Where College Funding Fits into our Financial Plan

Dave Ramsey’s Baby Steps offer a simple approach to meeting financial goals by working on the first three steps one at a time. After retiring all non-mortgage debt and building an emergency fund, the plan teaches to work on steps four, five, and six simultaneously, with priority given to retirement investing, then college funding,  and finally mortgage payoff. We veered off the Ramsey plan with regards to prioritizing paying off our home over funding our children’s college savings plan.

When we finished Baby Step Three, our children were in preschool and kindergarten. The largest part of our debt snowball was a refinanced second mortgage, and we realized we had made a lot of headway on the principal  in a short amount of time. Using a mortgage calculator, we estimated we could pay off our house completely in 7 1/2 years with additional principal  payments that worked with our budget after fully funding our retirement investing. We opted to add minimally to our children’s college funds, knowing that if we stuck to our plan, our kids would be in 6th and 7th grade when our mortgage was completely retired, and we could invest more heavily in college savings accounts.

Today our children are 11, 10 & 5, and we have continued with our plan since it's establishment five years ago. Adding another child to the mix three years ago hasn’t changed our approach to college funding. When our home is paid off, we will begin investing substantially into each of our children’s college fund. Where we fall short, we will be able to earmark monthly payments for their education in the absence of a monthly mortgage payment.

In addition to creating a financial plan, we also talk regularly with our children about college choices and that we will expect them to work and help pay for their schooling. We’ve introduced them to the terms post-secondary option, scholarship, in-state tuition and community college. They emotionally grasp that debt takes away long term freedom, and learning about the about saving money through college choice already resonates with them.

Not everyone is able to financially support their children in their post-secondary schooling, and that’s okay. Parents can still guide and encourage their children to make thoughtful choices about where they choose to attend and the financial implication of those decisions. The first time someone suggested attending community college to me was when I was a senior, and I felt deeply offended. I was arrogant, and believed that option was below me. Perhaps if a plan had been a part of a regular discussion, I might have been open to different choices. One book that highlights an alternative choice to student loans in the absence of parental savings is Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parentsby Zac Bisenhoff.

I often remark, “I was a much better parent before I had children,” meaning I believed I knew what to expect. The same may be true of our college plan. It looks good and makes sense on paper, but what our children ultimately do will dictate the long term success of this theory. Moving forward with this plan is our most thoughtful way to approach caring for our children as they enter adulthood.

Where Does Giving Fit into Dave Ramsey’s Plan?

When people first begin attending Financial Peace University, the are often scared, frustrated and ashamed of their financial situation. Registering for a class and committing to learn something new is incredibly brave, and it feels inappropriate to add any guilt to an already tender situation by challenging people to grow in their giving right away. I am incredibly grateful that although giving is the first item on Ramsey’s Budgeting worksheets, it is the last lesson taught in the nine week class.

We started tithing when we first married and were living on two incomes. It was challenging but deeply rewarding. We faced the death of our son Jack and life with his surviving twin brother while initially still meeting our commitment. However, acclimating to one income, parenthood, grief, and a falling away from our church began a slide in our regular giving. For a couple of years we gave sporadically to people and organizations with whom we felt a connection while searching for a new church home and a financial plan that would work. When we needed help the most, we stumbled into a congregation we grew to love, and then read The Total Money Makeover. We made the connection between budgeted giving and growth in our faith and returned to giving a tithe on our take-home pay (minus taxes and insurance) while working to melt our debt snowball. Returning to tithing was difficult, but giving and budgeting in tandem changed us in profound ways. Here are some of the truths that we learned by giving throughout our Baby Steps:

Giving Grows Contentment - Looking back on the Summer of 2007, when we decided to give the Ramsey Plan a shot, we lacked contentment. We felt justified using a credit card because it was only for “needs.” We believed we were wise to borrow against our 401K for a motorcycle because we would be paying ourselves back the interest. We were proud that we had found a creative way to finance our home borrowing 103% of the principal so that we could skip a down payment and bypass PMI. Our rush into these purchases reflects a time when we were constantly measuring our happiness by what we could accumulate. Ranking patience and discipline above purchases was not a part of our character. Deciding to freeze our borrowing forced us to look closely at what we had and decide it was enough.

