529 College Savings Account

Trust me when I tell you that college is expensive. I’m sure many of you already know that because, like me, you are still paying on your dreaded student loans. Now that I am a father, one of my highest goals in life is for my daughters to graduate from college debt free (that is if they decide to go to college). I am big on education, so as of now I am planning for them to go that route as well.

Photo Credit: McBrearty Capital Management

Once you start looking at your options, you will find that one of the more common tools these days for college tuition planning is a 529 College Savings Account. There are a few different variations of a 529, but essentially this is an investment account that will grow tax free. The earlier you start one of these accounts, the easier it will be to accumulate enough funds to cover college. We have had a 529 account for my 5 year old daughter since she was about 2 years old, and we have had one for my 3 year old daughter since she was born. They are currently averaging around a 10% annual growth rate in addition to our contributions!

A very nice feature of the 529 account is that anyone can contribute to it. Our family often utilizes this feature to put money into our accounts for birthday or Christmas gifts. It obviously lacks the thrill of giving the girls a fun toy to play with, but they will certainly appreciate it later on! I believe the current contribution limit without penalty is $14,000 annually. It is unlikely you would hit this amount unless you got started late in the game and are trying to max out contributions during the last few years of high school.

Another perk to this program is that the funds are not limited to college. The money in your 529 account may be used for elementary, middle school, or high school as well, including related expenses. The maximum amount on this without incurring tax penalties is $10,000 annually which can go toward tuition, books, or other expenses necessary while enrolled in school. Unfortunately, there is a downfall that comes along with the 529 as well. If the funds are not used for school or educational expenses, they will be heavily taxed when pulled out from the account. Fortunately, if one child does not end up going to college, you are able to transfer the beneficiary to another child if you choose to do so. They can then use it towards their schooling.

Finally, it is important to limit the funds in your 529 account to only what is needed for schooling. Like I mentioned previously, any funds that are not used toward school will be penalized. That includes additional funding that was not needed for school. Before accumulating a significant balance in your account, be sure to evaluate the amount needed to pay for you or your child’s education. Consider tuition cost (be sure to include inflation), living expenses, books, etc. It would be a good idea to re-evaluate this annually. While you’re at it, you can take a look at your growth rate to determine if there needs to be some adjustments made regarding the investment funds.

Depending on the plan you follow, saving for college might not be the top item on your financial to-do list. However, I can tell you that it is incredibly important if you are hoping that your children will someday earn a college degree. It is never too early to open an account, even if you are only going to use it for small contributions on occasion or have family contribute rather than buying gifts on occasion.

Personal vs Business Finance

I have been in the business world for several years now, and I am currently wrapping up the final semester of my MBA program (Woo!). Since I began studying personal finance while in business school, I have noticed that there are many more similarities than differences between personal and business finances. {Side note} I have also noticed that often times our student loan debt did not contribute to a degree related to our current profession, mine included!

I hear it all the time.. “I wish someone would have taught me about money in school”. Well, me too. It used to be a thing. When I talk to the previous generation, many of them can recall learning how to write checks and keep track of their register. Luckily most of us did learn this skill one way or another, but the basics will only get you so far in this world and economy. To be honest, I think personal finance is a more important subject than most of the courses you took throughout high school, your undergrad, graduate, or post-graduate degree. Of course it’s great to be a leader in your field earning a 6 figure income, but if you can’t manage it what is it worth? Someone bringing in half of your income could easily achieve a higher net worth.

Learning to manage and operate a business seems all too similar to managing and operating life in my opinion. Now that I know the things I know and realize these similarities, I wonder how I have gotten by for so long without applying this to my life. Sure, I could have learned it on my own as I am doing now by studying personal finance. If that’s your stance on this though, we should all know how to do everything because the material is out there somewhere! At some point before spreading our wings as an adult, personal finance should be a requirement whether the individual plans to run a billion dollar company or stay at home and raise the family.

When we look at personal finance, what is it that we are evaluating and managing? Income, expenses, debt, interest rates, savings, assets, retirement plans, etc. When we look at a business, what do we evaluate and manage? Revenue (Income), costs (expenses), liabilities (debt), interest rates, capital (savings and operating funds), assets, succession plans, etc. Sounds a little repetitive, doesn’t it? That’s because it is. Sure, there are typically many more aspects to a business than to personal finances, but the fundamentals of profits and losses are nearly identical.

If you haven’t realized it yet, you are operating a small organization within your own household. The kicker is you might even be doing it without a business degree or experience of any kind. Congratulations! It is possible that you have done this successfully despite the odds. Unfortunately the studies show that most of us have not been very successful in managing our small personal organizations. That isn’t because we intentionally did something wrong. It is because we just didn’t know how to do it right.

Now take a long hard look at your current situation. Even if you don’t have business experience or the education, try to approach it with a business mindset. The goal is to maximize profits, savings and assets by minimizing liabilities and expenses. Take control over your organization that is your personal and family finances. There is material out there to learn more about it, and I can direct you to several of those sources. The important thing is to really pay attention and start to consider where you stand financially vs where you want to be.

