You’re used to the normal expenses such as dance tickets and apparel, sports fees, game tickets, and club dues. But, goodness, all that pales in comparison to the pressure you’ll feel left and right for the things you’ll be asked to pay for during senior year. Some of those expenses may even be mandatory depending on the school.

• Senior Pictures – formal school yearbook pictures and informal personal photography
• Homecoming / Prom
• Graduation Announcements – Don’t forget the Thank You notes and Stamps!
• Graduation Party
• Graduation Gift
• Class Ring
• Cap & Gown, tassel, cords, and stoles
• Senior Trip/Bash
• Yearbook
• Letterman jacket
• Miscellaneous Senior Gear – t-shirts, hats, keychains, etc.
• Diploma Frame
• Test fees – AP/SAT/ACT
• College Applications & Transcript fees
• Travel for College Campus tours

That’s a pretty long list that can quickly add up to thousands of dollars. Of course, your actual costs will vary widely based on your family and the high school. Some schools require seniors to purchase or rent a cap and gown, while other schools provide these for students. There may be things that families can easily decide to cross off their list as well.

Homecoming and Prom will probably be more expensive for girls than boys since girls tend to get their hair, nails, and makeup done. Guys usually rent their tuxedo while girls purchase their dresses, shoes, and accessories. Then there may be alteration fees for the clothing. Add in flowers, dinner, and a limo and these kids are getting a nicer date than I get these days.

Class Ring Expenses

I don’t believe in high school class rings! I know this may be an unpopular opinion. They hold sentimental value for many and are easily customizable to highlight your child’s high school memories, but I believe they are just a waste.

If your child attends college, they aren’t going to be sporting their high school clothing or accessories. After being worn for a short time during their senior year, those rings will likely collect dust at the bottom of a drawer or a jewelry box. I chose to not get one and don’t regret that decision, but if my child decides they really want one then we’ll have to add it to the budget discussion.

I also never hung up my high school diploma so I never needed a frame. But I did hang my college one!

Do you really want it?

The point is to really look at each of these optional expenses with your child and be realistic. Does your senior even want the item? Or is there peer pressure to get it? They don’t have to get something just because everyone else is getting it. The opposite holds true too, if they really want something.

Savings Options

Don’t forget to look for unconventional ways for things. Maybe your child doesn’t care to take senior pictures (beyond the obligatory yearbook photo), but you do. Hiring a photographer or using a studio can have drastically different costs. If that is out of reach there’s always taking them yourself or finding a photographer doing a model call. Often, you’ll only pay for the pictures themselves or a minimal fee if you agree to be a model for their portfolio.

Include your child

Be sure to include your child in these decisions. It’s a great opportunity for them to practice budgeting and planning for expenses. You could budget $75 dollars for a class ring and if they want a more expensive one then they can pay the difference themselves.

Personally, once my oldest is in high school we’ll start putting a small amount of money aside each month. Then, as we close in on senior year, we’ll jointly decide how to spend that money.

Thoughts from a Recent Grad

Donald has been in college for a year. Here are some of his reflections on his senior year.

“My Senior year experience was way different than I expected. I had planned on taking an extremely light course load and getting a full-time job somewhere working about 20-30 hours a week. As it turned out, my courses required a lot more time and effort than I thought, and I couldn’t find a job that I thought would work out for me, so I ended up with a lot of work and no money. What money I did have was used very sparingly.

I didn’t get a class ring or class jacket because I knew I wouldn’t really wear them, but I did pay for a few smaller trips and a larger one to Washington, DC. The trips were absolutely worth it! Experiences would be worth a lot more than anything else, so I happily coughed up the money. I spent a little bit on smaller things like nights out with friends for the same reason. I also spent some money on silly little things because it made for fun moments!

For Christmas, I bought a coffee maker and some coffee for my first period class to use because there were only seven of us and most everyone was a coffee person. I think the whole setup was about $35, but the fun we had with it was absolutely priceless! In short, if you’re unsure about buying a material item in your Senior year, don’t do it. Save the money for the moments you have with the people that matter.”

