All right, in this session, we're going to go through the budget tab over here. So, the budget's become important, you know, kind of one of the big ideas that has driven my, I guess, career, kind of my, it's college preapproval. You know, this idea that college should be preapproved just like a mortgage, demonstrating how we're going to pay for all four years down to the penny, including the student loans and the student loan payment, and contrasting that with what you're going to make from that chosen major from that university. So, but, you know, having, you can't jumpstart. So, understanding what the schools think we can afford, we went through the ESC calculations, and obviously those, you know, are going to change as incomes change and assets change, but college approval's going to do the heavy lifting, very accurate ESC projections, and that's obviously going to drive what we might get from financial aid systems. But the budget is something that oftentimes is overlooked. So, this really, I think, kind of simple conversation, even, you know, for clients that have resources, this is now about what do we have for Ray for college, right? Because the facts is everything that the family has, because that's what they want, but the budget is important to get, you know, what do we have for this student for college? How do normal families actually pay for college without just taking it all out on loans? So, obviously, if you've had the ability to save, 529s is a great place to do it. So, but we're at the point now, it's kind of like we'd rather keep it, not invest it too aggressively. So, if you are reviewing people, if they do have a 529 savings plan, take a look at their asset allocation. You know, how are they allocated? Oftentimes, you'll find if they started 529 15 plus years ago, they put it in, you know, just two funds, and that was it. You know, at the advent of all the age-based portfolios and target dates has really, I think, helped a lot of people not be over-invested when they're there. But just if you're doing a review with a client, I think it's a, it's just a nice value add. Say, you know, at this point, you want to be geared down so that, you know, predominantly you're in cash and bonds and safe, safer instruments at this point. So, just something to think about. But from a budget standpoint, if you do have 529s, what do we have for Ray? And this part's important, too, because what families do, for one, they probably would like to do for all. So, this is the point where we're also getting, you know, the parents on the same page, right? So, some of the elements when we talk about the behavioral and emotional aspects, this is the part where putting the facts in is kind of, it's just, it's the numbers. It's the balance sheet. It's the W-2s. It's the returns. When we talk about budget and how we want to actually pay for college, one of the things that we'll, that I encourage you to do is when you meet with people, one of the first things I'll ask is just say, hey, you know, we're going to get into the money. You provide us with a number of details, but tell me about your college experience or your higher education experience. You know, did you go to college? Did you complete some? Did you complete it? You know, what did you major in? Where did you go to school? How was it paid for? And you begin to have this conversation, and you learn kind of their backdrop. And I think that, you know, it's important, especially when you've got two spouses in the room that maybe come from very different backgrounds. You know, we want to talk through this budget and say, well, you know, how was your college paid for? Well, I went to a private school, all paid for by my parents. I had no debt, and that's what I'd like to do for the kids. And you got the other parents sitting there going, well, gosh, I scraped and clawed and took out some loans and had some scholarships, but I was a, you know, a journey person. It took me six years to get my undergrad and, you know, had to do it sometimes part-time to make sure that the ends met. So having that conversation helps develop their college funding philosophy as a family. So, you know, going through this budget exercise, what do we have for Ray for college? You know, so here we've got 529 college savings plan. So let's just kind of going through the exercise now. If we've had that initial conversation, so you'll see it starts to populate. Well, let me do this first. So the reason why is it 2,500 out of the chute? Because we automatically calculate if the family will qualify for the American Opportunity Tax Credit. So the American Opportunity Tax Credit, we do plug it in as part of the budget because we want to make sure to understand, help them understand what are the qualifications, how does it work, it's refundable up to $1,000. And then, you know, without going down the nitty-gritty, all the details are here. You know, if you spend up to 4,000, you can get up to $2,500 back. We do, you know, encourage without, again, getting nitty-gritty, if you can use non-529 dollars to meet that, that's ideal, because it kind of considered a double dip for tax benefit purposes. So there's, you have to go, there's a calculation, you know, if you can use non-529, that's the best way to make sure you get the full credit. So we're assuming that that happens. And again, it's just helping them understand, here's what it is, here's if you qualify. You know, the basics are if you're below 160 and you're modified adjusted gross income, you're going to get the full tax credit over the four years. So that's money that you may not have had in your pocket before. So just, that's why that's there. Hopefully, it's just a helpful talking tool. So that's where that initial for one-year budget is $2,500 out of the chute. So just going through this, you know, if you have 529s, let's put it on the board here. We've got $10,000. Let's just say, and let's say, you know, we're about a year out from college and we're putting in $100 a month. So we've got 12 months more. So we'll have, you know, that'll add to our pot. So that's what we have in 529s. Then next conversation, are there any other assets that the family has earmarked for college? So that's here, parent pledged assets. So maybe they have a mutual fund or they've got a stock program at work that they've thought about. You know, that's been something that we've kind of earmarked for college. So, okay, so we've got $30,000 in this mutual fund account. We've got, you know, two kids. So we've got 15,000 for each of them is kind of what we've earmarked. Okay, so this family of four, they've got 15,000 each coming from another asset. And then this conversation is really important to talk about, you know, cash flow. So the way I start there, and you can kind of see some of the descriptions over here, but you want to walk through and say, okay, so what are some things that we're doing now that we don't have to sacrifice any lifestyle things right now that we can cash