A Financial Plan Fits All the Pieces Together

Every time I present at a local high school on paying for college, I always start by asking parents a question: “How would you define the term ‘financial planning’?”  The usual responses are budgeting, investing or retirement.  These answers are true in the sense that each are pieces of financial planning.  But, if you look at each piece separately it’s impossible to see how they fit together to solve the puzzle. Understanding how the pieces fit together is what allows you to make wise decisions with your money and reach your goals.

Many people lose sight of their overall financial picture when they break up retirement, college, investing, budgeting and taxes into separate categories.  While this may simplify the planning process, it ignores how the financial pieces can affect one another.  One misplaced piece can create a ripple effect that prevents you from solving the puzzle.  For example, college and retirement have been viewed as separate objectives by many people, including some financial advisors.  But, these two pieces always fit together.  If college is a tollbooth on the road to retirement, then whatever we spend in college tolls we won’t have for retirement.  You don’t want to unnecessarily delay your retirement to pay for your child’s college if you don’t have to – no one does.

So, if you’re looking at paying for college, you need to understand how college admissions, financial aid, taxes, investing and personal finance pieces come together to determine which colleges you can afford while still staying up to speed for retirement.  There are many other pieces beyond college that if not put together correctly could negatively impact your retirement goals.  There’s the obvious ones like not saving enough or investing wisely.  But, think about all of the transitions and events you will encounter throughout your life.  What about a new baby or grandchild, death or illness, marriage, divorce, career change, job loss or moving cities?  Will these pieces not shift your situation, goals and priorities?  Of course!  This is why financial planning is an ongoing process and not just a one-time event.  Not only will you need to fit all of the pieces together, but you will also need to adjust the pieces of your financial plan as your life evolves.

It takes a lot of time, effort and variety of expertise to put together a sound financial plan.  If you desire a financial partner that can help you simplify the process and put all the pieces together with purpose and meaning, Contact Us to schedule a call or introductory meeting.

Filing FAFSA? Test Your Readiness to Pay for College

Starting October 1st families will be able to access and complete the Free Application for Federal Student Aid (FAFSA) and College Board’s CSS Profile. In order to help you cut costs and create a strategy to pay for college, here are 10 Questions to test your readiness before you file any aid form.

1.   Does your student’s schools of interest impact affordability?

Merit aid awards, cost of attendance, need-based aid eligibility and likelihood of admission are all dependent on the colleges being considered. College selection and affordability always go hand-in-hand.

2.   Does every college offer merit aid?

Some schools offer academic merit aid while others do not. For example, many private elite colleges do not offer academic merit aid regardless of whether a student is a perfect applicant or not.

3.   What forms are required for need-based aid?

The Free Application for Federal Student Aid (FAFSA) is used by all accredited colleges for federal aid awards, while over 260 private colleges, and some public flagship universities, also utilize the CSS Profile to assess a student’s eligibility for an institution’s own lucrative grants and scholarships.

4.   How will your assets and income be counted on each aid form?

Your aid eligibility is equal to the school’s cost of attendance less your Expected Family Contribution (EFC), which is the portion the cost a family is responsible for paying. The higher your EFC, the lower your financial need. However, there are three different methodologies a college can use to determine your EFC. The Federal Methodology uses the FAFSA, while the Institutional and Consensus Methodologies utilize the CSS Profile. There are some stark differences between these methodologies, so your child’s need-based aid eligibility can vary greatly depending on which methodology a college uses to assess your family’s income and assets. For example, your home equity can be counted at varying values or not at all.

New Study Shows Importance of Budgeting College Visits Into The Overall Cost Of College

New Study Shows Importance of Budgeting College Visits Into The Overall Cost Of College

When it comes to college selection and increasing the likelihood of admission, parents and students tend to focus on maintaining a rigorous schedule and elevating GPA and standardized test scores.  There are other factors that impact admissibility, such as the college essay, extracurricular activities and volunteer work.  However, according to a new study conducted by Lehigh University and Mathematica Policy Research, many colleges now consider “demonstrated interest” as an important factor in their selection process – and the level of your student’s “demonstrated interest” can matter.1For example, what better expresses true interest: a request for a brochure, an email or phone call to admissions or a visit where the student can tour the campus, speak with current students and meet face-to-face with an admissions officer, dean and/or professor? 

