Check out the infographic that’s helping everyone at Frugaldad understand the heights to which this furious ambition has led.

And, like last year, Amazon lures millions of shoppers with respite from holiday stampedes and looted shelves.  They will officially match the Black Friday doorbuster prices of every major retailer.  And unlike confusing sale-exclusives, Amazon will always honor their own coupons.  You can grab some of Amazon’s best here: http://frugaldad.com/amazon-coupons/

Well, that stance has softened a bit over the years, for a variety of reasons. The student loan industry itself has a lot to do with the way I feel, but the majority of my shift has been in the way I view the education of my children, both in a formal setting and through informal learning at home.

Our College Experience

My wife and I both struggled in college to meet financial obligations. I turned to student loans to finance my tuition, and after returning to school years later, I turned to Visa. My wife shared a similar experience, often struggling to cover rent and living expenses while in school.

My first year or so of college was pretty well covered by my mom, who somehow managed to carve out tuition, and room and board out of her own household bills. I worked part-time at a local fast food restaurant, then a vitamin store, and finally a sports retail store in the local mall. I spent the summer after my freshman year working for a landscaper – mowing lawns and digging trenches for in-ground sprinkler installation.

It was tough working and going to school – no doubt about it. I remember one particularly bad time during a winter quarter when the old car I took to college quit running and I had to walk to work off campus, at night, in the cold, and yes, it was uphill in both directions (or so it seemed)!

I spent much of that time feeling sorry for myself, which did little to help the situation. Of course, later I realized it was a good experience. The part-time work covered my groceries and incidentals, and Discover covered the rest, since they were nice enough to give me a credit card application at a football game in exchange for a free t-shirt.

Those student loans, and the college credit card debt, haunted me for much of my early 20s, but I had nowhere near the average student loan debt most college graduates have these days (around $25,000, according to the latest figures). In fact, total outstanding student loan debt now exceeds credit card debt.

The Gift of Education

I don’t believe college education is a right, and I do not believe my kids are entitled to a college degree. For that reason, I choose to consider it a “gift.” I’m not loaning the money to my kids, and I’m not asking them to take out loans. I’m not asking them to go into debt, either to me or the federal government.

We are gifting our kids money that we will have set aside their first 18 years of life for the purpose of obtaining an education in a field they are passionate about first, and will support their lifestyle, second.

That’s not to say they won’t have some skin in the game. They will be expected to work during the summer for their own spending money, and they will be expected to pay for certain items as high school students, either from an allowance and/or part-time work. However, it is my goal to get them through college, should they choose to attend, without accumulating debt.

What If My Kids Don’t Go to College?

If our kids decide instead to learn a trade, or start their own business, or take some other path, we’ll use the money to help there as we can (minus the tax penalty from withdrawing 529 money and it not being used for education).

That might look like investing in a mechanic’s set of tools for my son, or giving my daughter some seed money to start a business, or helping either of them with licensing or specialized training (outside of college) they may require to do what is they love to do. Who knows what that might be.

The Sooner You Start Saving, the Less You Have to Save

I recommend parents start saving for college early. Celebrate the arrival of your baby by opening up a 529 college savings plan and begin investing, even if only small amounts. Grandparents and aunts and uncles can contribute money as well. The longer you have to invest, the less you have to contribute each month.

As kids get older, encourage them to open their own savings account at a local bank, or somewhere like ING Direct, that now offers a savings product specifically for kids at a higher interest rate than most traditional banks.

Introduce kids to the magic of compounding interest. Help them learn the mechanics of banking – checking balances online, reading a statement, completing a deposit slip, and most importantly, balancing a ledger.

I would be remiss if I didn’t mention this final point. Be sure to take care of your own financial needs first. As they say in airline travel, in an emergency you should put on your oxygen mask before helping others with theirs.

Before heavily funding college savings for your kids, be sure you are socking away enough for your own retirement. It’s natural to want to put your kids first, however, if you don’t take care of your financial future you may become a burden on them later. After all, there are no grants or scholarships for retirement.

I’d like to get your comments on the idea of paying for college. How are you planning for the expense in your family? (Note, there is no wrong answer here, as everyone has a unique financial situation and value set).

Hopefully, by sharing a few of these bad money moves, it will prevent others from doing the same. And don’t worry, if you are over 30 and still doing these things, it is never too late to start living frugal.

Is Tuition Cheaper at the School of Hard Knocks?

1. Take out three times as much in student loans as your first year’s salary. I’m all for following your passions, but if your passion only pays $35,000 a year, please reconsider borrowing $100k to get the required degree. Here’s more from a couple that owed more than $100,000 in student loans.

2. Trash your college enemies on Facebook and Twitter. Might be funny now, but your future boss probably won’t see the humor in it. Remember, the Web is an open book, and down the line things you say online can and will be used against you.

3. Trash yourself on Facebook and Twitter. The picture of you half-naked partying on the beach at Spring Break will probably get you a few more followers, but remember that future boss?

