Best financial planning tip for donut hole families

[Anonymous]

Anonymous wrote:So paying off things like car and consumer debt is already done. What other financial planning did you think made an actual difference for families that are full pay oos but will really struggle to be full pay.

I told them they couldn't go OOS. Pretty simple.

[Anonymous]

Anonymous wrote:Community college to in-state. Your kid will be fine, and you desperately need to learn to stop "keeping up appearances."

This is what we're doing with our current senior. Younger kid may have more of a shot at an athletic scholarship, but that remains to be seen.

[Anonymous]

When our oldest was in late elementary school, we did the math and realized that our house would be paid off when he was in his 3rd year of college. By adding just a bit to each monthly payment, we accelerated it so that it was paid off halfway through his senior year of high school. That is freeing up a ton of cash flow during his college years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We paid off our mortgage.

This is sound advice, OP! You can pay off the mortgage and also when the time comes, see if you can get merit at private universities

Seems short-sighted to do that when most expensive schools will expect you to tap home equity to help pay for college. Now you'll just be taking out a home equity loan, probably at a higher interest rate than your mortgage.

Colleges use home equity differently. Not all of the expensive ones do - in fact most of the elite ones don't. Just avoid applying to the ones that do.

[Anonymous]

Anonymous wrote:When our oldest was in late elementary school, we did the math and realized that our house would be paid off when he was in his 3rd year of college. By adding just a bit to each monthly payment, we accelerated it so that it was paid off halfway through his senior year of high school. That is freeing up a ton of cash flow during his college years.

So you paid off the 3% mortgage instead of putting it into investments that could earn a lot more than 3%. Yay!

[Anonymous]

Anonymous wrote:we shifted 600k of assets into non reportable. mostly paying down our mortgage, but also wrapping up a long list of needs: new roof, added an ADU, did dental work, redid driveway, maxed retirement, updated a bunch of legal work like trusts, etc.

Where did you have 600k of assets? I’m assuming it wasn’t from retirement.

[Anonymous]

Anonymous wrote:We paid off our mortgage.

Assuming you're not in a house poor scenario and can afford to spread out your mortgage payments over time.....I don't think a financial planner would recommend you paying off a low interest mortgage loan in advance vs investing the same money (or some of it) in either a 529 or retirement product (IRA/TSP/401k/403b) that will likely grow at a higher rate than the mortgage and incur zero capital gains over time.

[Anonymous]

Anonymous wrote:we didn't really have it laying around. we lost our two remaining parents. so all 4 parents gone and we had some inheritance.

we've never made 250k. our HHI is about 140k. we do have two 529s that are about 100k each do to great returns over last 15 years. so I guess we saved more on less income than you did.

if you make 250k, you can afford a new roof

Perhaps mark some of the inheritance to college for kids and some to retirement. Speak with a financial planner. Retirement comes first - if the FP tells you you can't afford to use inheritance for college - then look in-state, apply to lower ranked SLACs that will try to lower price to be affordable to you, or look at schools in south that give large scholarships as long as you meet the GPA/SAT-ACT hurdles (these are literally in charts to see).

Best of luck

[Anonymous]

Anonymous wrote:

Anonymous wrote:When our oldest was in late elementary school, we did the math and realized that our house would be paid off when he was in his 3rd year of college. By adding just a bit to each monthly payment, we accelerated it so that it was paid off halfway through his senior year of high school. That is freeing up a ton of cash flow during his college years.

So you paid off the 3% mortgage instead of putting it into investments that could earn a lot more than 3%. Yay!

Yes and the price we paid for college dropped from 95k to 35-45k per kid for 8 years. Yay indeed.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Lowest paid parent quits working for four years. Will make a huge difference in the net price calculation!

Unless the coa is way more than that parent's income, this doesn't make that much sense, IMO. You are losing out on that extra income, plus it will be harder for that parent to go back into the workplace.

Also leaving a job means likely losing out on tax-advantageous retirement savings via employer plans - and employer contributions to retirement too (if they have matching). And if federal worker, lowering long term pension.

[Anonymous]

Most strategies are small potatoes compared to simply having kid graduate in 3 years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:When our oldest was in late elementary school, we did the math and realized that our house would be paid off when he was in his 3rd year of college. By adding just a bit to each monthly payment, we accelerated it so that it was paid off halfway through his senior year of high school. That is freeing up a ton of cash flow during his college years.

So you paid off the 3% mortgage instead of putting it into investments that could earn a lot more than 3%. Yay!

Yes and the price we paid for college dropped from 95k to 35-45k per kid for 8 years. Yay indeed.

What the PP is saying is that you could have put the extra payments made towards the mortgage into a 529 that grew at more than 3% per year and with tax free gains.....meaning you would likely be better in the long run (when they both ended college). That said - glad this plan is working for you (genuinely). (I also say this as someone who paid off their mortgage early vs investing that money to get higher gains in market compared to savings on mortgage debt rates. It's just nice to have it paid off...but financially we'd have been better off no paying the mortgage down.)

[Anonymous]

Anonymous wrote:

Anonymous wrote:We paid off our mortgage.

Assuming you're not in a house poor scenario and can afford to spread out your mortgage payments over time.....I don't think a financial planner would recommend you paying off a low interest mortgage loan in advance vs investing the same money (or some of it) in either a 529 or retirement product (IRA/TSP/401k/403b) that will likely grow at a higher rate than the mortgage and incur zero capital gains over time.

+1

[Anonymous]

Anonymous wrote:OP here. We are definitely considering in state but there are a handful of "dream" schools that are oos. Not a lot of them but a handful. If DS gets in, we'd like to send him with as little pain as possible.

What is doughnut hole to you? Too much for aid at state school or private? There's a big difference. At 135k, we didn't qualify for aid at state schools but did at many privates, not just top tier. Our house is (now) worth a lot, but that didn't seem to be a problem. We paid oof car, paid for necessary repairs/improvements for the year, full year's property tax, full credit card amounts, essentially anything we could, before filling out CSS.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:When our oldest was in late elementary school, we did the math and realized that our house would be paid off when he was in his 3rd year of college. By adding just a bit to each monthly payment, we accelerated it so that it was paid off halfway through his senior year of high school. That is freeing up a ton of cash flow during his college years.

So you paid off the 3% mortgage instead of putting it into investments that could earn a lot more than 3%. Yay!

Yes and the price we paid for college dropped from 95k to 35-45k per kid for 8 years. Yay indeed.

That couldn't be from just paying off your house if you were that close to paying it off anyway.