Be Frugal

Navigating the realm of your senior year high school expenses is a pivotal lesson in financial acumen. Before making purchases, pause and think about if you even want it—a sage strategy to curtail impulse spending. Look for budget saving opportunities that often hide in plain sight, but remember, frugality doesn’t equate to deprivation.

Allocate resources where they matter most by doing what’s genuinely meaningful to you. What expenses would you add to this list or surprise you the most? Have you found a creative way to pay for any of these expenses? What did you really care about but your child didn’t?

Thanks to Karina Moretz, Associate Advisor for this post. Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com

The post Navigating Senior Year of High School Expenses appeared first on Pathfinder Planning.

More good news – with some smart planning and a few money-saving tips, you can enjoy a memorable summer vacation without breaking the bank. Let’s explore some effective strategies to help you save money during your summer getaway.

Plan and Book Early

One of the best ways to save money on your summer vacation is to plan and book early. Many airlines, hotels, and travel agencies offer early bird discounts or special promotions for those who book well in advance. By securing your flights and accommodations early, you can often take advantage of lower prices and have a wider selection of options.

When you wait to book flights, you may find the costs are more expensive. This is because so many last minute bookings are business travelers who are not as price sensitive as families.

Be Flexible with Travel Dates

Flexibility with your travel dates can lead to significant savings. Consider traveling during the shoulder season, which is the period just before or after peak tourist season. Prices for flights and accommodations tend to be lower during these times, allowing you to enjoy the same destinations at a fraction of the cost. Additionally, midweek flights and departures on less popular days can also help you snag better deals.

Embrace Alternative Accommodation

While hotels are a popular choice for vacations, they can be quite expensive, especially during peak season. Explore alternative accommodation options like vacation rentals, hostels, or even camping. Websites and apps like Airbnb and VRBO provide a wide range of affordable alternatives, often with additional amenities like kitchen facilities, which can help you save on dining expenses.

One way that we have discovered to save money on vacations is by searching Airbnb or VRBO, and then searching for the property to see if it is listed on any other site, or directly through the rental managers website. You can also message the “host” on Airbnb or VRBO and try to negotiate rates. They will sometimes offer a discount, allow you to book directly and save the hundreds in extra fees and charges through those websites, or both.

Opt for Off-Beat Destinations

Instead of heading to the most popular and crowded tourist destinations, consider exploring off-beat or lesser-known locations. These places often offer unique experiences, lower costs, and a chance to immerse yourself in local culture. Do some research, seek recommendations, and discover hidden gems that can provide an unforgettable vacation while being kinder to your wallet. Smaller cities and quieter beaches may offer better deals.

Pack Smart

Packing smart can save you money on your summer vacation. Remember to pack essential items such as sunscreen, toiletries, and medications to avoid expensive purchases at your destination. If you’re traveling by air, pack light to avoid excess baggage fees. Additionally, consider bringing reusable water bottles and snacks for the journey to save on overpriced airport or convenience store purchases.

Remember the 80/20 rule – you don’t need as many clothes as you think. Remember that you an always do a load of laundry while on the road.

Explore Free and Low-Cost Activities

Research the free or low-cost activities available at your destination. Many cities offer free walking tours, public parks, museums with discounted entry fees on specific days, and community events. Take advantage of these options to enjoy local attractions without spending a fortune. You can also consider outdoor activities like hiking, swimming, or picnicking, which are often budget-friendly and allow you to soak in nature’s beauty.

National Parks are classic family getaways. If you are visiting several during the year, consider the US Park Pass. It’s a great deal for your whole family as daily entrance fees can add up. They offer passes for Seniors, Military, and those with permanent disabilities. You can get a free pass the year your child is in 4th Grade as well.

Go!

Planning a summer vacation doesn’t have to drain your bank account. By implementing these money-saving tips, you can make the most of your summer getaway while keeping your budget intact. Remember to plan ahead, be flexible, and explore alternative options to find the best deals. With a little bit of creativity and resourcefulness, you can enjoy a fantastic vacation filled with lifelong memories without the financial burden.

