Debt Dumpers 2022

[piglet1979]

Does anyone have any recommendations on saving for college? I am hesitant to start up one of those...are they 529s? I'm nervous about contributing to something that will ONLY allow them to pull the money for college if they eventually decide (oh please no) not to go, etc.

I don't have much to offer here. I have 2 teenagers and we have not done anything. I do work for a scholarship and college access place and I know a bit (not a lot) about the 529 plans. I do agree, setting up a plan not knowing if the kids will go to college makes me uneasy. Especially since DD (14) at times says she is not going to college. You can the up and if only one of the kids goes to college it can be transferred to the one going. The only other I can think of is just a savings or CD account. Others may have more insight though.

 

[afan]

I don't have much to offer here. I have 2 teenagers and we have not done anything. I do work for a scholarship and college access place and I know a bit (not a lot) about the 529 plans. I do agree, setting up a plan not knowing if the kids will go to college makes me uneasy. Especially since DD (14) at times says she is not going to college. You can the up and if only one of the kids goes to college it can be transferred to the one going. The only other I can think of is just a savings or CD account. Others may have more insight though.

I agree on CDs or a high interest savings account. Also, not going to college isn't and shouldn't be looked at badly. There are trade schools, apprenticeships and other things that all offer well paying, rewarding, needed jobs. College isn't for everyone and if they have a good plan on what they want to do, let them. Better than wasting money just to have them drop out.

 

[EilonwyWanderer]

While we'll cross that bridge when we come to it (my kids are in single digits), my husband dropped out of college in his sophomore year and says it was the biggest mistake of his life, so he's a big proponent of them getting their undergrad degrees in anything at all since that piece of paper opens a lot of doors if they don't want to go a technical route. He ultimately got his degree after a long road as an adult.

I have multiple degrees and had a lot of student debt associated with them since my parents hadn't saved anything for college, so I'd rather make sure we have something for them when it's time to make that decision but none of them are in economics so I have no idea what a good savings route is!

 

[piglet1979]

I agree on CDs or a high interest savings account. Also, not going to college isn't and shouldn't be looked at badly. There are trade schools, apprenticeships and other things that all offer well paying, rewarding, needed jobs. College isn't for everyone and if they have a good plan on what they want to do, let them. Better than wasting money just to have them drop out.

While we'll cross that bridge when we come to it (my kids are in single digits), but my husband dropped out of college in his sophomore year and says it was the biggest mistake of his life, so he's a big proponent of them getting their undergrad degrees in anything at all since that piece of paper opens a lot of doors if they don't want to go a technical route. He ultimately got his degree after a long road as an adult.

I agree. Dh and I only have an associates degree. I wish I would have continued though. It was just going to be to much when I looked at going back with 2 young kids and working full time. DH is in IT and really doesn't need anything else. He does also have several certs too.

We have told DD that that is fine and talked about other options. She loves doing hair and is really good at it. She was French braiding her own hair by like 7. She is also pretty good at photography and is taking 2 classes in school. She goes back and forth on if she wants to go or not. She has 3.5 years to decide. I was just stating that I had one that might not go.

 

[EilonwyWanderer]

It was just going to be to much when I looked at going back with 2 young kids and working full time.

You should look into it again if you're still interested! I started a part-time PhD program when I was working full time and had a 1 year old at home, then gave birth to my second in the middle of my second year spring semester! It was definitely tough at times but you figure out ways to make it work. This was pre-COVID and so I brought my three month old with me to residency. When I graduated she was 3 and since she'd basically grown up in the program they gave her a little mini-diploma at the ceremony, it was so cute.

 

[DLgal]

Does anyone have any recommendations on saving for college? I am hesitant to start up one of those...are they 529s? I'm nervous about contributing to something that will ONLY allow them to pull the money for college if they eventually decide (oh please no) not to go, etc.

Set up the 529.

First of all, the money doesn't ONLY need to be used for college. The plans have expanded to include everything from private K-12 education to including ANY post High School continuing education expenses. Can be vocational programs, trade schools, certificate programs, community colleges, etc. If a child gets a scholarship, you can withdraw the amount of the scholarship tax and penalty free.

In addition, as mentioned, 529 funds can be transferred to another familial relative (sibling, parent) without penalty, so the money can be used be a different person than initially set aside for. My husband is using part of our kids 529 money right now to pay for a Masters degree.