4. Go to school out of state because you like the football team. I included this one because I did it. Well, sort of. See, I thought I could walk-on for my favorite school’s football team, forgoing scholarship opportunities in-state. It was a dumb move, and one I paid for during the remainder of my 20s.

5. Just get a degree…in anything. Don’t “just get a degree” for the sake of getting a degree. Learn something, and prepare to apply it in the real world.

Work to Live, Don’t Live to Work

6. Accept a job you hate right out of school because it pays a lot. This ties in with student loans. Many graduates are so saddled with debt, they have little choice than to go after the biggest salary, even if it isn’t the best opportunity.

7. Form a partnership with three old fraternity brothers from college. It’s been said the only type of ship that won’t float is a partner-ship. Let the one with the most capital start the business and hire the other two. Much cleaner, and if the business fails, you can all walk away and still be friends.

8. Borrow thousands to start a new business. Entrepreneurship is the spirit that built this country, and I’m all for it. However, consider saving and starting up with cash.

9. Accept your first job offer without negotiating. A little wiggle room often exists in salary ranges, schedule flexibility, paid days off, etc, but you have to ask.

10. Spend $2,000 on your new corporate wardrobe before getting your first check. One of the classic mistakes by new earners. As with most things, it pays to pay with cash. Buy a couple nice outfits for interviews and your first day on the job, but beyond that, make do with what you’ve got until you get your first check or two. Then pay cash to add a new outfit to your wardrobe over time. Also, check out things like Macy’s Coupons and Coupon Codes for great deals on those few nice outfits for interviews.

The Borrower is Slave to the Lender

11. Cosign a car loan for your best friend. I no longer borrow money to buy cars. And I especially wouldn’t borrow money to buy someone else a car, which is essentially what you do when cosigning a car loan. As a cosigner, you are on the hook if they default. And if they need a cosigner, there’s a good chance they will.

12. Give up credit virginity for a free t-shirt. When I was in college, I signed up for a Discover Card before a football game because they were giving away free t-shirts. Dumb. My running joke is that t-shirt probably cost me $500 in interest charges over the next few years.

13. Borrow money from your parents. What kid wants to borrow money from their parents? Not only does it change the relationship between parents and kids, it makes it tough to declare financial independence when we constantly have to turn to the First National Bank of Mom and Dad.

14. Pay off a credit card with a credit card, without closing one of them. Performing a balance transfer from a particularly high-rate to a low-interest rate credit card makes sense in the short run. That is, unless you fail to close the old credit card. If you leave both accounts open, chances are you’ll eventually wind up with double the debt.

Cars Don’t Make You Any Sexier

15. Buy a car because you can “afford the payments.” Ever wonder why car dealers advertisers the cost of a car in monthly payments? It’s because writing $32,000 in window paint isn’t quite as catchy as $379 a month (for 60 months with a balloon payment at the end). See, it just doesn’t have the same ring to it, does it?

16. Drive like and idiot. Driving like an idiot can cost you big time. Makes it hard to save money on car insurance when you are collecting traffic tickets right and left. Not to mention the hit you’ll take on gas mileage.

17. Refuse to buy a used car because you don’t want someone else’s problem. This tired saying keeps coming up when a discussion on used cars takes place. A car transforms from new to used the second it leaves the car lot. A well-maintained, previously owned car, can save you thousands of dollars over a new model.

18. Buy a new car because it gets better gas mileage. Gasoline prices continue to climb, but it’s not an excuse to go and take out a loan on a new car with better gas mileage. In most cases, you’d have to drive thousands and thousands of miles to break even. Buy a car for better gas mileage if you already planned to buy another car, and you are concerned about the environment and your wallet.

19. Don’t shop for car insurance. No seriously; take the first offer you get. Don’t shop around for a better car insurance quote from places like esurance.com. Yeah, that will save you tons of money.

Insurance? That’s for Old People

20. Go without health insurance–even catastrophic insurance. When you are in your 20s, the last thing you are thinking about is getting sick. After all, you were just a teenager a few short years ago and the feeling of invincibility hasn’t quite worn off. Don’t take the risk. At a minimum, look into a health savings account or similar high-deductible plan that will cover you in the event of a major illness.

21. Turn down cheap life insurance because you don’t have dependents. If you die without dependents, someone may not be counting on your income, but it will still cost money to settle your final expenses. Don’t transfer that burden to your parents, or a close friend, because you were too cheap to pay a small premium for affordable life insurance.

22. Refuse to find disability insurance. After all, you are only 26, right? Who becomes disabled at 26? A lot of people. Illness, accidents and other bad things happen to young people, who are more likely to survive them disabled than die. Protect your new salary by finding disability insurance.

23. Don’t go to the doctor. Again, here’s that invincibility thing. At a minimum, follow your physician’s guidelines on annual or semiannual check ups. A little preventive medicine can go a long way towards extending your life and saving you money.