Thanks to Aaron Salmon, CFP®, Director of Investment Strategies for this post. Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com

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The Purpose of Maintenance Funds

There are three main assets that require ongoing maintenance for most families:

1. Home
2. Vehicles
3. Health

Everything we own requires upkeep. None of our assets just go on and on without a few tune-ups along the way — our bodies and material possessions are no exception. People require doctor appointments and dental cleanings, cars need oil changes and tires, and houses need painting and repairs.

Taking care of your belongings helps extend their lifespan and minimizes the total amount of money you’ll spend in the long run. The challenge is, maintenance does add up and if you’re unprepared your wallet can take a big hit.

Should I Use Emergency Funds?

By definition, maintenance is not an emergency. You should expect maintenance. Emergencies are completely unexpected. The challenge for maintenance is that the timing of the expenses is unknown. Think of these as non-monthly expenses. You should not use your emergency fund to deal with these on-going repairs.

Going into credit card debt is another no-go. It can be way too expensive. However, ignoring maintenance altogether only means that eventually, you’ll be looking at a much higher bill when something breaks completely.

You know the saying — when it rains it pours. You can expect to need new tires at the same time a hailstorm dents your roof which is also exactly when your son breaks his finger. When this happens, life will feel like an emergency because things are piling up. But these are all repairs and ailments that can be planned for. When you plan for these non-monthly expenses, you will fee more confident that you can pay them so they don’t become emergencies.

Solution: Maintenance Fund

So what do you do if you want to keep your car running well, your household operating smoothly, and still manage your money well?  The answer is: a maintenance savings fund. Think of it as an emergency fund for your ‘things’ — making all of those repairs easier to afford.

We tend to focus and spend our money on what’s right in front of our face, rather than think long term. Upkeep requires longer term thinking, so we need a system for creating this fund.

The easiest way to start is to incorporate regular, automated savings into your budget. Whether you regularly save $10 or $100 a month, you will have money set aside specifically for these expected but untimely expenses.

Have you ever started a workout regimen after a few weeks, months, or even years (no judgement here…) of little-to-no physical activity? How did you feel? Tired, sore, and ready to give up, right? I’ve been there more times than I care to count!

Funny thing, though. After a few weeks of getting back into an exercise routine, you start to feel energized, the pain subsides, and you become motivated and excited to stay on track. That’s because you have moved from starting at square one to maintaining. The same thing happens when you begin saving. It becomes a natural part of your budget and easier over time.

How Much Should I Save?

By now you’re probably thinking, “okay, Mom…I got it! I NEED a maintenance fund. But how much should I save and keep in there?”

While there is no hard and fast rule, here are some numbers that I have found that work.

For your home, you first want to have the amount of your homeowner’s insurance deductible on hand. If your deductible is $500, start with that much. If it is $1000, begin there. After that, save approximately 10 percent of your monthly mortgage payment into a high-yield savings account. For example, if your mortgage payment is $1,000, aim to put somewhere around $100 per month into your maintenance fund. If you are still working on your budget and don’t quite have that much, that’s OK. Some is better than none.

For your cars and vehicles, similar rules apply. Keep your deductible amount in the bank and save about 10% of your monthly payment amount. If you are not making car payments, then consider saving what would be a car payment. By saving $300 0r $500 a month, you will have funds available for major repairs or to purchase a new car in the future. Think of it as paying yourself instead of having to take a loan.

Medical expenses can be tricky, but a great place to begin is by having your maximum out of pocket expense amount on hand. Check your medical insurance policy. If your maximum out of pocket expense is $5000, that is your starting point. You can hold these funds in a tax-advantaged Health Savings Account, or in a regular savings account at your bank.

Chances are you won’t need to dip into these fund often, but the idea is to grow the balance over time and continue replacing funds as they are used. When something breaks, needs to be repaired, or even replaced, the money will be readily available and won’t affect the rest of your budget.

How Maintenance Funds Help Preserve Your Assets

This isn’t just some theoretical advice that I’m trying to sell you on because as a financial advisor I’m supposed to. No, we actually live this!