Creating Memories, Not Interest Payments

Summer time is when many of us are planning vacations or wishing we were able to take our families to a new fun destination. There are several reasons why this may not be possible for some of us, but one of the top reasons is money. Either not having enough extra, or having other expenses come up that take precedence over a getaway.

Of those who are able to make a family trip happen, few will do it the right way.. paid for in cash! This doesn’t necessarily mean they are “rich” or even earn a huge income. It can also mean that they were intentional and strategic when planning for the vacation. Traveling is extremely costly, especially when you have a family like mine or even larger. A quick trip to visit relatives can cost us over $1,000 easily!

We go on vacation to reduce stress and enjoy the money we have worked so hard for (among other reasons). The mistake many make is bringing home credit card bills that they racked up on their trip. I’m sure it was a blast while it lasted, but is having to pay it off for the next year or so worth it? Wouldn’t it be great if all that you brought back from your incredible experience were memories and maybe a few cool souvenirs?

A good way to do this is by creating a “sinking fund”. The concept is not as complicated as it sounds. It simply involves setting aside funds for a specified period of time to be utilized for a specific purpose. In this case that would be a vacation. You can do this by determining the total cost of your planned trip, and then figure out how many months until you will need to book or pay for it. Then you will know how much you need to contribute to the fund monthly in order to have what you need when the time comes.

I have done this for several different things that included both large and small expenses. It is a huge relief and can also make it fun as you begin building the fund. It doesn’t need to be in a separate bank account as long as it is being tracked somehow (preferably in a budget). I realize this sounds a lot like a savings account, but it is one you are allowing yourself access to and assigning with a specific purpose.. Vacation!

It is almost time to start planning for the next big adventure. Work out the details now and start contributing so you can enjoy your friends and/or family with as little worry as possible!

Spending Habits

When you receive a paycheck, what are your first thoughts? Are you relieved because you ran out of money a week ago? Do you head straight to your favorite store to splurge? Are you excited to pay off some bills that you have been waiting to take care of? Is a percentage directly deposited into your savings or investment account and left untouched?

These actions would generally be a progressive improvement over the other, depending on the financial situation of the individual. Over time, we develop habits and behaviors in life that become very difficult to change. One’s goals and aspirations should determine these habits and behaviors, but unfortunately it is often those habits and behaviors that determine our goals and aspirations.

That doesn’t sound right, does it? Let’s think about this. If I’m struggling financially, my goal is likely not to be a millionaire. That might seem too overwhelming or far fetched. Instead, my goal might end up becoming simply to make it through each month. Because of the developed habits and need to spend money, this might feel like it is a victory.

But what if I set my goals first and created habits later? What if I decided I wanted to retire one day? Maybe even become wealthy? If that was my plan, my behavior would focus on not only making it through the month, but limiting expenses as much as possible in order to have some money left to my name at the end of the month. From this point I can continue to increase my income while maintaining a lifestyle of saving and budgeting. My behavior would be focused on the end goal, not the other way around.

We are the only ones who can decide where we want to go and what we want to achieve in life. There can obviously be some outside influence or motivation, but in the end it comes down to us. We are not limited or subject to our current financial situation. We are limited by our habits and behaviors. Things can change. We can improve and evolve. We can reduce our expenses over time, which will lead to building wealth and stability.

Next time you get your paycheck, consider what you are doing with it. Are you going to let it all vanish into thin air, or are you going to have a plan for it? Try resisting your habits for one month and see what happens. If you already have good spending habits or are in the process of making improvements, good for you! With that said, there is room for improvement for all of us, you included!

Financial Imperfection

I have brought up in the past that a common reason for people going into debt and struggling financially is comparison. We want what others have, and we want to impress others or appear to be more well off than we actually are. This is not the case for everyone, but for a significant percentage of the population.

The same situation holds true for those of us attempting to gain control over our finances and get on the right track. Now rather than comparing ourselves to those we did in the past, we begin comparing ourselves to others on a similar journey. We start to wonder how they got out of debt so fast, or what they are doing right that we are doing wrong. They seem to have the perfect plan!

Personal financial habits and behaviors are difficult to change, and even more difficult when we become discouraged. The process of getting out of debt or living on a budget already seems impossible even without the added challenges. By comparing our financial situation to others, we are almost guaranteed to fail or quit along this journey.

An important factor to remember is that everyone has a different situation. We all have a different income, different expenses, different debts, different family dynamics, and different lifestyles. Having a perfect financial plan for ourselves would be great, but it is not likely. Progress is the key, no matter how incremental. It is not an all or nothing situation. All we can do is our best.

There are “proven plans” out there that do work for many people. That doesn’t mean they work for every person. If it worked for everyone, then we would all be wealthy and debt free. Starting the journey to improve your finances is a huge step in itself. Beginning to see progress is an incredible motivator. Remaining on the path is admirable. Becoming wealthy and debt free is incredible. Comparison will shatter everything you have been working towards. Your plan doesn’t need to be perfect, it just needs to work for you and keep you focused on what is important.

