I’ve Paid For This Twice Already…

Why You Shouldn’t Buy Your Kids a Home

One of the most popular gifts baby boomers are giving to their children these days are homes. Many are deciding to outright purchase a home or pay the down payment for their kids. While this may seem like a very gracious act, it is actually incredibly dangerous, and can put retirees at risk of losing their retirement. In fact, those considering buying their children a home shouldn’t for the following reasons:

You’re Spending Your Retirement

We all want to help our kids, but there is a fine line between help and too much help. Your children have the rest of their lives to purchase a home and save for retirement. You don’t. The years in which you can save are limited, and by investing in a home for your child, you could be risking a large portion of your savings. While we would all like to believe that our children are responsible enough to make mortgage payments, the truth is that the foreclosure rate is still high due to low wages and job loss.

Gift Could be Taxed

If you decide to pay your kids’ down payment, your children may be taxed for the gift you gave them. Since they couldn’t afford the down payment themselves, there is a good chance that they won’t be able to afford the taxes on the gift you gave them either. Instead of paying their down payment, help them start a savings account for a down payment. This way you can pay a little at a time so that your kids won’t get taxed, and they will have to learn to save for themselves.

A Lack of a Life Lesson

If your kids can’t afford to buy homes, then they probably don’t need to be owning one. Homeownership is expensive, and if your kids are already struggling to make ends meet, they probably aren’t going to be able to afford all the monthly expenses that are included in homeownership such as the mortgage, private mortgage insurance, utilities, and regular maintenance. If your kids default, that could leave you responsible for the mortgage if you co-signed which may be a payment you can’t financially handle.

While your kids may be looking at you with pleading eyes when they say that they want to buy a home, it truly is in your and their best interest for you not to buy a home for them. If they can’t afford to put a down payment on a home, then they don’t need to be buying one through a conventional lending program. They need to instead try to obtain financing through a more affordable option such as FHA or USDA – not the bank of Mom and Dad.

Don’t risk your life savings to put your kid in a new home. You worked hard for it, and you need to make sure that you are protected and will be able to live comfortably before you purchase a home for your child. Otherwise, both you and your child may wind up without anyplace to call home.

Save Money on Your Child’s Education

Raising a child can be one of the most meaningful experiences of a person’s life – but it is also one of the most costly. From food and clothing costs to vacations, transportation, and summer camps, raising a kid these days will cost you several hundred thousand dollars over the course of their childhood, an expense that most families are prepared to manage but a hefty one nonetheless. The estimated cost of raising a child, however, can double – from around $200 thousand to over $400 thousand – when the cost of a college education is included. This cost is a considerable one, even for families that are highly financially secure. On that note, then, here are some tips for saving as much money as possible if you plan to finance (or help finance) your child’s education:

Save Early

If you think your young son or daughter may one day go to college, start saving early and treat the process no different from your long-term financial preparation for retirement. Open a dedicated savings account and make regular contributions, even when your child is young. You’ll be glad you did so when the time arrives.

Work With Your Child

Many parents believe that the financing of a child’s education is an either-or: either they pay for college in full, or they provide little to no support in the process. But a intermediate approach is the best one for many families. This would mean paying for some percentage of tuition and having your son or daughter take out loans to cover the rest. It may also mean making a deal with your child whereby they work during their high school summers and devote considerable time towards securing scholarships; in turn, you help pay for their college costs.

Apply Broadly For Scholarships

There are so many scholarships out there that most college applicants, if they work hard enough, should be able to secure some sort of funding. Don’t just rely on getting need-based aid through FAFSA or on the merit scholarships proposed by your child’s high school guidance counselor. Instead, search broadly and have your child apply to as many funds as they can.

Pay Responsibly

Most schools offer several different payment plans. Of these, there are usually plans that allowed for deferred payments (and are often ultimately more expensive) and those that let families prepay the tuition in full before a semester begins. If your child’s school has such options, look to choose a plan that guarantees the lowest total costs, regardless of exactly when you are required to pay.

Cut Corners

The cost of attending college includes far more than just the cost of tuition. It also means paying for housing, food, and textbooks. All of these costs can be cut considerably from normal estimates. Textbooks can be bought online, from sites like half.com, rather than from the campus bookstore. Housing can often be found cheaper off-campus in an apartment than on-campus in a dorm. And your child should be prepared to shop for their own food and make their own meals; doing so is not only healthier than eating dining hall food, but it is usually also cheaper as well.

Hopefully these tips can help you find some savings when it comes to the cost of your child’s college education. While a college degree is certainly very valuable, it is always good to be prepared and defray the accompanying costs as much as possible.

How to Save Money at Your New Years Celebration

New Year’s Eve is nearly upon us, and for many that means gearing up for a night full of celebration. Parties will be had, drinks will be drunk, and resolutions will be made.  But for many, the night will also bring about a hefty bill. In order to keep your night of celebrations from putting you in the red, consider using some of the following money saving tips:

Buy Your Outfit the Day After Christmas

Most New Year’s Eve celebrations require nicer attire; generally slacks and a button up or a cocktail dress. For women in particular, purchasing a new outfit for New Year’s can be an expensive affair. Even if you already have an outfit in mind that you would like to sport this New Year’s, wait to purchase that outfit until after Christmas. After Christmas sales generally offer better bargains than Black Friday does, allowing you to get the outfit you want at 40-75 percent off the normal sticker price.