Here are some examples of how we have used our Maintenance funds. We purchased a NEW 2000 Ford Explorer back in, well, 1999. It was the first new car either of us ever bought. Over nearly two decades, we put money into maintaining this car, and we extended its life with us. I have to say, we loved this car, however, with over 234K miles, and doors that didn’t quite work the way they should, we weren’t sure that we could fix the power issue it was having. We finally had to let it go.

So, our $30K car lasted 17 years for an annual cost of $1764 per year, plus maintenance.

We needed new windows at the same time my son was impaled with a stake through his nose. While I’m not excited about the bills that I know are coming, I also am not afraid of them since we have funds set aside for incidents like these. (Maybe if you have boys, you will want to consider a larger fund.)

The Big Takeaway

Americans tend to have small savings accounts. A report from the Federal Reserve reveals that 70% of Americans would use cash, savings, or credit cards to cover an unexpected $400 expense. 35% would have difficulty covering this expense.

Here’s your big takeaway: if you have an expensive item, be sure to budget for its upkeep.

At a minimum, a maintenance fund can help you have enough money on hand to pay for the annual upkeep your life requires. Not to mention, it also keeps you out of debt, provides peace of mind, and creates a level of confidence that you won’t be caught short handed.

So tell us: do you have a maintenance fund? If not, what’s getting in your way?

Pamela J. Horack, CFP® of Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

The post How to Create Your “Oh Crap” Maintenance Fund appeared first on Pathfinder Planning.

Blueprint for the Financial Planning Tower

The idea for the tower came as I started my financial planning firm. I began sharing with my friends my newfound career shift from stay-at-home-mom. I would say “I’m a financial planner” and they would respond, “Oh, so you sell insurance.”

No, no, no. That wasn’t right at all. I had to find a way to explain what financial planning was. So I began reading, researching and drawing.

Armed with background information from the likes of the Bible, the Certified Financial PlannerTM board, and lots of books and online searches, this idea came to me. Every financial group seemed to have a pyramid type shape, which seemed  to be a good place to start. The images I found were very focused on investing, which is only a piece of the puzzle, and I wanted to cover all aspects of financial planning. 

Two other pyramid shaped concepts came to mind. First, Abraham Maslow’s hierarchy of needs which explains how humans are motivated. Second was the Food Pyramid. I know that is now passé, but it still seemed an appropriate metaphor.

Should I call it a pyramid? Nope – sounds too much like Bernie Madoff and a pyramid scheme where people lose money. A tower sounds better. Towers are strong and sturdy and something to be proud of when complete. After much introspection (because that’s what introverts do) I developed the concept of a Financial Tower.

Level 1 – Financial Planning Tower Basics

Maslow’s hierarchy of needs begins with Physiological needs. Humans cannot really grow beyond this level until these needs are met. For example, if you are hungry, it’s difficult to focus on taking care of your children. You have to meet this basic need first.

Similarly, grains at the base of the Food Pyramid were thought to be the foundation for a solid diet.

Your budget is the foundation for all of your financial planning and makes up Level 1 of Your Financial Planning Tower.

Income

The base level of the tower begins with your Income. Remember when you were a kid and your mom gave you an allowance? Or maybe your grandmother gave you some money for your birthday. Maybe you earned money for babysitting or lawn work. Regardless of where it comes from, income is where everyone’s budget begins.

Expenses

Next comes your Expenses. Once you have some income, you’ll want to spend it. Notice that your expenses block is smaller than your income block. When your expenses are less than your income, you’ll have money to set aside in savings for an Emergency Fund. 

Emergency Fund

Your Emergency Fund is a critical corner of support for your Financial Planning Tower. Not only does this savings allow you to have money for unexpected events, it builds the habit of setting aside money. It trains you to save for a rainy day. Conventional wisdom says to have between 3 to 6 months worth of expenses in savings, but that number may be more or less, depending on other factors. Your job security, amount of debt, income, and other investment resources also factor into the right amount.

Notice that if you don’t have this block of your tower complete, the pieces above it are likely to fall.

Level 1 is the place where everyone starts budgeting. Just like Maslow’s concept of your Physiological needs, you have to have a budget first. If you have never created a budget, you still have one, it’s just dysfunctional. 