Going to the Chapel and I’m Going…to Need a Truck Load of Money

24. Marry the wrong person for the wrong reasons. Choice of spouse weighs heavily on future success or failure. They say opposites attract, but I’m not sure they stay together forever. Find someone who shares your dreams on subjects that matter most to you.

25. Spend six months of salary on an engagement ring. If you have to spend half a year’s salary on an engagement ring to impress someone you might want to think twice about your choice of partner. I’ve always thought one month’s salary was a good rule of thumb, and of course, pay cash. Further reading: Save Money on a Diamond Ring

26. Blow thousands you don’t have on a wedding. If you are debt free, and are marrying a partner who is debt free, stick to a reasonable wedding and avoid putting yourselves, or your parents, deep in debt.

27. Refuse to accept your partner’s debt. When you marry, you become one. So your spouse’s debts are now your debts. Remove “mine” and “yours” from your vocabulary when discussing debt and marriage.

Home, Bitter Sweet Home

28. Buy a house without an emergency fund. Something interesting happens you buy your first home. Right away, your name is put on a list of those who should be tested, financially. I’m being a little sarcastic here, but it does seem like the minute you stretch to buy a home without proper savings, something will break causing you to immediately reach for the credit cards.

29. Share a mortgage with your boyfriend/girlfriend. I’m not being a prude here. Even if you decide to share living quarters with someone before marriage, please avoid sharing a mortgage (or lease) with them. If you split up, and chances are you probably will, the financial impact is a lot messier with joint ownership.

30. Sign a long-term lease based on the salary you think you will earn out of college. Wait until the ink has dried on that first job offer letter before signing a lease (or a mortgage) for your first place. Better yet, wait six months to make sure you really can afford the payment, else you risk being house-poor right out of the gate.

31. Don’t put any money down on that new mortgage. As many have discovered the hard way, homes can lose value. If you finance 100% of your new home, you have zero breathing room should your home lose value and you be forced to sell. Buying a new home is not cheap, but try to buy yourself a little breathing room by putting 10-20% down (close to 20% is best to avoid paying private mortgage insurance).

32. Stretch to get into a new home because it is a good investment. Repeat after me – my home is not an investment. We need to break this thinking that all young people should buy homes because they are a great investment. Yes, they can increase in value, but like all investments, they can lose value, too. The difference is, when your shares of Apple go down, you aren’t putting the roof over your head at risk.

Kids Are Expensive, and Worth Every Penny!

33. Don’t get out of debt before having a baby. Any parent will tell you, things are difficult before kids are even more difficult after kids. Getting out of debt is no exception, so if possible, try to become debt free before having kids. Having said that, I believe children are a blessing, so don’t put off having kids just because you are in debt.

34. Offer to pay expenses for your grown children. This move alone will guarantee that they will never grow up.

35. Wait until kids are 16 to start saving for college. Who even thinks about saving for college until they are 16, right? Problem is, tuition increases and inflation become factors from the moment your kids are born. You have to save diligently to stay ahead of them both.

36. Give your six year-old a cell phone. My oldest is almost 11 years-old. After four years of begging, I’m starting to come around on the idea of her having a cell phone to take to sleep overs, sporting events, etc. (situations where we may need to contact her or vice versa). Her phone will be a real boring one with the only features being strong parental controls.

Investing in Your Future

37. Open an online brokerage account to trade single stocks before funding a 401 because you want to get rich quick. This point really doesn’t need further explanation. In my own experience, I remember opening an online brokerage account to trade single stocks in the late 90s because even people my age were making thousands in their sleep. Problem was, I got in at the top, was poorly diversified, and worst yet, I wasn’t contributing to my retirement account at the time. Talk about needing to re-prioritize!

38. Pass on a Roth IRA. Opening a Roth IRA at an early age may just be the single best retirement strategy for young people. I know you can’t get the earnings until your 59 1/2, but when you do, they are tax free! And don’t forget, in the even of a real crisis, you can withdraw Roth IRA contributions at any time, tax and penalty free.

39. Dump all extra savings into company stock. One of my first jobs was for Lowe’s (the home improvement store). I worked with a guy in his fifties who dumped 100% of his earnings into company stock (through the employee stock purchase plan and an outside brokerage account). He obsessed over the stock price because mild swings cost him thousands of dollars from day to day. I just couldn’t live like that.

40. Get your investing advice from late-night infomercials. Who hasn’t been tempted to flip houses, sell MonaVie, or stuff envelopes for hundreds of dollars a month? The problem is, for every legitimate opportunity, there are 1,000 scams.

Shopping, Food and Rock and Roll

41. Shop for clothes with labels that impress your “friends.” It’s time to be a grown up. Impressing your friends with clothes is something we did in high school.