Contentment grows with cultivation, and living with a barebones budget for several years intensified the growth of our contentment. This peace was a byproduct of making more money and spending less while watching our friends move up in cars and homes. We realized we were both giving to charity at a rate that months before would had seemed impossible, and also  steadily retiring debts. Accomplishing this much while living within our means shifted our thinking, and it became clear that “We have enough.” From that point on, comparing and craving material possessions loosened its grip on our hearts, and we were able to live fully in the blessings right in front of us. It’s not clear whether contentment grew out of living on a budget or systematic giving, but however it happened, this experience both  changed the way we live and the way we give.

Giving Reflects our Values -  Jesus said, “Where your treasure is, there your heart will be” (Matthew 6:21). The ways that we spend our money are a direct representation of the values that  we care about. When I scroll through debit card purchases or the titles of my cash envelopes, I see a lot about investing in relationships, making things beautiful, building a future, and caring for others. I am most authentic when my spending reflects my values, and giving to our church and other important organizations is a critical part of our story. Figuring out how to align  finances with values shouldn’t wait until a milestone is reached, but can be done anytime along the Baby Steps.

Giving is Fun - Giving is the most fun you can have with your money. If you haven’t experienced the joy of giving anonymously, I’d encourage you to give it a shot. Sometimes you even can hear the person muse about who sent the gift all the while you were the one who wrote the check, paid the bill,  or made the purchase. While we were paying off our debt snowball, we set aside a small amount each month for date night. This account took several months to grow to a point where we could go out for a nice meal or see a movie. For one date we arranged childcare the night before and went out for breakfast at a local diner in the morning. We noticed our waitress was hustling and dealing with some really rotten customers a couple tables over. Without really thinking about it, my husband and I both ordered small meals with the intention of leaving a sizable tip. We scooted out of the restaurant before the waitress retrieved our bill, but it was a ton of fun to imagine her response. Leaving a big tip was definitely more fun than ordering a full breakfast would have been. The story is far more memorable and fun than how we could have spent the money on ourselves in the diner.

We Want to Model Generosity - More is caught than taught, and if we want our children to become givers, they need to see us do it regularly. We give electronically to our church, but I am grateful that there are placards in the pews that say, “I give electronically” as a visual reminder for our kids to see that we are giving weekly to our congregation.

I love when our kids are able to bear witness to some of our secret surprise gifts, such as an incident in Aldi a few years back. A woman in the checkout line was seething. She was waiting at the register with a cart full of groceries that she was unable to pay for. I told her that I hoped her day got better, and full of shame she replied, “My company didn’t deposit my check today. They were supposed to, and they didn’t, and now I can’t pay for this.” With my two boys watching, I looked at  what was left in my envelope and told the cashier I would like to pay for $28 of her $36 purchase. The cashier looked a little taken back, and then told the woman the company would pick up the remaining balance. The stunned woman gave me a hug that I’ll remember forever and whispered into my ear, “You are an angel.” My kids saw this exchange and learned that sometimes, we just need to help each other out.

Giving Puts God to the Test - “Bring all the tithes into the storehouse so there will be enough food in my Temple. If you do,” says the Lord of Heaven’s Armies, “I will open the windows of heaven for you. I will pour out a blessing so great you won’t have enough room to take it in! Try it! Put me to the test! (Malachi 3:10)

I hadn’t studied this scripture much until I was invited to join the Vibrant Stewardship Project a few years back. The aim of the research was to look for reasons why people were generous in our congregation and decipher how that quality might be fostered in other faith communities. As I reflected on the challenge of putting God to the test, I was humbled to think about all of the different ways that God had blessed our giving. We have an amazing marriage, great kids, a loving extended family, meaningful work, and a lovely home. We also had been the recipients of generous financial gifts following the death of our son that actually nearly matched  the offering we had given our church that year. Could these blessings be the response that explain  this charge in Malachi?

