How Can Parents Allocate College Funds and Still Pay Their Mortgage?
Many parents feel a responsibility to pay for their child’s college education. While your mortgage and retirement accounts should be your top two financial priorities, it may make you feel good to contribute to your child’s college fund. These four tips will help you to strategize and plan your budget to include college savings.
Making Do With Older Vehicles
Car payments, insurance on a new car and maintaining the vehicle could be your biggest expense after your mortgage. If you are used to buying new every three to five years, keep your vehicle longer. Consider learning how to change your own oil. Preventive maintenance such as rotating your tires and replacing the air filter will also help your vehicle to last longer. If possible, switch to a vehicle with great fuel economy. This will reduce your fuel expenses. If you can, switch to mass transit or carpool.
Cutting Out Extras
Make sure that college savings has a line in your budget. After prioritizing your mortgage, utilities and debt payments, put in the college savings next. You might also consider cutting some extras out of your budget, such as eating out twice per week for dinner. Switch that out to twice per month. Brewing your own coffee, trimming your own hair and wearing your clothes until they wear out can all help to cut down on expenses. Your savings can be put into the college fund.
Your mortgage loan should always be your number one financial priority. Professionals, like those at Assurance Financial Group, know that you should consider watching interest rates if you’re looking at getting a mortgage loan. If the interest rate drops 0.5 percent below your current rate, a refinance might help to lower your monthly payments. The money that you save each month could be added into your child’s college savings fund.
Refunds and Deductions
Consider a tax-deductible college savings account. Most states have a 529 plan for college savings. You will not have to pay taxes up to a certain amount of annual contributions. The account’s growth is also tax-free. Relatives can also contribute to the account and enjoy the tax benefits. If you get an annual income tax refund or an unexpected bonus or rebate, funnel it into the college savings fund.
Saving for your child’s education helps your child to start out adulthood free of debt. While planning your budget, prioritize your own essentials and then add in the college allocation. This allows you the peace of mind that comes from knowing your mortgage is paid in full each month.
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