42. Eat out every single meal. Eating out has its benefits. No preparation, no clean up, more social interaction, etc. However, it will clean out your wallet a lot faster than cooking at home. If you are a horrible cook, spend the difference on a few cooking classes.

43. Buy a television that consumes 80% of the square footage of your apartment’s living room. Some plasma televisions cost more than the car I currently drive. Unless you sit 30 feet from your television in a giant living room in a McMansion, it’s hard to justify a television worth more than your vehicle. If you are in the marketing for a television, it’s worth checking Amazon for a coupon code before doing so.

44. Don’t set up a monthly budget. One of my high school teachers had a sign hanging in her room that read, “If you fail to plan, you plan to fail.” Nothing could be truer when it comes to managing your money. Get over your fear of creating a personal budget and spend a little time telling your money where to go.

So there you have it; 44 ways to ruin your financial future. Hopefully, you’ll avoid most of these along the way, but even if you don’t, winning with money over the long term is about finding discipline and financial maturity. And that maturity can come at any age – 22 or 42. The advantage of finding that maturity at 22 is that by 42 you could easily reach financial independence, and have limitless opportunities ahead of you.

*This post was featured in the Carnival of Personal Finance #256: Market Crash Edition

Kimberly Lankford, contributing editor at Kiplinger’s Personal Finance magazine, put together five smart uses for your tax refund. I’ve expanded on her ideas, and added eleven of my own to the list below.

Smart Things to Do With a Tax Refund

1. Pay off high-interest credit-card debt. Kimberly listed this one first, and for good reason. Eliminating credit card debt is one of the smartest ways to spend any windfall. The higher the interest rate on your debt, the bigger the payoff. Think about it; where else can you get a guaranteed return of 22% on your money?
2. Rebuild your emergency fund. Thanks to unemployment, underwater mortgages, and a general economic funk, many households have had to turn to emergency funds to weather the storm. It makes sense to allocate some or all of your tax refund towards covering future emergencies.
3. Boost your retirement savings. If your debts are paid, and you have plenty of money saved for emergencies, the next biggest bang for your refund buck is to invest in your retirement. Maybe that means funding a Roth IRA, if you are eligible. If not, drop the money in a savings account, increase contributions from your paycheck to your 401k plan, and use the savings to offset the difference.
4. Build your college savings. It’s tough to carve out retirement savings, college savings, and put a roof over your family’s head and food on the table. After all, there are only so many dollars to go around. Boost your kids’ college savings by opening a 529 college savings plan (here’s a look at the best 529 plans).
5. Help your kid save for the future. If you are the parent of a teenager that earns an income, did you know you can help them open a Roth IRA? No kidding. The only requirement is that your teen files a tax return. He or she can invest in a Roth IRA up to their earnings, or the maximum yearly contribution, whichever is smaller. So, if your daughter earned $1,800 last year babysitting, kept meticulous records and files a return, you could gift her $1,800 to invest in a Roth IRA. She’ll be well on her way to becoming a millionaire.
6. Start a side hustle. Ah, the infamous side hustle. Many of the world’s most successful entrepreneurial efforts were started on less than $1,000 (I started Frugal Dad on less than $50!). Use your tax refund to seed a business you’ve always dreamed of running.
7. Invest in a home improvement project. Lean towards projects that improve your home’s efficiency long term. For instance, installing a programmable thermostat and planting a few trees around your property will go a long way towards reducing your future monthly energy costs.
8. Open a “Car Replacement Fund.” Let’s face it; the car you are driving now will eventually die. Why not divert a little tax refund money to start a car replacement fund. If your current car is paid for, save what amounts to be a car payment in this account and when the time comes you can pay cash for your next car.
9. Build a square foot garden. Use a couple hundred dollars of your tax refund to purchase gardening supplies, soil, and seeds. Now’s a great time to plant, and soon you’ll be enjoying tomatoes right off the vine, instead of those shipped across the country in your grocer’s produce section.
10. Give it away. If you’ve been considering giving money to a charity, now is a great time. Donating your tax refund to a worthy cause can even help on next year’s taxes, as most charitable contributions are tax deductible.
11. Pay extra on your mortgage balance. We personally plan to pay off our mortgage early. Why? Because we value the freedom a debt-free lifestyle affords. Sure, we’ll miss a tax break or two, but I’d gladly end sending $14k to my mortgage company each year to save $3k on my taxes.
12. Get your will done. My wife and I recently updated our wills after a death in the family. Identifying guardians for your children, and disposition of your stuff in the event of your death is not fun, but it is absolutely necessary. If you have kids and do not have a will, stop everything, financially, until you have enough saved to visit an attorney and have one drawn up. It is that important.
13. Purchase a gym membership. Many gyms offer significant breaks for those that opt to pay one year in advance. My gym offered two free months and waived the registration fee if I agreed to pay for the full year, effectively shaving $90 off my annual gym costs. Be sure to check out the gym’s refund/cancellation policy before agreeing to such a long commitment.
14. Take a class. It doesn’t have to be an academic class, but it could be. Maybe you’d like to learn more about cooking, or self-defense, or real estate. Investing a little tax refund money in yourself can go a long way.
15. Go on a “paid-for” vacation. My family recently enjoyed our first cash vacation, and it was awesome! I didn’t have any bills to dread on the ride back home.
16. Create your own “car insurance savings account.” If you currently have a $250 or $500 deductible on your car insurance policy, consider raising it to $1,000 and parking $1,000 of your tax refund in a dedicated savings account. You’ll enjoy a permanent way to save money on car insurance premiums, and earn a little interest on your savings account.

