ElysianConfusion

May 25, 2012

College Savings… Really?

Ok, so I’m totally not there yet. And I know everyone says save for your retirement, not your kids college. And I definitely understand that. But in the long slog to debt-free, I’ve found it useful to consider where else I *could* be spending (or saving) my money. So I naturally went in search of an online calculator: http://www.savingforcollege.com/college-savings-calculator/index.php (aka World’s Simplest College Cost Calculator).

So – taking the defaults (for a child who has 9 years until college, will attend full time for four years, wish to pay 100% of costs, wish to meet goal by time child ends college, expect costs to increase 6% each year, expect to earn 7% after tax each year in your college savings fund) – plus adding in the little bit we have saved (mainly that my mom saved for them), and selecting the HALF-PRICE* rate of 25,000$ annually – 100% of the total college costs will be $184,771. I will need to make monthly contributions of $885 to meet this cost. For my second son, 100% of my total college costs will be $220,065. I will need to make monthly contributions of $751 to meet this cost. That’s a total of $1,636 per MONTH. Who has that much PER MONTH to save – just for college? Seriously?

Obviously that’s assuming a lot. I have no idea whether they’ll actually choose to go to college. I sincerely hope and expect that they will contribute, and that we will do our best to get whatever scholarships we can. I don’t know how to tell whether they’ll go to public or private, and both the cost increases and the percentage of earnings after tax seem like they’d be a little hard to reliably predict. Still, I’ll tell you this. Those numbers of what I need to save? They seem crazy (885 x 9 years of school x 12 months per year = $95,580 – which is a ton but seriously shy of $185k – $108,144 in deposits for the other child). Holy crap. Those two numbers added together are more than (we are still paying for) our house. And the total costs for both kids for college – that’s two houses! How do people do this? We are not what I’d qualify as poor. Stupid at money management (but getting better), but not poor. If this looks well nigh impossible to us, how does it look to everyone else?

For now, that makes me think seriously about AP classes, Community College courses, living at home during college, and encouraging my kids to save as much as possible. All of which we should do anyway. But seriously? Yikes!

*For 2010-11

Public 4-Year (in-state tuition)
Tuition = $7,605
Room & board = $8,535
Books & supplies = $1,137
Transportation = $1,073
Other expenses = $1,989
Total = $20,339

Private 4-Year
Tuition = $27,293
Room & board = $9,700
Books & supplies = $1,181
Transportation = $862
Other expenses = $1,440
Total = $40,476

May 8, 2012

It’s Official

My mortgage rate (still a 5/1  ARM) adjusted again. I thought it was going from 3.00% to (wait for it) 3.00% – that’s what the letter from my credit union said. But when I went to check my accounts, I noticed that my mortgage rate said 2.875%. Huh? Of course, I need to be sure about these things. So I called my credit union and explained my problem. They said they’d call me back after researching.

When they called back, they assured me that it did adjust to 2.875% (that’s 1% lower than the original, something I never expected to see). And today I got the mail, and with it came the letter confirming the rate. The credit union said they’d referenced the wrong index when they sent the original letter, and they have procedures in place now to make sure this doesn’t happen again.

On one hand – hey, less interest! I’ll keep my payment the same (it’s now $925 and change, we pay $1,000). This adds up to nearly one whole extra mortgage payment over a 12 month period! I might just have to add in a couple dollars just to make sure it actually is a whole extra payment. That’s something I wanted to do from the moment I got a mortgage, and I never had the flex in my budget to do so. How exciting is that!  According to this calculator, if I had a loan at 3.875% for 30 years for 210,000, and starting in June I paid 75$ extra per month, the extra payments will allow me to pay off my remaining loan balance 2 years and 4 months earlier. Paying off my loan sooner will save $10,291.60 in interest over the life of the loan. Yow!

Of  course, the fact that I have an adjustable rate mortgage means lots of things: I cannot predict where my rate will go in the future, and I can’t compensate for the payment adjustments I’ve had so far. It’s just a guestimate. Still, it’s exciting! Anyone know of a calculator that you can enter your yearly adjustments to date and predict how they’ll go in the future? Please let me know! At this point, the best I can do is be sure it will never go over 8.875% and it would take at least 3 years to get that high (and honestly, markets are not looking that good for that happening soon).

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