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Archive for Saving For College


Tax Time – Do you understand your tax return?

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Whoa – I was amazed to see that my husband and I were getting a giant tax refund this year.  Good as it feels to get that nice check from the government, mathematically it doesn’t make a lot of sense to try to get a lot of money back.  You’ve just loaned that money, interest free to the government for a year.

This year, though, that rate of return definitely beats out the performance of my portfolio in the stock market… wonder if I should think of it as diversification?

Part of the reason our refund was so big is that we had a baby this year and my husband didn’t adjust his withholding at work.  Also, we have a number of real estate investments in our portfolio, and we have the ability to write off the “depreciation” on these because I am a full time real estate professional.  That’s a special tax status that lets you have unlimited depreciation loss, rather than capping the loss at $25,000 each year.

The more involved in real estate and business you get, the more opportunities you have to save money on your taxes.  However, you’ll also be getting more and more complicated tax returns to fill out.

I discovered a few years ago that I could not efficiently and accurately complete my own tax returns and I started using a CPA which was a great decision for me.  They do it much faster and cheaper than I could do it myself.  That’s another form of leverage, freeing up my time to focus on revenue generating activities.

If you’ve started using a tax preparation software or other tax professional to prepare your taxes, it’s still important to review your return.  It would have been easy for me to skip to the bottom line, see I wasn’t going to have to write a check for my taxes, and sign and mail my returns after my accountant sent them back to me.


Instead, I decided to sit down and review them and I found several items I had questions about.  Whether you find errors and inaccuracies, or just notice items that show you’re saving money or have the opportunity to pay less tax, it’s important to know what you’re doing with your finances, and your annual tax filing is a good time to sit down and review things when the numbers are all in one place.

Look at how much you’re spending on taxes, medical insurance, interest on your home mortgage, and your retirement savings.  These are some of our biggest expenses and it’s good to know where the money’s going.

Financial reviews more often are even better, but at tax time, they are a must!

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Although I’m not the biggest fan of Suze Orman, it’s hard for me to pass up the opportunity to read some well thought-out financial tips from a nationally recognized advisor.   If you haven’t heard, you can download Suze’s latest 2009 book for free from Oprah’s website until Thursday, January 15 at midnight.  You can also buy it for $10 at

Suze Orman’s Advice on Saving For College

Since I have been working on setting up baby Blake’s college savings recently, I skipped to page 160 to read her chapter about college savings.  It was focused primarily on “What to do about college now that your college savings tanked when the stock market took a dive…” There was a lot of discussion about loan options and financial aid that didn’t really interest me.

What did interest me was the following few points – my personal takeaways from the chapter:

  1. Keep your child’s college savings 100% invested in stocks until your child is 14 years old.  Between the ages of 14 and 17, gradually divest until none of the portfolio is in stocks.  – My husband and I have talked about this one, he feels that 100% in stocks is still too risky.  My rule of thumb is: Don’t put anything in the stock market that you can’t afford to keep there for at least 5 years.  With that in mind, I might start shifting the portfolio balance toward bonds/cash a little earlier than this.
  2. Use a 529 Plan.  She mentioned Coverdell plans, but 529’s were the emphasis.
  3. Don’t get a private loan for college under any circumstances.
  4. Save for your retirement first and THEN put away an appropriate amount for your child’s savings.  Don’t put your child’s college savings ahead of your own retirement, in terms of saving priority.
  5. Visit to get more information on saving for college.

I actually did visit this website, which had a handy-dandy college-savings calculator.  It told me that I should be putting away $602/month for my child’s college savings.  Not far off from the $641/month I calculated on my recent article on financial planning for college.


A lot of the advice in the book seems to be working under the assumption that you have been negatively affected by the recent stock market crash and are experiencing job loss, panic selling, getting behind on your house payments, going through a personal credit crunch, or experiencing other problems with your finances right now.  It’s pretty much a back-to-basics tome coming from a conservative, “the sky’s not falling, but you do need to be safe” perspective, encouraging you to pay off your credit cards and make sure you have health insurance.

This may be timely for some families, but I did not find it especially relevant or inspirational.  However, it’s free, so I can’t complain.  Thanks, Suze!  Be sure to pick up your free copy and let me know what you think!



When it comes to college savings, you may feel that you’re fighting an impossible battle, but the more you can save and the earlier you start, the more options your kids will have down the road.

Now that we have a baby in the house, starting to save for college has become a big topic of conversation for my husband and me.