Just like the complex carbohydrates this level represents, your budget provides lots of energy, but little nutrition. It’s essential to your needs and always in motion, but doesn’t really grow your overall wealth unless you use it wisely.

As a planner, I want to be sure your budget works.

Level 2 – Financial Planning Tower Safety Needs

Maslow’s second level is Safety. Until this need is satisfied, more or less, we can move to the next level. In  financial planning terms, this level of Your Financial Planning Tower is critical. Your safety needs protect the things you have and people you love, providing a strong second level for your tower. Financial planning around risk solves everyday problems.

Fruits and Vegetables

Families need more savings for specific spending items. You know when you need new tires on the car? You may not want to purchase them, but it certainly feels better to use money that you have instead of putting them on the credit card to pay another day. That’s why these extra savings categories are fruits. Everyone loves fruit.

We also need insurance and estate planning. These are your vegetables because nobody likes them, but you have to have them because they are good for you. 

Operations and Maintenance Funds

The first block is your Operations and Maintenance Funds. (By the way – if anyone comes up with a better name, please let me know!)

Anytime you own something that’s very large, you will have to take care of it. And that costs money. The three main things you need to maintain are:

• Home
• Cars / Vehicles
• Health

There will be times in life when you will need money to pay large expenses. For example, you may need a new roof for your home. Or you may need tires for your car. Maybe you need to meet a large medical deductible. These expenses are not in your normal budget. You should set aside money so that when they happen, you’ll be able to pay for them without having to dip into credit. 

Long Term Goals

Often we have specific goals we want to fund. For example, maybe you are saving for a trip to Europe, a wedding, or you are looking to buy a new car within the next few years. These are goals that you can budget and save for on a regular monthly basis.

That trip to Europe for the family may cost $10K. So, if you save a regular amount each month, plus any bonuses you may receive, you may decide that you can take that trip in about two years. That’s a powerful goal that the whole family can get behind!

Insurance

Managing risk helps protect from catastrophic hazards that could bankrupt your financial plan. Insurance provides a means to protect your family if you pass away. And it replaces your income incase you cannot work.

When planning, you will want to look at your health and property needs to protect your larger assets.

Reviewing your life insurance and disability insurance are a means of protecting your income. I’ve seen lots of plans with too little in disability and too much in life insurance. 

Long-term care is a category unto itself. You may or may not need this type of insurance, but it may be difficult to make this decision without some additional expertise.

A proper needs analysis will help you decide the right amount of insurance as well as the right type of policy to purchase.

Estate Planning

Estate planning is not just a concept for rich people. It’s the surest way to protect your family if you aren’t there.

Estate planning is the only place that you can designate someone to be the guardian of your children or manage funds if you’re incapacitated. You do not want to leave these decisions to the laws of  your state.

This is not just a need for when you die – it’s also for while you are alive. If you are incapacitated, you want to be sure you have the right people making your health and financial decisions.

As our dependence on technology grows, your digital accounts need attention. Uncle Ben may be a great executor when dealing with accounting paperwork, but Cousin Zach might be the best choice to manage your Facebook and Twitter accounts when you are not here.

Having instructions like these gives you the peace of mind you need to move to the next level.

Level 3 – Financial Planning Tower and Investing

Now that your first two levels are set, we move up to the fun stuff that everyone wants to talk about – retirement and investments. This is the traditional venue for financial planning.

Level 3 of the Financial Planning Tower is equivalent to Maslow’s Love and Belonging level. This is where we develop our sense of belonging and really begin to feel good about ourselves and others. The Food Pyramid expresses this level as Dairy and Meats. It’s much richer up here!

Retirement Funding

Everyone loves to talk about how well their 401(k) is doing when the market is up, and how terrible things are when markets are down. The top questions that I get revolve around when, where and how much is needed to retire.

Personally, I believe the government has made it extremely difficult for working families to save for retirement. It’s too complex! People have gazillions of questions about IRAs, Roth IRAs, 401(k)s and other retirement plans. Pension plans also get their fair share of concern. These plans are more common than you may think. In addition to teachers, police, firefighters and other state employees, many companies still offer pensions to employees.