Also, if for some reason you don't end up using the money at all, you are only taxed/penalized on the EARNINGS portion of the money withdrawn, which isn't always a huge amount. The earnings get added to your taxable income for the year. There is also a 10% penalty, but very few people open 529s and never need the money for someone in the family. You are never taxed or penalized for withdrawing the amount you contributed. It's like a Roth IRA that way.

529 plans don't "expire." You can keep them open and earning money as long as you want. Your kids might need money later in life if they decide to go back to school.

And finally, if for some reason your kids become disabled prior to turning 22 and you have 529 funds they won't use, there is a special type of account called an ABLE account, that you can roll over the entire 529 into, tax and penalty free.

You will make more money invested in a 529 plan in an aggressive portfolio than you will EVER get in a taxable retirement account or anything like a CD. We opened 529 accounts when our kids were born and have only put in $100/month to each one and they are each sitting at $55,000, 17 and 15 years later, respectively. Younger DSs account was placed into the aggressive portfolio from the get go, while older son's was in a more moderate portfolio until I changed it after the 2008 crash into the most aggressive option.

 

[barkley]

We have told DD that that is fine and talked about other options. She loves doing hair and is really good at it

i've known younger people who went into cosmetology because it gave them a decent paying skill that they could use to facilitate attending college down the line. even met one who worked summers on cruise lines-most are not employees of the cruise lines but of the parent spas that operate onboard-. she would save by not paying rent/for meals all summer, make decent wages/get good tips and then be able to cash flow her college year by year (did under the table nails and hair for dorm mates during the year). i thought it was pretty brilliant. you might want to check into what free options are available where you live-our local district has a technology school with a 2 year program kids can take in their jr and sr. year. they have to start planning on it freshman year to make sure they plot out their high school classes right (they will attend high school half days jr/sr year) but they end up graduating high school at the same time they meet the qualifications to be state licensed and certified for hair design (and other optional services). parents only pay for uniforms and some supplies. it's a great deal!

 

[limace]

My eldest ended up going to cosmetology school-almost all paid by the 529. It would’ve been 100% if she hadn’t switched schools-argh. On the bright side, she has been steadily employed since she finished-3+ years now-and easily self supporting, looking at buying a house at 24. And her buds who did traditional 4 year degrees are mostly living at home, temping, etc. She has a gift doing something she loves that pays the bills-all a parent could want.

 

[DL1WDW2]

Absolutely great info and I have only read this last page…

 

[nat8199]

Correct but if you are in a high enough bracket then you aren’t even eligible for a Roth and would need to do a taxed IRA contribution (since you would be over the deductible limit here too) and then do a Roth conversion. If you do need to do it as a Roth conversion it’s best to do two years at once between Jan-April when you can contribute to the past year and current year before filing taxes. Contribute to the taxed traditional IRA and then immediately have it converted to the Roth so there’s no gain on the money and therefore no tax consequences. You need to contribute it all in a lump sum so you could set up a savings account to contribute monthly if needed until you get to the contribution limit. A financial advisor can help set this up.

It is actually super easy to do yourself! No need to pay an advisor. I do our backdoor ROTHs every January with Vanguard.

 

[MerissaAndMomLoveDis]

Does anyone have any recommendations on saving for college? I am hesitant to start up one of those...are they 529s? I'm nervous about contributing to something that will ONLY allow them to pull the money for college if they eventually decide (oh please no) not to go, etc.

So...I didn't do a great job saving for college for my kiddo. I was paying off my own student loans when she was young. I was finally debt free except for house and car when the economy tanked in 2008/9, and suddenly I was living on 1/3 of my prior income for a few years. I racked up a lot of credit card debt over a few years time. I just finally paid it all off last year. One thing I did do right though was figure out how much I could afford to (and willing to) pay each year for college (in my case, I was cash flowing it), and set a firm number for my kid as far as what I was willing to pay each year. I showed her the surprisingly low amount that she could borrow on her own to supplement that amount I would pay and firmly said that I would not sign for any parent plus loans and would not borrow any money to pay for her college (because I was an older first time mom and nearing retirement, I did not want to take on any more extra debt). We used colleges' net price calculators, so that she could figure out for most colleges if she could afford it before she made the final decision to apply. I really helped her be realistic, and kept her from being disappointed by getting an acceptance to somewhere she could not afford.