While I am uncomfortable advocating giving with the expectation of receiving something (especially money) in return, I am consistently amazed at the number of families that experience the outpouring of  blessings when they begin to manage their finances in a new way and give for the first time. So many families have shared how their marriages are stronger, their kids are more wholehearted, and their lives are less consumed by challenges. Still more share instances where unexpected money shows up in the form of gifts, refunds and bonuses. We didn’t start giving because we wanted to put God to the test, but are grateful for the ways that He has supported us in return..

One of the most rewarding parts of teaching Financial Peace University is  helping people understand giving in a new way. I am grateful for the many stories shared about how giving has changed the people offering their income, as well as those on the receiving end of others’ generosity..

When is a time that a gift of generosity has changed you?

Adopting through Foster Care

Today marks three years since our family grew through adoption. At the time, our girl was two and a half, and while she had been in our home for nearly a year, she was still coming out of her shell. When she first came into our care as 18 month old toddler, we didn’t foresee  her becoming our daughter. We had decided to become a foster family mainly to quiet a Holy Spirit call. We believed our family was full, but there was still room for one more place at the table,  we could lend a hand to a child in need. One thing led to another, and a year later we were sitting in front of a Dakota County judge promising to love this child in good times and bad for the rest of our lives. How we got there is the miracle of adoption.

When people learn that we were a foster family and adopted our girl through that system, I generally hear, “I couldn’t do that” as though our family is a band of super-heroes that is immune to heartache. It is actually those cracks and vulnerability that made us a great candidate to foster other children. We know of deep loss, having buried our son and brother, Jack, as an infant. Loss surrounds all relationships related to foster care, and having the capacity to wade through that pain with empathy allows for healing. Being present with grief and fear aid you in becoming a wonderful foster parent because those are the primary emotions kids are experiencing when they first show up in your home. Opening your heart to a child that may be with you only a short time is incredibly difficult, but  worth it.

Our girl wasn’t supposed to be in our care for very long. There was a plan that seemed reasonable with a path towards reunification. I’ve learned that what seems reasonable to a healthy, middle-class, college educated woman is not necessarily true for those battling mental illness and addiction. The plan unraveled quickly by county standards, and six months into her placement, our daughter was a ward of the state, with no suitable kin relatives available.

At that point, we weren’t even eligible to adopt because we  needed to complete further training for an adoption to take place. While her case made its  way through the system, we completed our concurrent training. The six months between the termination of parental rights and our adoption was agonizing. It was so hard to move forward with the loose ends dangling, begging me to contemplate worse case scenarios. In the end, all the fear and worry lifted like smoke from a candle as we drove home following the adoption proceeding. Finalizing our daughter’s adoption  was as amazing as the birth of a child.

My mind quickly lends itself to finances, and while the topic of financial support  isn’t hidden, it isn’t talked about early in the fostering process by the county. There was an “ick” factor in bringing it up because I didn’t want to be seen as a person who was looking to profit from children already hurting emotionally. Nonetheless, support is a piece of the puzzle that you might want to look into if you are considering being a foster parent.  We haven't had any placements since our girl’s adoption, but here is the compensation we were eligible for during her placement in 2012-2013:

Per Diem Stipend - Each day we were allowed $32 for her care. I remember this number because around the time of her placement, a dear friend had extensive smoke damage to her home, and the insurance company allowed $35 a day for the care of her dog. The values expressed in these amounts  bothered me then and still do today.

Full Medical and Dental Coverage - Our child received MN Care throughout her placement. We weren’t responsible for medical appointments, prescriptions, therapy bills, or mileage to those appointments.