flow? So what are we currently saving? So $100 we know we're putting into the 529. Okay, so let's assume we continue that through college. We're used to doing that. We've got that. But what other things can we think about? Well, part of the cost of attendance at the university is a meal plan. So they've got, you know, your room, and then they've got your meal plan. So average meal plan on an annual basis. And if you think about what they cost to feed, teenagers are pretty expensive to feed sometimes. So roughly $50 a week, $200 a month is kind of a good starting point for a lot of people, depending on, you know, the level of their income. And, you know, some of the folks that come through this program obviously may be on SNAP programs and maybe on free and reduced lunch. So, you know, these numbers you're going to have to talk to them about. But this is the parent. What could they help cash flow? Any amount we can help pay as you go is money we don't have to take out of student loans, right? So any amount we can help out with cash flow while they're there, that's going to be money we don't have to take out of student loans. So I think just if we could, you know, just say I'm just going to assume we can do $300 a month from cash flow, and it always never sounds like much, but when you multiply it by 48 months while they're in school, you know, that's where those numbers can really add up. So paying as you go, you know, that's a pretty nice chunk. You know, obviously the more you go up, the more that makes an impact. And we're starting to build out a budget here, getting those numbers up. So, you know, $300 a month, if we can get that, obviously that's money we don't have to take out in student loans. And that's really, from a parent's standpoint, that's what we've got, okay? So, you know, that's the parents. We're going to do some cash flow. We've got some assets set aside. And that's kind of the budget we have from the parents. And then from the student's standpoint, this is, you know, having the college money conversation, do they have some things that they've set aside? If they do have them set aside, is that going to go directly towards the cost of college, right? So if it's just going to be more for walking around money, that's not monies we would put in here, right? But if they did have, you know, they have saved up over the years. They've gotten some gifts and inheritance or whatever that thing might be. You want to plug that in here. So if we just say, okay, well, that's $5,000 that they have saved, that is going to go towards tuition and, you know, room and board and all those costs. So that's one. And then student-pledged cash flow. You know, a lot of our families that come through are going to be eligible for work-study programs, okay? So, you know, if it's work-study or if it's working part-time at a restaurant or, you know, waiting tables tend to mar like I did. That's how I made the ends meet. You know, those numbers, they don't make nearly the impact they used to. You know, making, you know, putting $300 a month towards college for me was about a third of college of the cost. But, you know, that same education was $10,000. Now it's $30,000. So, but you don't make that much more money by working. But understand, do you expect the kids to work during school? And if they do, you know, what does that look like? So, you know, a good number and just helping from a student-pledged monthly cash flow is just like, hey, if you made $200 a month and you did a no-work-study program, you know, maybe you're working, you know, 15 hours a week or something like that. And with work-study, you can have that apply directly to the bill. But, you know, oftentimes it's just it comes to them. They get a check and it's walking around money. But if the expectations that you can have that communication up front is, hey, you're going to work during school. And it could be over summer. So, you have $2,400 a year. It doesn't sound like much, but it's close to $10,000. Again, that's $10,000 we don't take out in student loans. So, having that student understand that part of what they're doing in college, if they do work to pay for college, that's an important element. So, that's $10,000 they don't have in student loans. And if you remember the rule of thumb, for every $10,000 you take out, you're going to owe back roughly $100 per month. Well, that's $100 per month you don't owe back because you worked and paid as you went. So, you know, having that conversation, getting, again, the parents on the same page and making sure and then pulling the student into that conversation early, right, make sure they understand what's there. So, you know, with that from the parent and the student, we now, you know, we've got up to a budget of $65,000, right? So, this is a pretty good budget. And then what do grandparents have? You know, this is a conversation that I cannot stress the importance of enough, both in your practice and as you go through working with families through the project here, the affordability project. So, it's shocking to me, you know, even being with, you know, highly successful people, they still can't talk to their parents about money. So, like, yeah, they got something. Like, well, we need to quantify it and qualify it because if it's in the right, if it's in the wrong bucket, like a UTMA account or financial aid candidates, it could really disrupt things. So, if there's $20,000 sitting there and it's in a custodial account, that's going to be counted as a student asset and it's going to be, you know, four times the assessment rate. So, we need to quantify it, qualify it. Where is it? How much is it? And if they're having trouble having that conversation, bridge that gap. You know, can you give us a statement? Is it in a 529? We want to make sure we do this the right way. And getting the number on the board because if it's 10,000 bucks, you know, that they have set aside, is it 10,000 or 10,000 a year? You know, what do we have set aside? So, if we just say $10,000, you know, we've got now a budget built out, 75,000, right, 18,000 a year, for a lot of families just seeing that and visualizing, okay, all right, this is how we might actually be able to do this. So, you know, this is probably a pretty good larger budget than many of the families may come through, but you get the point, right? What can we cash flow? Do we have dollars set aside, et cetera? Is there any grandparent or outside help? So, I'm going to start with assuming there isn't, but, you know, you get the idea of the concept. So, you know, getting a budget, you know, now we know exactly what they think we can afford, right, so we got there, that, and then we know what we can actually afford from our budget. So, next piece, we're going to jump in and go through the schools tab, and we'll explore exactly, you know, how to leverage the schools tab and what's all in there and all the elements.

budgeting

college expenses

preapproval

student loans

loan payments