Paying for private school in the DMV area

Tips and tricks for sending your child to private school for Washingtonians

Five things I learned from reading “A Journal of the Plague Year” that might apply to the novel coronavirus.

We usually keep the frugal holiday gift giving approach of four gifts per person: something you need, something to read, something to eat and something you want.

For my “something to read” item I usually request some book to totally geek out on. One year, I requested, received and thoroughly enjoyed a book called Salt: A world history.

A Journal of the Plague Year

About three years ago I asked for and received a book by Daniel Defoe (better known for his book “Robin Crusoe”)  called “A Journal of the Plaque Year”.  Defoe was born in 1660 in England and his book is written in the dialect of that era.  Because of the old English writing style, it was a slow read and I just finished the small book this past fall. 

Defoe, a journalist, wrote this book in 1722 a full two hundred years before antibiotics were invented. He had access to the stories of those who experienced The Great Plaque of London[1] in 1665-1666, facts in figures in the public record and his own observations of the 1720-1721 Great Plague of Marseille[2]. He admittedly took creative liberties writing the book to write in the first person style that made him famous (and paid) during that time. 

And while I am not comparing Coronavirus to the horror of the middle age plagues where many people  “ate lunch with their friends and dinner with their ancestors in paradise.” there may be some broad generalizations that are similar in terms of behaviors. 

Five Take Aways

Specifically, five observations stood out from his telling. Hopefully none of them come to pass during our current novel coronavirus pandemic of 2020. Here is my list: 

  1. Londoners generally thought it was the bad air because summer was worse. 
  2. People generally ignored the threat when it was in another borough or even one street over. They only adjusted their behaviors when illness reached their street. 
  3. Constables would bar the ill from leaving their homes.
  4. When the illness rates dropped down, the population would return back to normal patterns or return to town, sparking second waves of transmission.
  5. Social norms and property rights became much more lax than before the plague. Example: “Minister did Visit the Sick at first and for a little while, but it was not to be done”[3]

I found these take aways helpful when I first heard the news of a possible pandemic and it caused us to stay home sooner than many to protect the more vulnerable members of our population.

Be well. 


[1] “Great Plague of London.” Wikipedia. Wikimedia Foundation, March 16, 2020. https://en.wikipedia.org/wiki/Great_Plague_of_London.

[2] “Great Plague of Marseille.” Wikipedia. Wikimedia Foundation, March 21, 2020. https://en.wikipedia.org/wiki/Great_Plague_of_Marseille.

[3] Defoe, Daniel, and David J. Johnson. A Journal of the Plague Year. London: Penguin Classics London: , 2003, (First published in 1722)

The Power Of Staying Put

I’ve always felt that investing is like a bar of soap. The more you handle it, the smaller it gets.

Attributed to Darcy Howe, a VP with Merrill Lynch

Buraun, Kiisu. “Investing Is Like A Bar Of Soap.” Seeking Alpha. Seeking Alpha, August 10, 2015. https://seekingalpha.com/article/3425216-investing-is-like-a-bar-of-soap.

Staying put usually refers to staying in your current place of residence but the financial benefit principals apply to many situations.

Let’s compare the lives of the Doolittles and  Movealots families to illustrate.

The Doolittles are creatures of habits and tend to only make changes when its make a lot of sense to do so. The Movealots are all about improvements – upgrading and updating for the latest benefit.

suburb showing many houses in a orderly row

By IDuke (this edited version: Sting) – Edited version (sharpness, contrast and saturation) of File:Markham-suburbs_id.jpg, CC BY-SA 2.5, https://commons.wikimedia.org/w/index.php?curid=2944375

In 2010 the Doolittles and the Movealots both purchased a $300,000 house.  A few years later the Movealots had some equity and some raises and went ahead an upgraded to a $450,000 house. Around that same time both families bought a new car for $30,000.  Oh, and the Movealots just replaced their car with a new ride this past year with a new and improved $40,000 ride.

How did it work out?