If you’d like to avoid getting a large tax refund next spring, and instead get a boost to your take home pay now, check out the withholding tool at Kiplinger.com.

Clear out financing and tax issues with a San Diego tax attorney.

Before having kids, both my wife and I agreed we wanted to help our children with their education. My own experience struggling to finish school after taking on student loans, and then charging tuition and books to a credit card, strengthened my position. Like all parents, I wanted better for my own kids.

However, we also want to balance our desire for them to have it easier, our own retirement plan, and my wish for them to learn the value of hard work. One of the mistakes many parents make is that so overload college savings they hurt their own financial plans.

I’ve known parents who saved $200,000 dollars in mutual funds for their kids’ college education, but have zilch in their own retirement plans, a big mortgage payment left from their refinance, and a host of other debts. I will always advise to take care of your own financial plans first, and college savings second. After all, there are no scholarships for retirement.

Having said that, because we are maxing out our retirement plans (more on that in an upcoming post in the series), we hope to also fund our kids’ college needs – at least a large percentage of them. Unfortunately, we got a late start because we put off college savings while paying off our debts. The good news is that we have more to save without debt payments. The bad news it will take some hefty savings contributions to cover college expenses for our oldest, now 10 years-old.

Determining Future College Costs

Hope you are sitting down for this section. College costs are ridiculously expensive, and getting more expensive every year as the rate of tuition costs increases at a faster rate than inflation (between 5%-8% per year). Let’s run some numbers at the website CollegeBoard.com, which has a pretty good calculator.

Assumptions

• Annual college costs, in today’s dollars: $19,388 (4-year public, in-state)
• College cost inflation rate: 5%
• Expected years of attendance: 4
• Percent of costs you plan to cover from savings: 100%

The inputs above yield the following future college costs for both kids:

• Tuition costs per year in 8 years: $28,645
• Tuition costs per year in 13 years: $36,550

For those keeping score at home, that works out to $123,463 and $157,574 (keep in mind, tuition continues to inflate the four years they are in school) in college expenses for our kids. Ouch. Of course, this is sort of a “worst-case” scenario considering most parents don’t have to pay “full retail” for tuition at most schools.

There are a variety of college scholarships, grants, tuition reimbursement plans (if employed), etc. that can help defray some of the costs. But if you’ve learned anything about me from the site, I like to aim big, so let’s work with these numbers for now.

Accounting for the modest amount we currently have in 529 plans, and a 7% growth rate of the funds (which may be a tad optimistic given recent history), that same website suggests we increase our monthly 529 savings plan contributions to $715 a month for our oldest child ($512 for our youngest). Okay, so it looks like we’ll be cash flowing a good bit of her tuition if she doesn’t earn any scholarships, because saving that amount would be a stretch.

We could take a little from our Roth IRA account because you are allowed to use a Roth IRA for education expenses (contributions may be withdrawn at any time, earnings after five years and only for qualified higher education expenses). Of course, this would certainly impact our own retirement, so this would probably be a last resort.

So what’s the lesson here? Start saving early! If my daughter was a newborn today, I’d only have to save about half of that monthly amount (roughly $450) to hit a target 18 years out. If I had only taken my own advice ten years ago.

We have all heard of SMART goals. You probably know the acronym by heart…Specific, Measurable, Achievable, etc. Identifying savings goals is no different. As I mentioned last week when first introducing this series, my family has been pretty good at saving money since getting out of debt. However, we find ourselves trying to pile up money for no specific reason, other than we recognize saving money is the smart thing to do.

This wasn’t enough for me. I want to set very specific savings goals and then track them to completion. When we accomplish the first savings goal, we’ll move to the second. When we accomplish that goal, we’ll move on to the next, and so on. Think of it as a “savings snowball.”

Of course, some goals will run concurrently, particularly the big, long-range goals such as retirement and college savings plans for the kids.

To kick things off, my wife and I sat down to identify our short-term savings goals. That is, things we hope to accomplish in the next year or two, or have already saved for, but don’t want to tap for competing priorities.

Short-Term Savings Goals

Goal 1: Save $25,000 Cash for Emergencies. Any financial planner will tell you this is the cornerstone of any solid savings plan. After all, rainy days are inevitable. Whether you are covering the costs of a new roof, a new transmission, or covering expenses during a layoff, the emergency fund is a must-have savings goal.