Not only do we have to decide what type of plan to go with – we’re batting around doing BOTH a 529 Plan and a Coverdell Educational Savings Plan – but also how much to set aside.

The fact is, the top private colleges are extremely expensive and yearly tuition hikes show no signs of slowing. 

In fact, I read a interesting article recently saying that some schools were boosting their perceived desirability by charging MORE. Admissions actually went up when some schools raised their tuition because students have begun to equate a high price tag with a high quality education.

Can You Save Enough For Your Child’s College Education?

“In the absence of any objective measure of the value of an education, price becomes the default yardstick. The more expensive a college is, the better the education it presumably provides. (After all, if other families were willing to pay this much to send their kids here, it must be worth it.)” –

No doubt about it, college is getting expensive.  Assuming you wanted to, could you actually afford to send your kids to a private 4-year college? Here’s what you’d have to save:

  • Tuition, room & board, books, etc. at a private college may be on average around $142,000 for the whole she-bang.  Using $25,000 for tuition, $7,000 for room and board, and an additional $3,500 or so for books, travel, and entertainment each year, or $35,500/year.
  • At a public college with a tuition of closer to $6,500, but the same cost of living expenses, we could expect a yearly bill of $17,000 or $68,000 all together.  I know where I could buy a house for that much money, right now… (Come to think of it, maybe I should just buy that house on a 20-year mortgage and plan to sell it when junior’s ready for college…)

If you think that the cost of education will keep rising, let’s say at an average rate of about 5% a year, you’ll actually need more than this to pay for your child’s costs by the time he’s old enough for college.

Building in this price inflation, you could be looking at:

  • Private College Education Costs in 2028: $377,000
  • Public College Education Costs in 2028: $180,000

Whew!  That’s a real sting, but it pays to be more realistic and foresighted now, than to be caught flat-footed with fewer options on the table down the road.

Does Your Financial Plan For Your Kids College Let You Start Saving (and Investing) Now?

What all this means is if you want your kids to have the option of the very best education money can buy, and you start saving when they’re born, with a 20-year investment window, let’s see how much you have to put aside each month.  (I’m going to assume an 8% rate of return because we’ll need to invest a little more conservatively since we don’t have as many years for the investment to grow.)

  • To save up for the public school education, we’d need to save $3,700/year and we’d end up with $182,825 in 20 years.  That’s setting aside just $308/month per child.
  • To save up for the private school education, you’re looking at socking away more like $7,700/year to accumulate $380,474 in 20 years’ time.  That works out to $641/month per child, which is a much heftier chunk of change, especially when you consider the cost of several children. 
  • Also, if you start later, say when each child is five years old, you’d have to put away for $525/month for public school and $1,083/month/child for private.


I know most of us aren’t putting away that much for our own retirements (retirement savings should take priority over college savings in your financial plan, by the way) much less saving it up for the kids’ college.  It’s a big undertaking, especially when you consider all the other costs that come along with a new baby.

At a certain point, if you’re not incredibly wealthy, I think you have to just say, “I will save as much as I can reasonably put toward my kids’ college education, and if they want or need more when the time comes, perhaps they can contribute to the costs through their own job or business, through scholarships, and through debt. 

I was fortunate to get a college scholarship myself.  Even though it wasn’t to a fancy-schmancy private school  (rather, it was to a great public university), I decided to take it because it offered a great value.  There are lots of grants and scholarships available for kids who keep their grades up and excel in extra-curriculars.

Keep Your Head Down and Your Chin Up (If You Can Do Both At The Same Time) And Start Saving

It can be frustrating to feel like you’re fighting a no-win battle to save for a college education for your children.  The key is to not get discouraged, but to just make regular, affordable contributions month-in-and-month-out.

You may not be able to save 100% of what your kids will need for college, but remember that this is a gift to them, and everything that you CAN save will relieve them from debt, work, and compromise down the road.  However, although I’m not a big fan of debt.. hard work and compromise aren’t always so bad.

Keep Pluggin’ Away!



About Emily Cressey

Emily Cressey is a real estate investor and licensed real estate agent living in Seattle, Washington. After graduating Phi Beta Kappa with an Economics degree from UNC-Chapel Hill (Go Tarheels!) her focus has been on building business for cash flow and investing in real estate for wealth. If you have questions about real estate investing, personal finance, or would like some flat-rate, affordable advice on one of these topics. Please fill in the Contact form.