Have you ever operated a budget — with success?
When my husband and I have budgeted before, it’s been sort of a disaster. Here’s a sample conversation:
Him: “Uh, sorry, honey, we had some emergency car repairs.”
Me: “Well, it’s okay because I accidentally went $100 over budget on groceries. I’m so sorry.” (It was always things we couldn’t live without, I swear, like milk and toilet paper — not Pop-Tarts and ice cream!)
When you want to help pay for your child’s college education, are you thinking you’ll need the budget fairy to wave her magic wand? Are you thinking there’s no way you’ll get the hang of budgeting before college rolls around?
Budgeting isn’t always the answer to having enough to pay for college, though. And extreme cheapskate money hacks aren’t always the answer, either.
In fact, it drives me bonkers when I see blogs and websites that encourage you to make your own laundry detergent to save $34 a year. Or the ones that suggest only showering at the gym to save on the water bill. (Those articles are admittedly fun to read, though they should all be titled “The Best Frugal Ways to Torture Yourself.”)
I read about not budgeting in “Automatic Millionaire” by David Bach. Bach’s premise is that you pay your bills, your emergency fund, tuition — everything — online. (The big takeaway is that you save for retirement automatically, too.)
He says budgets don’t work, and I tend to agree. Budgets can be so impossible because something unexpected seems to crop up every month. If you make a budget work, my hat’s off to you, because I’ve never been able to.
It’s a really good idea to automate money before your kiddo goes off to college, and not the week after move-in day. Why? Because automating takes some getting used to.
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Why Automate Your Money Before College?
At this point, you might be asking, “This is handy and all, but what does this have to do with college?”
Great question.
The reason I’m writing about it is because automating can help you keep your financial ducks in a row. Knowing exactly how much is automatically whisked away can help you get organized and it can also help you understand how much you have left over to help your child with college expenses. The “stuff” that’s whisked away are the steady items that you know will come out each month and that are for relatively the same amount — such as your water bill, which usually hovers between $50 to $60 per month. Automating can help you get organized and help you understand how much you have left over to help your child with college expenses.
Even if you plan to contribute just a little bit toward college costs, automating will still help you more easily see how much is left over at the end of the month. It’s quicker and you know exactly how much is in your account.
What Can You Automate?
Remember how people (just one generation ago!) had to pay all the bills via check? I now marvel at how they had to keep track of it all.
I remember that my mom used to sit down at the table with a stack of envelopes, her checkbook and her signature roll of stamps. She so very carefully balanced her checkbook several times a month, something I obviously never do because I don’t have to. How did she carve out the time to do that?
Automating offers the solution to a whole host of frustrations: “I don’t like to budget” to “Did I pay that bill already — or not?” Consider these massive benefits:
- Automating helps you protect your credit. Your credit score can’t take a zillion missed payments. The three credit bureaus — TransUnion, Equifax and Experian — receive information about your financial activity from your utility company, your garbage service and your mortgage lender — everything. Automating ensures that you pay for things on time so you don’t have a ding on your credit.
- You get used to it. Simple, right? You get used to living on less. In terms of retirement savings, it’s the fastest way to wealth building because you don’t even miss it. For example, you won’t spend extra money on Target runs, cute new rugs for the patio and whatever else you can’t resist.
- You ensure that you’re saving money without thinking about it. Automating works beyond paying bills! This is my favorite reason to automate: You can save for your future. Automating savings is a great way to save for college because it automatically funnels your money into an account. (The retirement savings advantages are astounding!)
- Automating helps you practice living on less. This can be such an advantage. You can funnel your money into a 529 fund or a different type of fund. You’ll never know you’re missing it! Put money into a low-risk fund instead of a 529 plan if college is just around the corner.
Finally, there’s one more benefit: If you’re using automation for savings, it takes some effort to stop making automatic investments. In other words, it might be a major chore to stop automation for important things like college or retirement savings. For example, you might have to go online, remember your login and password, find the button to suspend payments, and on and on. Or you might have to call in and be on the phone with a representative for an hour. (Hardly something you have time to do, right?)
See how this is a good thing? The complicated steps might make it harder for you to stop payments so you continue to put money into your accounts.
How to Automate Your Entire Life
Okay, now I realize that most of you probably already automate. However, here’s the question: What are you missing that you haven’t automated yet? I just realized I’m paying doctor bills by calling into the hospital and our water bill via check. Uh, why?
And if you say, “I’m already automating everything,” are you automating money into savings, too?
It’s not too hard to figure out how to automate your money and long-term financial goals. Simply sign up for autopay at all the companies you make payments to. Automate the following:
- Bills
- Mortgage payments
- Car payments
- 529 plan payments
- Credit card payments
- IRAs and other long-term investments
- Emergency fund
Soon, you can add college payments to the list and you’ll automate them, of course! You can sign up for a tuition installment plan that will whisk that money away before you’ll even realize it. Check out my article on tuition installment plans if you’re curious to learn more about how they work.
Put yourself on autopilot for everything!
Automating Helps You Practice Replacing Old Expenses with New
It may seem like you’re constantly replacing old expenses with new expenses as your child has gotten older. For example, as your child has grown, you may have replaced:
- Formula for baby food
- Diapers for Pull-Ups
- Daycare costs for private school tuition
- Swimming lessons for swim team fees
- Youth soccer fees for private coaching sessions
- Private school tuition for college
- 529 savings for actual tuition payments
It seems like once you’re excited to be done paying for one thing, another expense takes its place! (How does that happen?)
It can actually work in your favor when you automate because you can start thinking about which expenses you’re automating now and can later trade for college tuition payments. For example, can you trade your automatic mortgage payment for college tuition?
Here are some examples of current expenses you might be able to trade for college tuition:
- Your mortgage (wouldn’t it be so exciting to pay it off?)
- Expensive music lessons
- Pricey club athletic fees
- Private high school tuition
- A car (kids often don’t need them in college)
You Can Still Automate Your Money if Your Child’s Ready for College this Fall
If your child’s getting ready to go off to college and you haven’t started automating your finances, it’s not too late. You can still get going now!
Figure out how much you want to contribute for college and start socking that amount away into a separate account — just to get used to having that amount subtracted from your accounts before real payments start in July, or whenever your first tuition payment is due.
The key is to take a look at everything once it’s all automated and then figure out how much is left over, particularly now that you can do a “find-and-replace” now that high school’s over. (No private school tuition, remember?!)
Automate Starting Now
Now, I realize you can automate your money to your heart’s content, but the fact remains: You still have to have the money in your checking account to begin with in order to pay for college.
This is where you might have to get creative. If you need to pull back on certain automatic deductions to make room for college tuition, do it. (Just maybe don’t peel back on your retirement accounts unless you’re sure you’re fully stocked for retirement.)
By the way, speaking of retirement (though it’s a little off-topic, sorry, sorry): “Automatic Millionaire’s” premise is that automating your money can even make you rich. If you’ve automatically deducted money from your paycheck into your retirement fund over a number of years, compound interest will make it so easy for you to save a lot of money. And if you haven’t been deducting money automatically from your paycheck up until now, you can still save a comfortable amount for retirement. You just need to make up for lost time by saving even more. I encourage you to listen to “Automatic Millionaire” or buy the book.
Think of all the ways automating (yes, even while your child’s in college!) can help you save your pennies during your child’s college years. One of the truths I know is that you can always have your child take out a student loan to go to school but you can’t take out a loan to retire.