Most also agree that 3-6 months of expenses is a good starting place when determining how much one should save. For us, our goal amount is around eight months of expenses – we added two additional months since we are a one-income family.

Goal 2: Save $10,000 Cash in an Opportunity Fund. The problem with emergency funds is that they are only supposed to be used in an emergency. Life throws plenty of opportunities, too, and we want to be prepared for them. In our first 12 years of marriage, we had to pass on many opportunities because we were carrying debt and had little savings. We like to think of this fund as our personal line of credit – there to use and replenish as opportunities arise.

One real-life example of these types of opportunities is blogging conferences. Previously, the attendance fee, transportation and lodging made attending these types of events difficult. Now, if the right opportunity came along, I could attend such an event, which could lead to making valuable connections for building Frugal Dad.

Goal 3: Save $10,000 Cash Towards a Car Replacement Fund. Let’s face it; our cars won’t last forever. Their demise is inevitable, no matter how well we take care of them. So why not begin planning for their replacement now, rather than turning to banks or auto finance companies.

In our case, my truck will likely die first since it is several years older than our family vehicle, and has about 100,000 miles more on the engine. At current prices, I could buy a replacement truck for about $8,000 – $10.000. Accounting for a little inflation, with the hopes that my current truck lasts a few more years, and accounting for the remaining cash value of my current truck, that puts the replacement truck cash need at about $10,000.

Goal 4: Save $5,000 for Home Improvement Projects. Our house was built in 2004, so fortunately very little is in need of upgrading. However, there are a few small home improvement projects  we are interested in doing around the exterior of our home, such as installing gutters, paving a patio (or building a deck), and planting more mature trees on the property.

We’re also considering hardwood or laminate flooring in the kids’ rooms as they both suffer from allergies, and carpet seems to hold in the dust and pet dander making their symptoms worse. A few thousand dollars should cover these expenses, but we believe in saving the cash first before upgrading the home, even if other lines of credit are there.

I’m happy to report that Goal 1 is accomplished, and we are working on Goal 2 (the Opportunity Fund). We’ll save for goals 3 and 4 at the same time, with the hopes that our outside home improvement projects will be funded by late spring or early summer, and our new trees can be planted in the fall.

Stay Tuned

Next up in the series, we’ll take a look at college savings for our kids, our next big savings priority and something we know we are behind on. I’ve done some preliminary research for the costs of tuition for both kids, and the numbers are staggering. I’ll share the specific numbers with you, and our plan for reaching the goal in the next decade (even less time for our oldest – yikes!) just in case they don’t land full scholarships. Hey, a frugal dad can dream, can’t he?

The first thing we did after reaching debt freedom was realign our financial goals. The first, of course, was to secure a fully-funded emergency fund, one that represented about six months of expenses. Admittedly, it was tough to keep up the same intensity towards saving money as we had for paying off debt. That brings me back to the thought-provoking comment left by Rob from PassionSaving.com. Here’s a portion of that comment that struck me:

If your experience is like mine, it won’t be all smooth sailing from this point forward. I say this not to be discouraging, but to point out what might be a basic reality of human life — it is a journey of ups and downs no matter how skilled one becomes at handling one’s money issues.

What I believe today is that accomplishing a big money goal like paying off one’s debt does not so much solve all your problems as open you up to a higher class of problems. The old problems truly are solved. But solving them provokes you into taking on new adventures, which lead to new problems. You will continue to find yourself frustrated and stuck and in pain and in fear in days to come.

My initial reaction? Yeah right! What could possibly be any more painful, financially, than going through the motions of paying off debt? What money struggles could we face that are even close to the struggles faced in the past? I suspect most people still deep in debt probably had that same reaction. But as I thought more about Rob’s comment, and began to experience life after debt, I understand his point.

Yes, we no longer have to contend with debt, but that doesn’t mean more daunting financial challenges aren’t ahead. My oldest child will soon be ten years old, which apart from terrifying me as a father, also serves as a wake-up call to get her college savings in order. Because we spent so many years toiling with debt and trying to get on solid footing, her college savings have suffered. The good news? Without debt we can afford larger contributions to her 529 plan, which should help us make up ground.

It’s a similar story for our own retirement plan. I diverted money we could have, and probably should have, used for retirement savings to pay down debt. Unfortunately, this means we missed a great opportunity to invest in our 20′s and let that money compound for a few decades. Are you reading 20-somethings? Make long-term savings a priority now!

In the final analysis, I would have to admit that yes, life is easier after debt. Paydays are now an exciting event because it means making more contributions to savings, rather than distributing most of your income to credit card and auto finance companies. But life after debt is not without challenges. And those challenges can conjure up the familiar fears and anxiety felt when looking at a pile of debt.

