“Personal finance is about 10% math and 90% emotion,” describes our guest today and money expert Debbi King. After ending up in bankruptcy, she finally got debt-free and decided nobody else should ever have to go through what happened to her. Using her accounting degree and education degree she became a coach and author to help everyone succeed financially.
Questions Answered Today:
What is your perspective on parents planning for college?
“Sadly I see a lot of stress and non-preparation,” laments King.
Parents often have their own struggles and aren’t able to just write a check to pay for college.
College should not be a given! Children need to find out what their passion is and then decide if college is the right path to reach that dream.
To a certain generation, college seems mandatory. It really isn’t anymore.
King suggests asking, “What would I do if I could do it for free?” Use job shadowing and other ways for kids to explore what they think they are interested in. Once they find what their passion is, they need to plan how to achieve it.
What is your recommendation when parents feel like they are coming up short?
“A lot of parents feel guilty and that it is their job to send their kids to college. It isn’t,” says King. It is very important that you don’t ruin your own financial future. Students have a lot more financial options.
Together, you can both work and pay for as much as you can of their educational expenses.
Consider going to community college for the first 2 years and then transferring.
Scholarships are critical if you need to attend a university. Even awards of $100 will add up quickly. Be sure to let your adult student take responsibility and lead the charge for tackling their college expenses.
How can you pay down debt?
It has to be your #1 goal to pay down debt quickly. King recommends:
- Do not wait! Pay it down even while you are still in school
- Get a summer job and put that towards your loan
- Make it a priority to pay it off
- Pay this off before buying a car or any other large expense
- Lower every budget item you can and get rid of that loan
- Live with parents, get a roommate, anything you can do
- Interest accumulates fast, so be sure to pay off that debt as quickly as possible to avoid having to pay more in the long run
“You don’t want that debt looming over you,” stresses King. If you only pay minimum payments, you could have that debt for 20 years.
What does the financial conversation with your child look like?
King has a few tips on how to have that awkward financial conversation about college with your child:
- Just casually drop pieces of the conversation in relaxed settings such as driving in the car, at the mall, or on vacation.
- Whoever can get through without the child putting their guard up is the one to start the conversation. You have to know your family dynamic.
- Be honest and upfront. Know what you can do and be frank.
- Be certain you and your spouse are clear with each other first about what you can do while still taking care of your own financial future.
- Kids don’t really understand money until they have their own experience.
- King’s daughter got a job at 16 and could figure out how many hours she would have to work in order to buy something and that made money make more sense.
- Senior year of high school is too late! “You can start as early as sophomore, but really ramp it up during junior year,” notes King.
Money is an area that is still very taboo and private for most people. King’s book “The ABC’s of Personal Finance” is very user friendly and explains everything you need to know to be in command of your own finances from A-Z.
LINKS AND RESOURCES:
- Podcast Episode Index of all our shows!
- Core Areas Article
- The ABC’s of Personal Finance
- Debbi King’s Website
- On Facebook and Twitter @DebbiKing
Core Area- True Price of College
In order to estimate how much college will actually cost, families have to figure out:
- Need-based aid
- Merit-based aid
- Scholarships/awards at the college
- Outside scholarships/awards
This will give you what college might actually cost. From there, you have to create a budget of how much to save and what you will need to spend.
Optional Area- Rental Property
A rental property is generally considered an asset.
For example: If you have a 4 family rental worth $400,000 and a mortgage for $300,000 you will use the net value ($100,000) on your financial aid forms.
You can also deduct fix-up costs, realtor fees, and taxes to determine the actual check you would get at closing then use this number (say, $40,000) on your financial aid form.
A rental property is also something you can use to employ your children. If you have your child go and help clean the place every once and awhile, parents can claim that deduction as an expense and students can claim that as income. They might not make enough money to pay taxes and can then save that for college.
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