If you don’t want to use an existing plan, come up with a plan that you are comfortable with to get started and motivated. Then improve the plan as you go. You will develop your perfect plan over time, and you will reach your goals by celebrating your victories while staying focus on the reason(s) you began.

Debt Forgiveness Will Cost You

We would all love for our debts to be wiped clean so we can have the opportunity to start fresh. I suppose that goes to show how much of a negative impact debt makes on our lives. It is uncommon that we may get the opportunity to escape some of our financial burden this way, and some may argue that it is unethical or unfair considering we create our own circumstances with the financial decisions we make. With that being said, it is possible under special circumstances to have a debt forgiven or settled.

A popular topic these days is student loan forgiveness. It is up for debate whether the government should step in to offer assistance to those currently burdened by student loan debt. For the record, and as student loan borrower, I don’t think this burden should fall on tax payers. There is already student loan forgiveness available for those working in the public service sector. I don’t have as much of an issue with this as we need individuals in public service and this is a nice incentive to go that route.

Another potential opportunity for forgiveness is a debt settlement. Typically this will take place when approaching a creditor with an agreement to pay a lump sum in exchange for eliminating the balance of the debt or loan. This type of settlement is most often done with credit card debt or medical bills. Again, this is not the recommended way to go about paying off money that you consciously borrowed or services that you received. Under the right circumstances however, this can be a valuable option.

An important factor to consider with debt forgiveness is that it doesn’t end there. When a debt is settled, the dollar amount that the creditor has agreed no longer needs to be paid is now considered income for that year. Because it is being considered income, it will then be subject to income tax. The taxable amount will vary based on the dollar amount forgiven along with the circumstances of the individual. In addition to the tax obligations, your credit score will also take a hit as a result. Either way, it is important to be prepared.

Like I mentioned, we would all love to suddenly be forgiven of our debts. Before you go this route, be sure to understand exactly what you are getting into.

Personal Finance Is For The Birds

How annoying are all of these personal finance people trying to explain to you what you should do with your money? It’s your money, it’s your decision, and it’s your future. Am I right?

Well, most of us don’t have a detailed understanding of how personal finances work or the best options available for our specific situations. We even get defensive if someone brings it up or tries to help. Often times those who study personal finance have been in similar financial situations, and they have either found or developed strategies to turn it around. Odds are, your initial impression is similar to many others when it comes to these topics.

Paying Off Debt

Who in the world ever thought this would be a good idea? Debt allows us to have all of things we would never be able to afford otherwise. How am I supposed to have the house and car of my dreams without taking money from a lender and paying them back with interest over time?

The answer to this is patience and planning. If we stay out of debt early on or pay off debt we have already accumulated, we can then put ourselves in a position to afford these things in the future without paying the interest and fees over time while continuing to build our wealth.

College Savings

College is great, but who is going to pay for it? We have other obligations and expenses in our lives, so I suppose the best option would be to let our kids pay for their own college after they graduate.

There are actually other ways to go about this. Aside from scholarships and federal tuition grants, a 529 Plan is a great way to contribute to a college savings account that will potentially grow in investments over time. You can also have family and friends contribute to this account for special occasions rather than buying gifts. This is a much better alternative than a student loan that holds a steady 20-25 year repayment plan with high variable interest.


Maybe I’ll kick down a couple of dollars here and there, but plenty of other people probably donate money to help the children in need or someone struggling to get by.

The reality is that giving can be one of the most fulfilling things you will do with your life and wealth. If you begin giving to others and experiencing the feeling, you will likely strive to do more. This will not only drive you to improve your finances, but also add purpose to your life.

Retirement Planning

Who would want to spend their 60’s (or even 50’s) and beyond enjoying what they have built? I’d much rather continue working to pay for the things I have and enjoy.

You will probably never hear someone say this, but many end up in this position. It is something we often don’t think about until it is too late. Eliminating debt will be a huge help toward retiring, but contributing to savings and retirement accounts (hopefully with some employer match options) early on will make retiring a much easier task. If you feel the desire to go back to work after retirement, do it on your own terms engaging in something you love. Don’t let it be because you are dependent on the income.

Leaving A Legacy

What’s the point of leaving money behind when we are gone? Our kids will probably do fine and be able to create their own fortune to support themselves and our grandchildren.

This may be true, but how great would it make you feel to have contributed to a successful future for them? If we leave our wealth to our children and teach them how to manage it, we are helping them live out the life we always dreamed they would! Our wealth shouldn’t end with us.

When considering personal finances as a whole, think about what your family might be missing out on in the long term by ignoring or avoiding any of these aspects. Are you going to get annoyed or angry if someone points out a flaw in your plan (or lack thereof), or are you going to take in the knowledge and apply it for your own benefit?