How will I even save enough to retire? How much will my kids need for college? Will I ever be able to save in taxable investments to chart a course to early retirement? I’ll approach these new challenges the same way I approached, and overcame, the ones related to debt. We’ll tackle them head on, and remain disciplined through the same frugal approach we take towards nearly all of life’s ups and downs.

The first step will be to conduct a more thorough review of our current investment elections, including the 529 plan itself, and the investment elections within the plan. Like most people, we went with our in-state option since it was a decent plan according to most rankings, and we could benefit from a state tax deduction on contributions. However, after reviewing performance of the limited fund options I’m not so sure it is the best place to park the kids’ college savings funds, tax deduction or not.

Which States Have the Best 529 Plans?

Utah

According to a recent Morningstar article, The Best and Worst 529 College-Savings Plans, it would appear both Utah and Virginia offer solid plans. Morningstar’s write up about the Utah plan sounded the most appealing to me:

For those who want a tax-sheltered way to save for college using Vanguard index funds, this is the plan. Utah’s 529 plan has long been a favorite of ours and remains a strong choice for its low costs, flexibility, and tried-and-true Vanguard index funds. The plan’s fees are a rock-bottom 0.22% to 0.35%, making it one of the cheapest plans in the country.

Hard to go wrong with “rock-bottom” fees and Vanguard Index funds! In fact, I think Vanguard is the best place to open a Roth IRA, too.

Virginia

Virginia offers two 529 options: a direct-sold plan managed by the state gives the flexibility to invest in a variety of different mutual fund companies, and an advisor-sold CollegeAmerica plan which offers a nice mix of American Funds with relatively low fees. From Morningstar’s review:

The state’s other topnotch choice, the advisor-sold CollegeAmerica plan, remains a favorite for its large selection of mostly first-rate American Fund mutual funds that give investors access to a broad array of asset classes, including emerging markets, small-cap foreign stocks, and foreign fixed-income securities. Fees are attractive, too, as most of the plan’s A-share options are below 1.00% in total annual fees.

It is still a good idea to check out your in-state 529 plan, because the ability to deduct your contributions, up to a certain amount, is very appealing. But don’t fall into the trap of investing in a bad plan for a tax deduction. Over the long term, you will come out further ahead by investing in a healthy plan out of state, if necessary.

A Word About Age-Based Allocations

Nearly all 529 college savings plans now offer various levels of age-based allocation, from the most aggressive to to very conservative. One problem with these types of plans, and any targeted-allocation fund for that matter, is that the person managing the fund may have a much different risk tolerance than you do. This could lead to funds being invested too heavily in higher-risk investments too close to college age. A sudden downturn, like the one we saw in the fall of 2008, could quickly pull the rug out from under college plans by decimating a 529 plan balance.

Parents, Secure Your Own Retirement First

I love my kids more than anything, but I also recognize that if I don’t manage to sock away $50,000 in a college fund for them, life goes on. They can work their way through school, like I did, and they can apply for financial aid, grants, scholarships, etc.

I’m not particularly fond of student loans, although some small amount of borrowing could make sense to supplement other funding options. And before all you student loan fans email me, let me just say that I’ve heard from too many 24 year-olds drowning in $75,000 of student loan debt to be persuaded to like them.

For Canadians, a plan similar to a 529 is an RESP (Registered Education Savings Plan). In basic terms, this is an account you can start for your child and make contributions to over the years; it’s a great way to save for post-secondary education in Canada. Be sure to look into this as an option.

As parents, our top priority should be taking care of our own financial futures so that we are not a burden on our children. Once we have paid down debts, built a solid emergency fund, and are contributing to our own retirement plans, then we can turn our attention to college savings. Remember, there are no scholarships for retirement.

Save for College with Upromise – College Dream Sweepstakes – Win $10k

We were convinced our compromise of financial personalities was for the greater good of marital harmony.  However, over the years our natural tendencies were overridden by circumstances – circumstances we created for ourselves, but had to work through nonetheless.

Just a couple years into our marriage my wife quit working as we decided she would stay home with our children. It was a decision we made together, and reflected both of our desire for her to be home until the kids were school age. Neither of us downshifted our spending appropriately for living on one income, and soon we found ourselves in debt. Our growing debt had an interesting effect on our relationship. My wife became a saver, and I sobered up (financially) after a couple years of spending more freely than I was comfortable with.

These days we are both enjoying a more frugal lifestyle. Just the other day my wife went grocery shopping and picked up $273 worth of groceries and cleaning supplies for $186. For hardcore couponers out there that might not sound like a huge savings. But for us it is huge! We both resisted using coupons for years, dabbling with services like The Grocery Game and other coupon websites only half-heartedly.

The reason we weren’t gung ho was because we weren’t both enthusiastic about couponing. I would clip, she would forget. She’d clip and give to me for my after-work run by the store, and I’d forget to use them at the checkout. But when we both got on the same page we started realizing some serious savings.