WIC - Children in foster care qualify for WIC, and we received vouchers for milk, eggs, cereal, rice etc. I had never used WIC before, and it is a humbling experience to be on the receiving end of judgement for using this service. I found stores that did a better job of labeling eligible products and was grateful for the times I was treated with kindness and respect when I had questions about the vouchers.

I have heard so much about the astronomical cost of adoption and assumed that as we forged ahead on that path we would be responsible for the cost of hiring a lawyer or something along those lines. In our situation, there wasn’t a single cost to adopting our daughter, and she is still eligible for several benefits having been adopted through foster care.

Monthly Stipend - Each month the state deposits $247 into our checking account. It was explained to me that this change was made years ago because several families would opt to keep kids in their care without adopting them so that they would still be eligible for the per diem rates. This compromise was made to encourage families to move towards permanency. This money is budgeted as any income and will continue until our girl turns 18.

Full Medical and Dental Coverage - Our child is still eligible for this coverage and we are eternally grateful. This coverage has allowed our family to continue therapy that would have been challenging under our coverage and copay plan. This benefit is available and needed for children adopted through foster care because there is often more stuff that has to be worked through.

Respite Care - We haven’t taken advantage of this benefit but are eligible for something like 21 days of paid respite care. In this scenario we would choose and hire the care provider, and the state would pay for it (I’m not sure if the check would come to us or the provider).

Adoption was not the reason that we decided to become a foster family, but it is the reason we finished. Our home is full and busy, and it’s difficult to imagine how we could provide the care that was initially required. This journey has been such a blessing in our lives, and we are grateful, while fully aware, that our child is not “lucky” as others often note. Being a part of our family has come at a tremendous cost for her, and she’s one of the most wonderful kids I wish I had never met. We are the lucky ones.

Landscaping on the Cheap

Finding frugal ways to live often means turning someone else’s trash into treasure. Last week I spotted a pallet full of bricks stacked behind a dumpster of a church while driving my kids to school. I called and left a message at the church asking if the bricks were indeed garbage; could I use them for a landscaping project instead. About fifteen minutes later I got a call back and was told I could take every last one.

An edging project on Pinterest caught my eye last year and I wanted to build my own  without dropping a ton of money on supplies. By finding a way to get my hands on a pile of bricks, this project cost only $15 worth of sand. We’ll also print off these pictures and mail the church a thank you note and a check for their gift.

One of the best byproducts of living debt free is that I’ve become much more environmentally conscious and have found many ways to repurpose materials that would otherwise be trashed. It feels great to add character to my home by creating useable features on the cheap. Here’s a couple of my favorites:

Last summer we put new flooring on our deck, and I used the old boards that were free of rot to build a “woodshed” for outdoor storage. Here’s a link to the project description.

A couple summers ago adding insulation to the attic left a pile of 100-year- old wood flooring at our disposal. I knew what I wanted but couldn’t find any plans, so I just sketched it out and did my best to build this shelf for our front porch.

Before you start a project, consider the possibility of using repurposed materials. Search Craigslist, ask around and be patient. A pile of supplies might be waiting for you somewhere too.

Why We Skipped the Company Match on Our 401-K

The decision to stop contributing to our retirement accounts went against everything my husband and I had been taught. We had both begun  investing 10% of our gross pay early in our careers and always took advantage of any matching programs with our employers. We knew that for the mathematical explosion of compound interest to take effect, we needed decades of time. Ignoring these teachings was akin to sinning with our money.

After reading Dave Ramsey’s Total Money Makeover, and spending a few months in our Baby Step Two Debt Snowball, we understood that we wouldn’t get the traction we needed to retire $55,000 of debt without adding more income. At the end of the day, we decided we needed to make more and spend less. Spending less at this stage of the Ramsey Plan meant to follow Dave’s advice and stop our retirement investing until we retired our non-mortgage debt and built a three to six month emergency fund.