Year Doolittles Movealots Average cost of that item at that time
1  Purchased a home $300,000 $300,000 $272,900  
2 Purchased car $30,000 $30,000  $29,217  
5 Upgrade home! Nope $450,000 $315,000
9 New car! Nope $40,000 $36,718

First Order Effects

At first glance it would appear that the Movealots spent $190,000 more in the same time period. Is that right? After all, even though they now have a higher mortgage, they don’t have to pay it back right away. True – but you still have to pay it back at some point. And that is money that could have been used to offset other future costs.  Let us assume only half of those expenses hit them during the time they are saving for or paying tuition. That is still $80,000 which is quite a bit of tuition costs in almost any school.

Second Order Effects

What we didn’t talk about yet are the second order effects – the tax, tags and dealer fees on new car, the realtor and moving fees.  This are substantial but nowhere near the hit of a third order maintenance fees.

Third Order Effects

That fancy car new car needs fancy new insurance. That upgraded and presumably larger home will need more care and feeding – from HOA fees, lawn, heating and cooling. These bump ups are bad – but not as bad as the fourth order costs.

Fourth Order Effects – The Big One

All items have a useful life, parts wear out and need to be replaced. And these occasional fourth order costs are the gotchas and they occur because when we replace an item it is almost always with a better more complex (and often bigger) item. Here is a real life example from our own lives. Our postage stamp sized house had to have the roof replaced. This set us back a mean $3000.  Our friendly neighbors who moved up on up had the same task in the new and larger home. Although the current cost estimate for our friends is well over $20,000.

That single fourth order effect – a random plus up costs of $17,000 is huge. Just a few of those will pay for tuition. Got a double oven? Double trouble! Dual zone heat? – Twice the replacement costs!

So if you are going to be a Movealot family – fine – but avoid  being an Upgradealot family so you don’t get hit with huge fourth order costs. Do you make more money then you did ten years ago? Great – keep it. Use it to go on vacation instead. Just kidding – vacations are for wimps.

Consider These Four Factors Before Making a Big Move

So before making a big move consider these four factors

  1. The up front cost difference
  2. The transaction fees and taxes
  3. The regular maintenance costs
  4. The rare but large one time expense differences

By doing so you will have at least compared the costs to see if the move is about the same much more or even saves you money for private school costs.

Automated savings magic

About five years ago our household switched from a regular phone line to an Ooma voice over IP device. Since we already had internet access there would be no additional monthly cost to have a land line in all the wall ports. Admittedly these days we tend to use cell phones but it is nice to have a home line and not very expensive. We spent the $149 on the ooma purchase already so it’s a sunk cost.

Oooma phone device

Our payment information changed so I dutifully logged in to update the records. I was pleasantly surprised that Oooma had been keeping track of all the savings we made with that one time switch and had it prominently displayed on the initial splash page. So far we have saved $2211 on phone bills with this original $149 purchase. A few years ago Ooma added a nominal and growing monthly fee of $3 which has since grown to $7.26 a month for 911 service and some mystery taxes. Lets assume it was 7.25 a month for the lat 5 years or $435 bucks. That is still a savings of $1775 over the five year period. Based on that initial $149 outlay that is a tax free 64% annual return which handily beats the stock market.

This simple move – which we can probably improve on – contributed substantial savings without any further effort. Automated savings can really add up over time.  Even one change can make a difference.

Some examples might include turning down the heat at night, and during the dayskipping a vacation 

or visit a library instead of buying a bunch of books and videos.

 

What can you do in your household?

Ooma Savings

Do you have a Fitbit? Get paid for your steps!

Get paid to walk!

Today I have walked almost 10,000 steps today at my own pace and made money while doing it. Those 10,000 steps, or almost five miles of movement, were collected while insourcing domestic household chores.

Pedometer steps for the day

The Step to Dollars Experiment

These steps were accumulated solely while doing household chores; this morning I ran five loads of laundry washing over 100 items of clothing instead of sending them to the dry cleaner. And I made lunch instead of eating out. And then I cleaned the house instead of hiring a cleaning service. After that I raked the leaves in the yard on this crisp Washington DC day instead of hiring a lawn service. Finally, I made  a simple home improvement and other odds and ends (got the mail and so forth).