 

[jen7233]

Does anyone have any recommendations on saving for college? I am hesitant to start up one of those...are they 529s? I'm nervous about contributing to something that will ONLY allow them to pull the money for college if they eventually decide (oh please no) not to go, etc.

We opened up ESAs within Vanguard when my kids were small and it's in a mutual fund growth index. I really don't invest in it anymore, feel done plus we have GI bill. Hard to even picture them right now as teenagers off to school away from home, they have some time management skills that needs to happen lol. However, I was some of the same way as a teen, last minute everything now my mind set is if I'm not early for something, I'm late. Anyway, my daughter I paid cash every month billed for her trade school cosmetology still employed in, and never had a college savings account for, ended up costing about 10k all said and done. If you don't want to do ESAs, 529s, etc., you could open and earmark a separate fund from your regular saving kept in your name and used for college expenses and pulled as and if needed. A disadvantage to that strategy may be on taxes.

 

[piglet1979]

You should look into it again if you're still interested! I started a part-time PhD program when I was working full time and had a 1 year old at home, then gave birth to my second in the middle of my second year spring semester! It was definitely tough at times but you figure out ways to make it work. This was pre-COVID and so I brought my three month old with me to residency. When I graduated she was 3 and since she'd basically grown up in the program they gave her a little mini-diploma at the ceremony, it was so cute.

It wasn't as much the time commitment but the money. We just couldn't afford it. We didn't make much back then, but still didn't qualify for the Pell grant. I also missed a grant by .5 on my cumulative GPA from when I was in college. It also was not going to help me move up at my job. Since then I have moved up to manager and my boss is trying to get me promoted again to senior manager. This all happened yesterday so he has to get it approved. I most likely can afford it now but the kids are in high school and play soccer, marching band and track so my time is very limited. I don't want to miss anything in these last few years with them before they go off on there own.

i've known younger people who went into cosmetology because it gave them a decent paying skill that they could use to facilitate attending college down the line. even met one who worked summers on cruise lines-most are not employees of the cruise lines but of the parent spas that operate onboard-. she would save by not paying rent/for meals all summer, make decent wages/get good tips and then be able to cash flow her college year by year (did under the table nails and hair for dorm mates during the year). i thought it was pretty brilliant. you might want to check into what free options are available where you live-our local district has a technology school with a 2 year program kids can take in their jr and sr. year. they have to start planning on it freshman year to make sure they plot out their high school classes right (they will attend high school half days jr/sr year) but they end up graduating high school at the same time they meet the qualifications to be state licensed and certified for hair design (and other optional services). parents only pay for uniforms and some supplies. it's a great deal!

Yes, we have this here as well. The school is actually right up the street from their high school. They also do some of it at the high school. DS is in a 4 year Biomed program that he will get college credit for. Though he has decided not to continue to take it. We have talked to both of them about this option. At one point DD talked about the EMS classes. I think right now she just really has no clue what she wants to do.

Absolutely great info and I have only read this last page… Can grandparents get involved with the saving build-up Any good ideas for catch- up if not started at birth?

Yes, grandparents can contribute. I am not sure how this works though.

 

[Woth2982]

While we'll cross that bridge when we come to it (my kids are in single digits), my husband dropped out of college in his sophomore year and says it was the biggest mistake of his life, so he's a big proponent of them getting their undergrad degrees in anything at all since that piece of paper opens a lot of doors if they don't want to go a technical route. He ultimately got his degree after a long road as an adult.

I have multiple degrees and had a lot of student debt associated with them since my parents hadn't saved anything for college, so I'd rather make sure we have something for them when it's time to make that decision but none of them are in economics so I have no idea what a good savings route is!

I believe the plan my inlaws set up for my daughter and niece, can be used for a trade school as well as college, I believe it can also be rolled into an IRA should they decide not to go to college.

 

[Woth2982]

Absolutely great info and I have only read this last page… Can grandparents get involved with the saving build-up Any good ideas for catch- up if not started at birth?

Yes! My in-laws set up my daughters account. They contribute $200/month to it. They have linked my bank account and my dads bank account to the account so any of us can make a deposit when we would like.