The steps of  Ramsey’s Debt Snowball solution are to list all non-mortgage debts from smallest to largest, make minimum payments on all of the debts but the smallest. Throw all extra money at the smallest debt until it is paid off, and then apply that money to the next smallest debt. The theory is that paying off the small debts rapidly will reinforce behavior and cause people to to believe they can win and eventually become debt free.

Using the income that had been spent on retirement investing allowed us to retire several of our little debts quickly and address some of the bigger loans with more fervor.  Personal finances have less to do with math and more about attitude, and with this single decision we began to see a dramatic shift. We started to see debt as a thief robbing us of our freedom and future. The anger and disgust we had towards our past choices and the lenders who were willing to finance the decisions compelled us to sacrifice deeply. Our focus sharpened, and we began to win with money.

We stopped our retirement investing for about three years. In that time we were able to repay consumer, medical, personal, and vehicle debt. We were also able to pay off the ridiculous ARM that covered our down -payment on our home (I should mention we actually borrowed 103% against our house back in 2004, bringing zero to the closing table). Eliminating this debt has created contentment in our home that has allowed us to take take advantage of financial opportunities in areas that we would have been reluctant to take carrying around a bunch of debt.

Investing and earning the company match for those three years would have had some advantages, but we probably would still be struggling to find a way to get out from under our debt. Paying off those debts afforded us the financial freedom to make other solid choices.

Ramsey's Insurance ELP Helped Us Save $962 a Year!

When we moved into our house twelve years ago, we had difficulty finding a company that would insure our new purchase. Our home, 88 years old at the time, featured a big slab of stucco that had fallen towards the ground, leaving a sizable crack. Because of the potential difficulties of repairing the crack,  a few insurance companies turned us down.  We decided to try contacting  the local State Farm agent who lived a couple blocks from our house. The agent walked over during his lunch break, took a look, and called back, saying he’d be happy to insure us. That friendly, neighborly, prompt service bought over a decade of our loyalty to that State Farm agent.

Last year we repaired the cosmetic stucco issue, and decided that it was time to rate the value of our insurance policies by shopping around. We asked our agent to review our policies for any additional discounts  towards our home, car, and umbrella policies. We learned we had maxed out all available discounts; our insurance coverage looked like this:

We recognized a few opportunities to save by raising the deductibles on our vehicles and our home. The goal of insurance is to transfer the risk of loss  from our family to an insurance company. With the changes in our financial standing in the past twelve years, we  are now able to absorb larger deductibles with our emergency fund so we can enjoy lower yearly premiums after having completed Baby Step Three. Even after tweaking the deductibles, our State Farm agent wasn’t able to compete with the insurance broker we found through Dave Ramsey’s Endorsed Local Provider (ELP) program.

Our new insurance agent, Brian DeMartino, is an insurance broker for Clear Choice. A broker is not captive to one large company and is able to sell insurance from several different companies, thereby securing the best rates for his clients. We will still deal with our agent if making a claim or adjustment would  be necessary, but our policies are with Travelers Insurance. Making this change was not difficult.   Working with our broker involved one lengthy phone call detailing our current insurance coverage, several emails regarding proposed policies, and a few more short calls to complete the transaction. It was quick, painless, and budget-friendly.  This change will save us close to $1,000 this year ($962 to be exact).

Here is the breakdown of our original quote:

While these comparisons between our original coverage and the new quote  are not for  identical policies, the overall value with the new company was clear. When we called to clarify that these were not teaser rates, we learned  that the auto insurance was considerably lower because we fell into a niche category of people that Travelers was working to insure. We decided to tweak our policies a bit more and dropped comprehensive on the Honda Civic and raised our deductible on the home to $2,500. These changes will leave leave us assuming a bit more risk for the savings of $308 annually. The description below is where we ultimately landed.

Insurance serves a valid role in a healthy financial plan. Shopping around is a pain, but it may be the best way to obtain quality policies for good value. If you do nothing else,at least take the time to evaluate your current insurance policies and determine where they can be strengthened or loosened to fit your needs.