And don’t get me started on Social Security, except to say that yes, I believe it will be there when you retire. 

Education Funding

Families look out for their children, so college saving runs a close second to retirement in terms of major goals. Unfortunately, we often wait too long to begin addressing this item, so parents seem panicked when they realize they only have two years to save.

When considering college, parents have many questions including:

• what is the viability of the student loan system?
• how do we effectively save?
• what is a 529 Plan and how does it work?
• can we afford the rising rate of education?

The rules around college often change with a new Presidential administration. We also need to consider if our children are ready for a four-years program. They may be better suited for two-year college, an apprenticeship or waiting and attending later. There are so many variables to address it can be overwhelming without some help.

Level 4 – Financial Planning Tower and Your Passion

Now that these three levels are covered, we move into what Maslow would call Esteem. Just like our body fat, our Esteem keeps us warm and happy. Level 4 of Your Financial Tower is your passion. While it is not directly related to money, this level is an emotional driver for all our goals.

We need to feel good about what we are doing in our life. We can be happy being an engineer, housewife, accountant, food server, or any number of careers, but often we are not. That may be because we haven’t done a good job building our tower. When we have not met our “deficiency needs”, as Maslow says, we have a difficult time being motivated.

When we are misspending and not saving, we always feel like we are behind the 8-ball. We feel like we can’t leave a job where we are unhappy because we have bills to pay and mouths to feed. We may feel trapped in a role that isn’t fulfilling because it doesn’t use our God given talents.

This is a time to rethink our purpose, maybe change old habits, and set new financial goals so we can shift from a job as an accountant to a passion of horse training. Or a food server to a bakery owner. Or a housewife to a financial planner.

Level 5 – Financial Planning Tower and Your Legacy

Level 5 of Your Financial Planning Tower is your Legacy. For us, that means our legacy – like Maslow’s self-actualization or the sugar on top. These are the things we leave behind.

This doesn’t necessarily mean the money we leave, although that is part of it. We’ve all heard the horror stories of debt-ridden people with nothing left for the kids. Families are then left to fight over the teapot.

Our legacy is truly how we are remembered when we are gone. Do you want to be remembered as someone who didn’t have much money, but was a great photographer who shared his work with everyone? Or would you rather be remembered as an overworked executive who didn’t have time for the kids?

Our legacy often has very little to do with our money.

In the Basement of the Financial Planning Tower

Now, if you look at Maslow’s tower, or the food pyramid, you’ll notice that that’s all there is. A few levels that build a triangle shape. However, in finance, we still have to deal with our debt.

I really had to think about this one, since there was no other comparable concept within the models I had. So I looked at my tower and decided that debt is just spending more money than we have, so it had to be an expense. But it couldn’t go up, so it had to go underneath our expenses. And down, and down.

Then, I thought what would it be like if we didn’t get the emotional support we need? And what if we didn’t get the food we need to survive? Well, that would be starvation, and that’s exactly what debt is.

When you continue to borrow money, your income goes to pay for expenses you couldn’t afford in the first place. You can never build your tower up because you are always busy filling in that hole. Debt robs us of the funds we need to build our tower, so we have to use it prudently and keep it under control. 

Construct Your Financial Planning Tower

After years of planning and telling the story of your Financial Planning Tower, I have seen it positively impact others. People often tell me that they never thought of planning that way, or that the image made so much sense to them.

Pathfinder Planning uses the Financial Planning Tower to help working families find gaps in their finances, fill them in, and continue building. Here are some examples of the successes our clients have had:

• Paid off $100K in debt
• Had disability insurance in place before a skiing accident
• Completed estate planning to accommodate an adult special needs child
• Rebalanced retirement accounts resulting in reduced investment fees and increased return projections
• Savings to support their family when the breadwinner lost their job during COVID
• Bought a second home
• Changed from a job to a dream before age 50

We understand how difficult it can be to address all your competing needs at once. The Financial Planning Tower gives you the structure you need to prioritize and achieve your goals. These concepts can and do work for our clients! They can work for you as well.

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com

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