It’s not difficult to see that a high level of demonstrated interest can come at a hefty price tag.  College is already expensive, and depending on your child’s wish list, college visits could add hundreds to a few thousand dollars to the total cost.  This admissions trend demonstrates the importance of budgeting college visits into the overall cost of college.  Research shows ...

Paying for College is Expensive and Confusing!

Harmon Wealth Management | Mailing Address | 3923 28th St SE #166 Grand Rapids, MI 49546 | Phone: (616) 745-4831

Office of Supervisory Jurisdiction | 6300 Ridglea Place, Suite 910-A | Fort Worth, TX 76116 | Phone: (817) 447-2811

Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, member FINRA/SIPC. Investment advisory services offered through Cambridge Investment Research Advisors, a Registered Investment Advisor. Cambridge and Harmon Wealth Management are not affiliated. Cambridge does not render tax or legal advice.

It’s Not Too Late for Seniors to Apply for College Admission and Financial Aid!

Is your student set to enter college next fall but the cost is too expensive?  Did your student delay applications because of the uncertainty or confusion regarding their next best step?  Well, it’s not too late to apply to many colleges across the nation.  Every May the National Association of College Admission Counseling (NACAC) posts a list of schools that still have open seats to fill.  This means there are hundreds of schools still accepting applications and offering financial aid.  Many families assume that if they miss the standard deadlines they’re simply out of luck.  But, this isn’t the case!  One of my collaborative partners, a guidance counselor at a local Grand Rapids high school, recently told me that he will have students applying to colleges and filling out financial aid forms throughout the summer.  So, if you’re son or daughter applied to a school only to find out that it’s simply too expensive or was simply late to the game there’s still time!

Don't Be Fooled, College Planning Is Retirement Planning

Don't Be Fooled, College Planning Is Retirement Planning

Are you really getting specialized advice on how to pay for college from your financial advisor?  Many well-intentioned advisors list college planning as one of the many services they provide.  However, much of the advice in the financial services industry today focuses on saving in a 529 or educational savings account.  Don’t get me wrong, saving in a 529 is a good idea, but it is merely one small component in the college funding equation.  In all honesty, how many parents are actually going to be able to pay for their share of the college cost solely from a 529?  The simple answer is not many.  Need proof?  Just take a look at the chart below that shows the estimated monthly contributions parents would need to make to a 529 just to cover the average cost of an in-state public college for one child.  For example, a parent of a newborn targeting a 7% rate of return would immediately need to start socking away $559 a month just to cover the four-year cost of college … yikes!  Furthermore, if parents are going to have to pay sticker price for the more expensive or prestigious colleges, then the required monthly contribution would need to go up dramatically.  This feat is unrealistic for the majority of families who simply don’t have room in their monthly budget for this level of contribution.

Why Ask Why in the College Search Process?

By Rick Zomer, Guest Contributor

The college search process can often feel overwhelming and confusing. To make it even more complicated, what if students and parents are focusing on the wrong questions? High school juniors and seniors can become consumed with figuring out what institution they’ll attend after completing high school. Parents, teachers, guidance counselors and friends often contribute to this pressure by focusing on where a college or university is located geographically, or where graduates from a given institution end up getting jobs. But, by spending the majority of their college search process focused on the question of where, there is often little time devoted to asking an equally significant question: why go to college?

Don’t Wait Until Junior or Senior Year to Get Advice on Paying for College

Each new year brings forth the opportunity to set new goals in order to bring about meaningful change.  But, the reality is that many of us will set outcome goals without establishing any concrete processes to help us arrive at our desired destination.  Paying for college is a perfect example.  Most parents want to help their children pay for college, but often put off any planning until the student’s junior or senior year.  This may very well leave parents scrambling for a last minute, ‘magic bullet’ to significantly lower their higher than expected share of the cost – which likely won’t exist.  The hard truth is that college is an expensive investment.  If you don’t believe me, just take a look at the projected cost of college over the next decade where the best schools in the country will have an annual sticker price above $100,000 – and that’s after taxes.  This might seem ridiculous, but history has shown that as long as families continue to line up to pay the cost, colleges will continue to increase their sticker price.

