spend it leisurely looking for additional clever things to do .

Once you start a snowball it is a lot of fun to keep rolling the sucker.

 

What To Look For To Start Your Own Financial Snowball

Look for neighborhoods where folks are sweeping their own sidewalks, mowing their own lawns and washing their own cars. That is the correct place to live. Or starting living the way now – you don’t even have to move.

Are you sure you can’t afford private school? Reconsider the power of the financial snow ball.

Enormous snowball made in South Park in a snow-covered Oxford by Kamyar Adl

Enormous snowball made in South Park in a snow-covered Oxford By Kamyar AdlFlickr, CC BY 2.0, Link

* We have been here 11 years so total saving is actually $15,840 on the cable, a few thousand on items we never bought and a few thousand more for productive things we did with all that free time that we didn’t have to pay for. So it is more like $25,000 in savings but for this exercise you get the point. You can do this.

 

 

 

 

 

 

The power of a cold shower

Paying for private school requires change from within.

The costs might require taking a promotion that is both good for your organization and good for your family but not in your comfort zone.

Or, it might involve forgoing a worthwhile and generally enjoyable vacation, or upgrading the coffee maker. Or, in a peaceful way, it might involve saying no to a lot of things.

Voluntary Discomfort As Mind Training

In short, it requires you to be proficient at voluntary discomfort. This requires you to be prepared to act with integrity in the moment. And training is what prepares you.

Enter the cold shower. I know, it sounds crazy but bear with me.

This technique is quick, low cost, effective and good for you and the environment.  And it makes you

caption2

By Miguel AndradeOwn work, CC BY-SA 4.0, Link

appreciate the simpler things such as,  oh I don’t know,  room temperature air and, well, not being in a cold shower. This last part, while amusing at first, is where the power of it comes in as it changes your mind set. You build patience and tolerance to discomfort. A brief cold blast of water puts a tough meeting later in the day in perspective and makes it easier.

 

Instructions:

  1. Start with your shower at the normal temperature.
  2. After a minute or two turn it down just a little.
  3. Repeat until you get to cool and slightly uncomfortable
  4. Adjust the water temperature to make it colder still and end the show with a cold blast of water for a few seconds.
  5. Mind training complete.

Your voluntarily discomfort practice will enable you to focus your mental powers on what is important. Soon enough you will scoff at ‘pampering yourself’, ‘indulging’ or ‘you deserve the very best’ advertisements and correctly see them as a form of weakness.

You need the clarity of mind to shake that stuff off and decide if paying for private school is appropriate for your family and then the mental toughness to stick to it.  A cold shower regimen can help tap the power of voluntary discomfort training for any worthwhile endeavor that requires focus over time.

This is Not New and Can Make You Healthier

And this is not a new form of training. Thomas Jefferson bathed his feet in cold water every morning for 50 years (they didn’t have showers).

As an added bonus it *actually* makes you healthier and tougher by increasing brown fat cells (little space heaters in your body).   It might even help you stay healthier longer –  read this  2015 interview with Ed Ronthalier who started the practice in 1918.

 

 

 

The school district shuffle

Housing is one of the largest expenses a family takes on. And reducing that expense is a potential source of funding for your children’s education.

Villa Haas Mansion - Source: Wiki Commons

Villa Haas Mansion – Source: Wiki Commons

We purchased our home knowing that we were sending our child to private school. And this meant avoiding housing in the best school districts and saving a lot of money.

The numbers

In California, for example, housing in the best school districts cost 50% more. The median home value in California is $472,100 in 2015. A house in a great school district that cost 50% more would be $708,150. That is an additional $263,050 right there. And that doesn’t include the lower cost of upkeep for will be a more forgiving neighborhood. And the lower cost of ongoing operations in a smaller house (air conditioning, heating, hot water, replacing the roof and so on).

A good kind of peer pressure

US Currency - Source Wiki Commons

US Currency – Source Wiki Commons

We did exactly this in the DC area and our house is  now worth about $400,000 (on a really good day). That might seem like a lot but it’s on the low end – even for our neighborhood.  We live in a largely blue collar neighborhood with wonderful salt of the earth people. The only pressure to keep up with the Jones is to be self-reliant. With two mechanics on our street the idea of someone else washing our car or mowing the lawn is readily frowned upon. This “peer pressure” is a further financial turbo boost and part of the education of your child.