 

[barkley]

figured out a positive side to the supply chain breakdown-not one single shelf stable item i had on my trader joe's list can they stock these days per the manager, but not being to buy them offset the increased prices i paid for the frozen/fresh on my list. net result-fewer items but about the same out of pocket cost

 

[virge]

Financial Goals

• Build regular savings account to a balance of at least $10,000. (Used a large amount of that account to pay for surgery and other medical bills.)
• Put any “extra” money towards mortgage. (I count “extra” money as supplements from work, items sold on eBay/fb, etc.) - $50 “extra money” paid towards mortgage
• Increase automatic monthly transfers to 529 accounts to match salary increase that starts in Feb.
• Increase automatic monthly deposits towards supplemental retirement to match salary increase that starts in August.
• Organize financial info for my family. (I take care of all the bills & finances for my family, except my husband’s retirement accounts. I tease that he would be in trouble if something happened to me. I need to make sure he has all the info in one place, so it won’t ever be a real issue.)
• Run annual credit reports. Completed

 

[MDFam]

Set up the 529.

First of all, the money doesn't ONLY need to be used for college. The plans have expanded to include everything from private K-12 education to including ANY post High School continuing education expenses. Can be vocational programs, trade schools, certificate programs, community colleges, etc. If a child gets a scholarship, you can withdraw the amount of the scholarship tax and penalty free.

I completely agree with opening a 529 for all the reasons in DLgal's post! Thanks to the magic of tax-free growth in a good portfolio, my older daughter's college (currently a Junior in college) is being paid for with us only having contributed what amounts to a little over half of the cost with the rest coming from the tax-free earnings. My younger daughter's 529 is already fully funded because of the tax-free earnings 3 years before she will start college, and our actual contribution was about 50-60% of what the total value is now. We have been contributing for only about 10 years.

One minor point on DLgal's post - my understanding about the detail regarding the scholarship withdrawal isn't quite the same. My understanding is that you can withdraw the amount of the scholarship to use for any purpose without incurring the 10% penalty, but you would pay normal income tax on the earnings portion of the withdrawal.

 

[DLgal]

One minor point on DLgal's post - my understanding about the detail regarding the scholarship withdrawal isn't quite the same. My understanding is that you can withdraw the amount of the scholarship to use for any purpose without incurring the 10% penalty, but you would pay normal income tax on the earnings portion of the withdrawal.

You are correct. Thanks for clarifying.

 

[DisneyMandC]

Hello again! After a disastrous 2021 (not necessarily in terms of money, just life in general), I'm back and am thinking about my money goals for this year. I accomplished my goals from last year, but one of them will carry over into this year since we'll be saving for yet another car to purchase at the end of this year.

1. Save money for a car... again. I didn't think we'd be buying a car last year when I made this goal in January 2021, but our Nissan Lemon (Rogue) had different plans. We ended up buying me a new-to-me car in August and DH is now driving my old Hyundai for the very few times he has to leave the house. We'd like to get another SUV before the end of the year so will save some money for that. I have about half of what I want to spend saved right now. I'm hoping that the car market crashes before then so I'm not spending top dollar on two cars I did purchase a Toyota and that's what we plan to buy DH too, so hopefully after this we won't be spending money on cars for a LONG time. I plan on driving my Camry into the ground.

2. Open a Roth IRA and start contributing. I highly doubt I'll max it this year what with saving for the car and other obligations, but I at least want to start contributing a small amount each month.

3. Get the mortgage under $200,000. This should be doable given the current track we're on paying a little extra towards principal each month.

4. Lower my grocery budget. We actually didn't do terrible last year, averaging about $500 a month. This also includes the several times a month I take dinner out to my grandma as well. But I know that I could get this down further, even with the rising price of groceries. I've really dropped the ball on using coupons like I used to, and I know there are a lot more ways for me to save.

5. Continue the neverending battle to lose weight/get more fit. I didn't gain any last year, my weight really stays constant. And I actually had started working out a lot more and being more active, but when my dad died I was depressed and didn't feel like working out, and that pretty much carried through to the end of the year. I need to get back into the flow.

Hope everyone has a good 2022!

Well, I already have to scrap one of my goals lol. Who know that you couldn't contribute to a Roth IRA if you file your taxes "married filing separately"? Not me. I opened them last weekend and put $100 in each and then learned that. So now I'm off to open a traditional and move the money there.

I'm not sure what I want my second goal to be now. I already have a 457 plan through work. I just started a health insurance with an HSA, so I suppose I could devote some more money to that. I do need to save more towards our future home renovations too.