This same synergy developed through shopping with coupons has carried over into other areas of our financial life. We both decided we were tired of being in debt and have been paying it off like crazy the last several months. We are now equally passionate about building our savings, our kids’ college savings plan and our own retirement.

How much do you and your significant other differ on finances? Has this changed since you first met?

I’m a father of two kids, and I know how it feels to want to give your kids everything.  But I honestly think parents are unnecessarily beating themselves up over these college fund balances.  Parents and college-bound kids are going to have to make some tough choices between now and next fall, and the toughest of those choices will be dealing with the financial reality that a large portion of their college funds are gone.

These days most families turn to student loans, particularly those who lost half the value of college savings in a matter of months.  Their story is a cautionary tale for those invested in risky investments too close to a financial goal, but since they all recognize that now there is no sense beating them over the head with portfolio allocation instructions.  No, we are where we are, and we have to figure out where to go from here. Because I generally dislike student loans, the following tips will intentionally leave Sallie Mae out of the mix.

Photo courtesy of StuSeeger

Seven Ways To Fund College Without A College Fund

1. Reconsider your choice of school.  I sound like the guy who doesn’t read his own articles.  I made the mistake of getting hung up on an out-of-state school because my best friend was going there, and I liked the football team, and it was my favorite college town.  Big mistake.  While I do have the ultimate souvenir from those days away at college (my wife), I also came home after 2 1/2 years with a pile of student loans and credit card debt.  After enrolling in a local university it was obvious the quality of education was just as good, and the tuition was considerably less.  Lesson learned.

2.  Ask for help from friends and family.  One of the more interesting concepts I have seen lately to formalize this process is a type of social investing market lead by Freshman Fund.  Students and parents tie the child’s Freshman Fund account to existing 529 college savings plans, and then share the student’s profile with family and friends.  Contributions are collected and deposited directly into the 529 plan behind the scenes (no need to share account numbers, etc. with extended family).

3.  Apply for every scholarship under the sun. I mean that quite literally. If I were a high school junior facing rising tuition costs and a small balance in my college savings fund I would make it my part time job to apply for as many scholarships as possible.  I would enter writing competitions, join various associations, and basically spend every free moment researching scholarship opportunities.  Even if you applied for 1,000 scholarships and 990 of them turned you down, there is a chance those remaining 10 could finance a year of school (or at least offset some of the costs of that first year).

4.  Get a part time job.  This one is a little controversial because some argue that part time work detracts from the college experience, or leads to lower grades. I started working my freshman year to cover books and miscellaneous expenses, and later worked even more hours to pay for an apartment and utilities. Admittedly, it was a drain, but I appreciated things far more than if my mom paid for everything.  I think it helps kids to have at least a little financial skin in the game.

5. Work full time for tuition reimbursement.  Many companies offer tuition reimbursement plans to their employees.  Start by researching companies in the field you are ultimately interested in studying. Most company websites offer a list of perks included in their benefits package, and if you have questions about tuition reimbursement eligibility contact the company’s human resources office (or recruiter) usually listed on the job search page.

6. Live at home and stay local, or commute a short distance. Room and board can add significant costs to already inflated tuition costs.  If you are short on cash you might be able to pull off tuition-only and stay and stay on the “Mom and Dad” meal plan. As a compromise, at least consider living at home your first year or two and then look for a reasonable off-campus option for the final years at school.

7. Take a year off to save up the cash. Again, not a popular option for most high school seniors eager to get started on college life. But families need to be realistic; if the money isn’t there it just isn’t there.  And with many people being laid off, or at least fearing they may be laid off, most parents are reluctant to try to cash flow tuition at an expensive school.  It might make sense to take a year off, work full time while living and home, and save every single dime you earn towards the next year’s tuition.

I wish I had chosen this route – in fact, I ultimately did. I went to school right away for a couple years, returned home and worked for a couple years, and then wound up working my way through my remaining time at school. Looking back, I could have done things even smarter by starting a Roth IRA when I was a teenager to save for college. That’s right, you can use a Roth IRA for college because contributions may be withdrawn at any time, and earnings may be withdrawn penalty free for qualifying higher education expenses.

Again, I want to stress to those parents and students out there who might be reading this that it is not healthy to play the blame game. Many parents are mad at themselves for not rolling funds into cash last year, and many students are equally mad at parents for losing so much of their college fund.  Being mad at yourself, or resentful towards your parents accomplishes nothing.  Now is the time to pull together as a family and work to find a solution that works best for everyone involved.

High school seniors, resist the temptation to take out huge student loans. I know the money is there, and you don’t have to pay it back for a few years, but you will have to pay it back.  When you graduate college you will be filled with the excitement of getting started in your career, and finding your first home. Don’t spoil it by tying a noose around your neck and hanging four years of student loans from it. Those loans will limit your options, and are often the gateway to other forms of debt such as credit cards and car loans. Make the sacrifices now so you don’t have to make them later.  I promise, ten years from now you won’t regret it.