With the rising cost of college and the ever-evolving financial aid process, families need to begin the college planning process earlier than they realize.  Don’t wait until your child is a junior or senior to start planning.  I recently worked with a local family whose oldest child was only a freshman.  Even though their student is still three years away from enrolling in college, they already know how to best position themselves to save as much as possible.  They are also aware of the different rules that apply to their unique situation at various schools across the nation.  But, most importantly, these parents now know the impact that paying for college will have on their retirement so that they can stay on track.  The sooner you get advice on saving and paying for college the greater your potential savings on the overall cost.

Pay For College With Tax Aid

Harmon Wealth Management | Mailing Address | 3923 28th St SE #166 Grand Rapids, MI 49546 | Phone: (616) 745-4831

Office of Supervisory Jurisdiction | 6300 Ridglea Place, Suite 910-A | Fort Worth, TX 76116 | Phone: (817) 447-2811

Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, member FINRA/SIPC. Investment advisory services offered through Cambridge Investment Research Advisors, a Registered Investment Advisor. Cambridge and Harmon Wealth Management are not affiliated. Cambridge does not render tax or legal advice.

Is Home Equity A Financial Aid Game Changer?

Recently I have been receiving a lot of questions from both parents and counselors regarding home equity and its impact on financial aid.  This is a popular subject as anyone that has a mortgage is required to make regular payments which increases the amount of equity in the home.  But, what does this mean for need-based financial aid purposes?  Just like the answer to every college planning question, “it depends.”  If your child is considering schools that only utilize the federal methodology to determine a family’s ability to pay, then you won’t need to worry about home equity as the FAFSA doesn’t count it as a reportable asset.  In this case using other reportable assets to pay down your home could be a wise decision as it may increase your financial aid eligibility by 5.64% of the amount you put towards home equity.  In other words, taking $25,000 in savings and applying it to your mortgage could increase your aid eligibility by $1,410 per year at schools that strictly use the federal methodology.

But, what happens if your child is considering one of the 250+ schools that also utilize the CSS/Profile for institutional grants, tuition discounts and scholarships (free money)? 

Paying For College Is About Much More Than Just 529s & The FAFSA

With the sticker prices of the most prestigious universities now approaching $72,000 per year, it’s no wonder that parents are actively searching for advice on how to pay for college. Parents are quick to flock to the internet and media for guidance, but typically end up walking away with a headache from an overload of information that can be both overwhelming and confusing. Some families will turn to their financial advisor for help, but the majority of the college advice coming from advisors today is focused on whether or not to save, and how much, in an education savings account, such as a 529, Coverdell or an UGMA/UTMA. This approach only covers one aspect of the college funding conundrum; it’s only one piece of the puzzle. This especially holds true when you consider the fact that the majority of parents will simply not be able to set aside enough money in a 529 to cover the price of a four-year college for each of their children. So, while there’s a wealth of information available on college funding, there’s a poverty of advice.  This leaves parents with the same dilemma they started with: “How in the world are we supposed to help our children pay for college while still preserving our assets and income for retirement?” 

Last summer I had the privilege to present at the Michigan Association for College Admission Counseling’s (MACAC) Summit at Aquinas College.  While the counselors found my presentation on the family’s best strategy to pay for college educational and informative, they were surprised by its complexity.  One counselor, in good-humor, suggested that I offer cocktails the next time I present.  However, the hard truth is that figuring out how to pay for college on your own is like trying to navigate the US Tax Code without an accountant.  Why the complexity?

Tackling the College Search and Application Process

By Guest Contributor, Kerstyn Pocklington

Fall is in full swing here in West Michigan! The leaves are beginning to change, your favorite college football team has played their first game and children are back in school! This also means that, if you have a student in high school, the conversations about college are most likely picking up at home.

Whether this is your first time navigating the college process or you’ve been through it with older students, it is a time that has the potential to feel stressful and overwhelming.  This is an exciting time and one that, if executed with a plan, can be fun and a bonding experience for parent and child.  After reading this article, we hope you will feel more organized, more at peace and more empowered to tackle this exciting time with your student!

With the college search and application process, here are a few of the FAQs that we get often from parents.

Where do we even begin in this process of finding the right school for our child?

The college search and application process can feel daunting. Our advice: Start early, begin thinking about “fit,” and expose your child to a variety of schools.

Start Early: For the first 2 years of high school, students should spend time discovering what it is that makes them unique. Get involved in a variety of activities and see what sticks. High school isn’t only about building a resume for college, but rather about discovering what gifts you as an individual offer and can take out into the real world.