The Numbers

Let’s take a look at the domestic insourcing numbers for the day.

Activity Insourcing cost Outsourcing cost
Laundry $6 (electricity and water, amortized equipment) $500 ($5 a piece)
Lunch $3 (materials) $15 (take out, gas)
Lawn $.01 (cost of rake amortized) $25
Deep cleaning $5 (cost of materials and equipment amortized) $75
Home improvement $0 $112 (online estimate)
Gym membership $0 $60
Blood pressure medications $0 $100 (monthly cost, some of which insurance covers – but someone still pays for it)
Totals $14.01 $887

So I avoided $872 in expenses. And that means I avoided having to earn $1177 dollars before taxes and deductions. And all of this took only 9560 steps as reported on my trusty low cost Ozo fitness pedometer ($100 less than a fitbit for those wondering).

Did I actually get paid?

Using these numbers we can calculate that my pay rate was 12 cents per step ($1177/9650 steps). And all this wandering around took about five hours so my hourly pay rate was $235 an hour.

And while I didn’t actually get a check for doing the work I didn’t have to earn that money either. Once you understand how much of your labor is taxed, calculating the un-taxable work of insourcing the numbers are eye opening. All these things needed to happen – by me or someone I hired.

But wait there is more.

In addition to getting paid, I also got more than the recommended amount of moderate exercise in for the week. And apparently, walking can reduce mortality rates by 20% (although presumably not forever). *And* walking regularly reduces depression rates. That seems priceless to me. Still, we can measure it and mental illness can reduce income by up to $16,000 a year.

And form of mental illness can be somewhat alleviated by hauling laundry up and down some stairs once a week instead of sitting on the computer or watching the big game.

Fear not you can still do this Saturday morning and still watch the Nationals in the world series. Not on cable of course!

Go Nat! And Go You!

Get up and grab a rake or straighten up the living room before the big game. Every little bit helps conserve big funds for that next tuition bill and might even raise your income back at the office. Get paid to walk!

Paying for tuition

There are really only three levers available for tuition expenses.

  1. Increase your income
  2. Decrease your expenses
  3. Lower the cost of the tuition

Example Moves

For example, increasing your income could include something as complex as changing your job. Or it could be a simple as changing paycheck deductions.

And decreasing expenses might involve lowering housing expenses by moving. An easier move is to switch family vacations from expensive air travel to local day trips.

Finally, lowering the cost of tuition can might forgoing a top pick school for a lower cost institution. Or it could be as simple as obtaining financial aide.

Consider All Three Tuition Levers

There are many options to help pay for tuition expenses. For example, you can save 100% on many expenses, use a 529, select a different school in the DMV or get a scholarship.

Be sure you have investigated options in all three categories as a combination of them might be enough to cover tuition expenses.

How to save 100% on any purchase

September is the start of the fall coupon season here in Washington DC. Coupons are mailed in mass to consumers across the region as we stock up for winter.

Many of these discounts , 20% of this week only as one example, are very compelling. And I used to fall for these, well, fall offers. What if I need one later? I sure would regret having to pay full price later on!

It took me years to understand a basic principal I first read about on the Frugalwoods Financial Independence Site. And that approach is to not purchase the item in question at all. This is the quickest and most effective way to save money. And you always save 100%. Do nothing. Say no. Recycle the coupon and go about your business.

Think about it. After all, even 50% off a $100 dollar you bank account balance is lower by $50 dollars.

I have become better (not perfect, but better) at resisting the mad dash of coupons falling from the sky into my mailbox and the internet into my inbox each fall. Brace yourself as more coupons are headed our way as we approach the holidays!

Five Ways You Save!

What I have learned is that by taking the risk of avoiding a sale and perhaps needing to buy that item later at full price is I actually save in five ways.

  1. First, I save the 100% purchase price of the item.a
  2. Second, I often don’t need the item. Ever. I just thought I did when I saw all the money I could “save”.
  3. Third, I save on the shipping, care, upkeep, storage and eventual replacement of items I never buy. This is roughly about 20% of the item for semi-durable goods .
  4. Fourth, I save the taxes I would have paid on the income I needed to earn to purchase the item.
  5. And finally, I save on the ecosystem “stuff” tends to have and all those related purchase for the ecosystem.