Purchase Party Tickets in Advance

New Year’s Eve is known for the party and the booze, and neither are necessarily cheap. In order to save yourself a couple of bucks this New Year’s, find a bar that is offering an all-inclusive celebration. In larger metro areas especially, bars will offer a package to New Year’s Eve partiers that offer entrance, food, and drink for one low price – allowing you to get dinner and drinks for relatively less than what you would pay if you chose to wine and dine separately.

Take a Cab, Not Your Car

While taking a cab is not always a cheaper option, it will definitely be a better bet – especially if you plan on drinking. DWIs are by no means cheap, often costing several thousands dollars, and can even cause you to lose your license or job. Instead of taking a risk, take a cab or other form of public transport to where ever you plan on spending your New Year’s.

If you don’t plan on drinking, taking a cab may still be in your best bet. Because of those that will drink and then drive after a night of celebration, you and your car will be at a heightened risk of bumper to bumper to severe accidents. By keeping your car in the garage, you can avoid the heavy traffic, risk of accidents, and parking fees.

New Year’s Eve should be a night of fun, not only marred by a high bar tab. Start your New Year off right by not racking up more credit card debt and planning ahead instead. Not only will you be able to have a great night, but you will have enough money for that greasy breakfast you’ll need the morning after.

Big City Life on a Small Town Budget

After I graduated high school, I made the decision to pursue a degree in the  profession of advertising. I attended a large state university in the middle of Illinois and studied my brains out until I graduated. While living close to a large university, I still enjoyed the benefits of a small town in terms of affordability of housing and the relatively inexpensive cost of groceries.

After graduating with a degree in communication, I hit the jackpot and received an internship at a large advertising agency up in Chicago. While still living off of student loans, I found the price disparity between the urban and rural areas mind-boggling. While most of my classmates stayed in small towns and did not have to adjust their cost of living budgets, I had to adapt quickly to my new surroundings.

Ask the Locals

No one knows how to save money in a large metropolitan area better than the locals. While out of towners flock to tourist traps, the townies know the most affordable and authentic places to eat, see concerts, and experience big city life. If you are without the guidance of locals, check out sites like UrbanSpoon and Yelp to see what long time residents are saying.

Find Roommates You Can Tolerate

Living in a big city on a shoestring budget means that you are going to be living with a couple of other people. The cost of getting a single bedroom unit is far more unreasonable than sharing a multi-bedroom unit with a couple of others. Make sure you are rooming with people who will consistently pay rent and take responsibility for their share of the bills so you don’t get stuck with unnecessary debt.

Get Rid of Your Vehicle

If you are making car payments, insurance payments, and paying for gas in the big city, all you are going to get is major traffic congestion and a lot of road rage. Instead wasting your money, try some of the convenient public transportation options. Major cities can’t afford not to be interconnected with buses, trains, and trolleys, and paying for a Chicago Transit Authority pass is much cheaper than maintaining and insuring a car.

Stay in on Friday Night

College is over and you have to live like a responsible adult. While you could get away with a $5 all-you-can-drink keg party at college, the adult party world consists of $20 cocktails and bottle service at trendy downtown nightclubs. Keeping a social life is an important part of networking and finding like minded people. Don’t eliminate it completely, but opt to stay in on a Friday night so you can catch up on Parks and Recreation or learn how to play acoustic guitar instead of blowing your paycheck on drinks.

After my internship, I landed a job at the agency and moved into my own apartment. I am still adhering to several of the money saving principles I learned during my internship and have actually been able to save up a considerable amount of cash for traveling and investing.

The Cold Hard Reality of Credit Card Debt

The Cold Hard Reality of Credit Card Debt

It can happen to anyone. You get out of college and you can’t find a job. Meanwhile, the bills keep piling up. Before you know it, you’re using your credit card to pay for groceries. You know it’s wrong to spend money you don’t have, but it feels so right. It feels like you deserve this money—after all, you’re just using it to survive—and so you think between it and living on the street, you’re picking the lesser of two evils.

You start using your credit card for other things too. Your bills, costs of repairs, even recreational activities. You think of it as an investment, and suddenly find yourself charging bar tabs and sushi dinners. Before you know it, you’ve racked up several thousand dollars worth of credit card debt and are receiving anxious calls from creditors who want you to up your monthly payments. Avoiding who just called you, you continue on your way, charging your way through your twenties. Why? Because there’s no other option.

While this may sound like a horror story, it’s a cold hard reality for many graduates, or anyone taking on huge expenses beyond their means. It seems the cost of living has gone up while wages have straight-lined. Similarly, the cost of education has skyrocketed while assurances of post-graduate employment have plummeted. For many people, the credit card is the only option during financial crises. In fact, our whole country charges its expenses, the government and banks alike, borrowing money from foreign lenders and mortgaging infrastructure without any realistic way of repaying.

Some people adopt a philosophy of small concessions on a regular basis. Less glamorous weddings and requests for gifts in the form of honeymoon donations; simple lifestyles without an abundance of expensive gadgets or groceries; living with parents rent-free (maybe chipping in on a bill or two). More and more people are realizing the dearth of jobs in advance and are opting for less expensive college educations while the economy recovers. Still others take jobs for which they are massively overqualified in order to chip away at their debts. Whatever works.

There are ways to defeat debt, but you’ve got to pull yourself out of the malaise of thinking you’re doomed. Create a budget, a timetable, and an ethos of positivity. Chop your expenditures in half and consolidate any savings into paying down high-interest debt obligations. Downsize your expectations for a big house and a fancy car and instead live in the hope that you will find happiness and financial independence. The first step to that is embracing the cold hard reality of credit card debt and facing it head-on.