Money is Finite - Make More and Spend Less

After living on a zero-based budget for a few months, we began to understand a new truth in our life. Money is finite. While cash is readily available through varieties of loans, actually living on what we make instead of what we can borrow is a giant step towards freedom from debt.

Realizing that money is finite, and trying to pay down debt from when you believed it was not, really only leaves two options. Make more and spend less. In this post, we’re going to focus on ways you can make more money when trying to pay off your debt snowball.

Free dressers simply repainted.

Sell from your Surplus - All of those things in your house that are relics from living beyond your means are open game for reducing debt. Walk through your house as though it was a thrift store and figure out what people might want, and then try to sell it in garage sale, on Craigslist, Ebay, or Facebook Garage Sales. We’ve sold vehicles, tires, tools, sports equipment, clothing, electronics (broken and working), bikes, books, furniture, collectibles, kid and baby stuff, instruments  and many, many more items. We applied our money to our monthly budget, and in the days of debt reduction, this was critical in making headway on our loans. Remind yourself that the item was attractive enough that you bought it once; someone else will see it’s value and will buy it used.

Lego Dresser sold for a great profit.

Sell from the Surplus of Others - If you start selling your things and you find you enjoy it, or are good at it, you may also find income in selling from the surplus of others. Find deals or freebies at second hand stores, repurpose them, or simply sell them to a broader audience to add money to your debt snowball. One of the ways I did this was through buying cheap dressers, sanding and painting them, and selling at  four or five times my initial purchase price. Strollers and kid toys that needed a good cleaning were worth my time, and I could easily turn around and sell for a profit. 

Sell your time - Dave Ramsey says, “There’s a great place to go if you’re broke. To Work.” There’s a season when a job is more important than a career. Paying down your debt snowball is one. Being hired by friends and family for babysitting, yard work, cleaning, and running errands could be a great way to get some quick cash. Looking into part time retail work, delivery drivers, or uber with no long term commitments can be a wise choice. The success people have retiring their debt is tied to the degree to which they are willing to sacrifice. Giving up nights and weekends for quick cash can make an incredible difference in your success.

Sell your “Brand” - What unique good or service would people be willing to buy from you? Two of my favorite hobbies are repurposing used goods and crafting. I’ve done this in my home for many years, and last year I found a product that seemed like a product I could make and sell for Christmas. I created 100 snowman kits in November and sold 93 of them before Christmas. It was really fun because I was able to share one of our favorite family gifts with new people, and I made some extra money. Your “Brand” has a place in the marketplace; it’s up to you to find it.

Sell your talent - Finding additional ways to leverage your skills within your career can be a great way to create additional income. Overtime, contract work, coaching within your field and teaching are a couple of ways this could take shape. Towards the end of our debt snowball my husband took a traveling position at his company that came with a considerable pay increase. It turned out that traveling didn’t work for our family, but the lessons he learned allowed him to grow his career, while increasing our income. 

Look for a Raise - I remember being shocked when my husband came home and said that he had asked for a raise and received it. Who does that? Apparently plenty of people do, and in certain situations, it is a reasonable way to increase your income. If you don’t see that as a possibility with your employer, it might be worthwhile looking for a new company. Sometimes the easiest way to figure out your value as employee is to find out what a new company would be willing to spend for your talent.

Be Open about your Goals - It is amazing the work that shows up at your doorstep when you begin to share with others that you are working towards a goal. We had several different opportunities to earn $100 here and $75 there throughout our time in the debt snowball. The most lucrative of these options was working for my brother installing a contact management system for relators that he was coaching. Huh? I didn’t even know this was a thing until I shared I was interested in making some additional money for our family.

Dave Ramsey’s motto in Financial Peace University is “Live like no one else so later you can live and give like no one else.” The same is true of working overtime and picking up a second job. This isn’t a long-term lifestyle commitment, but rather a short term strategy for living with intent focus on retiring debt once and for all.