The secret life of stuff

I have now observed first hand that many items I purchase appears to have a secret life of it’s own. A laptop needs electricity, software, updates, my time to operate it and eventually replacement. Even a door mat needs water, electricity and detergent for the occasional wash.

The point here is not to do without – just to be ok with just enough. By doing nothing when handed an amazing limited time offer you will often save 120% of the purchase cost and have a simpler life. The funds saved can be redirected to tuition payments.

Quit Like A Millionare!

I am a big fan of Kristy Shen and Bryce Leung over at Millennial Revolution. They have innovative ideas and execute their plan amazingly well. They are way more advanced than me and I learn a lot from their site and recommend you check it out. And they recently released a book called Quit Like A Millionare! I recommend you read the book. Borrow it from the library or obtain a copy via my free give away instead of buying it. In the book Kristy candidly describes her background and correct (in my opinion) perspective on money as a result. In particular I recommend you read “Don’t follow your passion yet” (chapter 4) and “Your house is not an investment”(chapter 9). In the Washington DC area understanding this information can boost the quality of your life in so many ways. Change your perspective of what is awesome and easily pay for tuition and live well my friends despite DC ranking 5th in Kiplinger’s 2019 most expense cities to live in ranking.

Book cover for Quit Like A Millionare

I want you adapt the techniques in the book and use your new financial super powers for good. Sponsor a child through SOS international, donate to the human society, Go help a family in need, share what you have learned (like Kristy and Bryce have through their site, interviews and book) or educate a child.

To help you on your way the first three people to comment on this article asking for a book (be sure to include your email so I can determine where to send it) will be sent a free copy.

Five ways to cut college tuition costs by a third in the DC area

In the DMV we are lucky to have a number of education options available. Did you know there are also ways to reduce tuition costs? Here are five ways to cut college tuition costs by a third or more.

  1. Many people we know spend the first two years of school at community colleges and then transfer to their desired school for the final two years of study. For example, Montgomery College has a tuition of $5000 a year. The University of Maryland is $12,000 a year, ($20,000 if you live there). So you can either pay $80,000 for a four year degree from UMD… or $50,000, for the exact same degree by first completing your core credits at a local community college. That move save you $30,000 on tuition costs.
  2. And many companies in the DC area will pay for your tuition. The MITRE Corporate , with offices in McLean, Virginia, will cover $28,000 of your studies. Assuming your student picks up a graduate degree at night over three years at one of these employers that is another $84,000 in tuition assistance. And you get to apply what you learn right away.
  3. Also, DC residents should learn about the D.C. Tuition Assistance Grant program which grants up to $50,000 in benefits.
  4. Stay close to home. UVA’s in state tuition is around $20,000 a year. Out of state? Almost $50,000 a year. Save your family $120,000 by selecting avoiding a school that requires a trip on the beltway to get there.
  5. Finally, many colleges offer a discount to children of employees. For example, here is the 50% of tuition remission offered to University of Maryland Employees. That is $24,000 in tuition assistance right there.

Combining these steps can make tuition more affordable for both private and public colleges (and some high schools). These five options total $308,000 in tuition assistance with no scholarships. This will save you from having to earn almost $400,000 in income to pay for the stuff.

Education is a high priority in the DC area given the nature of the work here. Area institutions, governments and employers recognize and support this if you take the steps to apply for the benefits.

Get back on track after vacation season with this simple trick

Often, after a holiday weekend such as the recent July 4th celebration we find our we have upgraded our life style without upgrading our income. This can be detrimental to paying for tuition and it’s easy to go cash flow negative if the fancy new life style becomes the new normal.

Luckily, there is a super easy method to reset life style meter that has been around for thousands of years.

The middle road doesn’t work

At first glance it seems that the right thing to do should be to “get back on the budget” after a big spending trip or “eat right” after festive holiday meals out at fancy restuarants.

However, that is really difficult to do as we experience a downgrade and most of us our loss averse. Who wants to go around with limits and carefully watching every move? Not me. That is too hard!