Sure the house won’t be as fancy as the more expensive version but that has its own appeal. And you are doing this for the benefit of the kid. Stop caring what other people might think of you. Embrace voluntary restrictions on consumption. Grow up. Be the adult here. You can still be cool. Forget square footage. These days it is all about how much more environmentally friendly your smaller (and presumably older) house is for the planet. Brag about your stewardship of the planet. Your an environmentalist now!

Tiny House. Source: Steven Walling, Wiki Commons

Really Tiny House. Source: Steven Walling, Wiki Commons

Your child will eventually move away from home – but the values, mental models, and behaviors they pick up at school will be part of their identity for their entire lives.

 

I look forward to seeing you in our neighborhood soon as you downsize. You are welcome to use our leaf blower – I will show you how to use it.

 

“The beautiful thing about learning is no one can take it away from you.” — B.B. King

 

Do you want a $20,000 raise? Learn to use your kitchen table as a financial power tool.

My table saves us money. You can have one too. Chairs are optional but encouraged.

Here is how you use a table to save money; if you eat out at a restaurant get it to go and eat at the table you have at home. That will save you 15-20% on the tip. Ideally you should eat at home most of the time but if you don’t this simple technique saves time and money.

Paying for Private School French Country Kitchen

Paying for Private School French Country Kitchen

Tips add up

Let’s take a look at the numbers. Assume you tip 20% and eat out as a family, three times a week for a total expense of $150 a week. 20% of that cost – or $30 dollars – is spent on the tip. Skip that and in a month you will save $120 while eating the exact same food. In a year that is $1,440 not spent. And you don’t have to wait for the check.

In ten years you will have saved $14,440 in expenses which would have cost over $20,000 in income before taxes to pay for during that time. All that from  thinking differently about your kitchen table.

Keep at it!

Keep reading to collect ten of these money saving techniques and suddenly paying for private school might not seem as daunting.

Free your mind

Wait, are you saying I just need to  do things differently, do some basic stuff for yourself  and avoid some junk and then I can send my kids to private school, retire early or donate stacks of cash to worthy causes?

That is right.

Why isn’t everyone doing this? Isn’t it going to be hard? I mean, after all if it was easy everyone would be doing this sort of thing, right?

Theory of the mind (or mind control for beginners)

There is an answer to these questions and it is called theory of the mind. This super power like ability enables you to mirror the experiences of someone else simply by watching them or hearing their story.

And throughout history this has been very useful. You can watch someone knit a few times and start to mimic them. Or you can hear a vivid story of an adventure over the hills and forever remember to avoid the cove of three trees. It’s like you are there – because, in your mind, you are there!

Fantasy Island

This also makes entertainment, well, so entertaining. You can follow your favorite team all season and when they win the championship you will share in their jubilee and say “we” won even though the team doesn’t know you exist. Or you

can escape into a fantasy land where you easily relate to and experience emotions of the hero Hobbit. And there are often valuable morale lessons in these fictional tales and they can provide much needed perspective but it comes with a steep price.

It’s Fake (News)

And, it is worth noting, it is all fake. You aren’t doing any of it. Sure, going on a wild adventure in a movie or book is a wonderful experience. But it is fake. And doing the dull but profitable job of keeping accurate records is downright boring in comparison.

 

The matrix is an illusory world

The way to fix this is to free your brain up. Specifically, force yourself to turn off the video and close the book. Sit still.  Wait a bit until you get bored. Then, think about what tiny super easy thing you can do that can improves your situation. Then do it. Repeat.

Stop watching fictional people live out their fictional lives while yours slips away. Go for a walk in your boring old neighborhood. A real walk.

G Ruga Coral Maple Tree Photo

Coral Maple Tree

As you step outside and see the soft glow of the people watching their programmed lives you will soon realize you have almost no competition, few are interested in easy, unexciting, but highly profitable tasks. You have already won by simply unplugging. Everyone is busy consuming visual symbols to stimulate their brains electrical impulses.

Now you know better.

Welcome to the real world. Let’s get to work.

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).

 

 

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