Go completely without for an instant attitude adjustment

Instead, take the easier path and skip it. And I mean skip it. Hit the easy button to turbo boost your tuition payments for school by going to the opposite extreme for just a few days and avoid the behavior entirely. This will quickly reset your hedonistic meter and is a fun challenge in of itself.

For example, did you just visit a bunch of wonderful restaurant’s last week while on travel? Good for you! Now next week fast for the first day and then eat only at home for the rest of the week.  The benefit is that a fast is an interesting challenge, a break for both your overloaded digestive and financial systems. And, I assure you, after a 24 hour fast, rice and beans and is a flavor fest. And then, when you do go out again, a simple drive through option will seems luxurious and you will naturally be more appreciative and much slower to inflate your life style. Of course check with your doctor before conducting a fast or any major change to your life style. This should not be considered medically or life style advice. It is just the way we do it.

To reiterate, learn to hit the easy reset button by going to the other extreme. Did you drive to the beach and back? Take two days off from driving before you end up jetting all over town using up gallons of gas and depreciating your car as quick as you can start up the engine.

Meditate on the meaning of emptiness

Budgets, counting calories, rationing gas is too hard, and no fun. Expand your mind with the age old practice for completely abstaining from the consumption in question for just a short while. Free your mind and your bank account at the same time.

How to Budget for Private School (Hint: Normal Budgeting Techniques Don’t Work)

How To Budget:  A Typical Family

Most finance gurus recommend a detail zero based budget where every dollar gets a job as it comes in. That is brilliant and works to get you and keep you out of debt and to plan for longer term saving goals.

Paying for Private School French Country Kitchen

Paying for Private School French Country Kitchen

This didn’t work  for us to pay for a private school education because tuition is instant and  needed now, not in the distant future. As soon as your children go to school you have to pay right. You can’t benefit from compounded interest  over many decades or paying it down over time if you have private school as the goal for your child.

A more focused approach made sense for us!

How To Budget:  A Private School Family

A private school family must set a tuition payment away as soon as the paycheck comes in and live off the rest. This is similar to the pay yourself first  method  used for retirement accounts. In fact it’s the same thing.

Here is what a private school family budget looks like:

  • Pay your self first – Retirement
  • Pay first – Tuition
  • Pay first – Food, Shelter, Clothes
  • Build an emergency fund as you can
  • Pay for other stuff

When a pay check comes in, automatic transfers are set up at the bank to take the correct portion out and transfer it to a savings account. And the day before the tuition payment hits, the correct amount is taken out of that savings account and put into the checking account to pay the tuition amount.

We use a similar method for the housing payment and anything that remains is spending money.

Budget: A forecast of the future

US Currency - Source Wiki Commons

US Currency – Source Wiki Commons

The reason we take this approach is to enable us to pay for the tuition without fail. Planning a grocery budget, a vacation budget, a clothes budget and so forth is error prone. Some months you are going to be off and tuition (at least for us) is big expense that can’t be adjusted because we over spent somewhere else.  All that budgeting work is really difficult and stressful. You end up seeing a bunch of categories that you can’t afford and it makes you feel bad.

 

Make It Easy Instead

We take a simpler view.  We pay for tuition and basic expenses and find joy in simpler experiences. A walk in the park, a good meal or a week together as a family.  Vacations are for wimps and instead we  create a life you don’t need a vacation from  and instead focus spending on a few key things. For everything else, we are  ok with second place.

This focused style of budgeting is a bit easier to manage and a bit less time consuming. Walk through our budget:

Food: Lets keep it low but still eat well and go out.

New car fund: Zero

Cable category?

Zero.

Travel budget. Zero.

Home addition budget. Zero.

Vacation home budget. Zero.

Reality Check

Of course to do this you need enough income to be able to pay for your basic expenses and a tuition. Do that analysis first before signing up for a private school tuition. There should be ample wiggle room between your historic food/shelter/utilities expenses and what it would be with tuition. That wiggle room is the amount of tuition you can pay. Don’t count on future raises or “making it work”. Measure and then decide.

« Older posts