Photo by Peter Bregg
Organizing these expenses will take time as you may be committed to past spending decisions–such as mortgages and vehicle purchases. Even if you are preparing to send your child to private school a few years from now, it is important to be proactive today. Often people get stuck in a contract that they cannot get out of, or if they do get out they pay significant fees, so it is important to avoid long-term contracts that limit your ability to prioritize your expenditures.
The most common culprit in whether someone can afford their goals or not are vehicles. Often people are paying more than $700 a month on a lease or loan repayment. The biggest trouble with cars is how fast they depreciate in value. From almost the instant you purchase a car the value drops to significantly less than the outstanding loan. Therefore, to sell the car later (to free up money) doesn't make sense because the outstanding car loan would be more than the car is worth. I highly recommend parents only purchase used vehicles unless they have a cash flow management plan that included saving for a new vehicle. This doesn't mean that you cannot ever purchase a new car again, but you must save for it. The money you would be able to save by buying a used car could save enough money to pay for some private schools.
If you have a mortgage, then you have to make your mortgage payments. However, there may be flexibility in the amortization of the loan, therefore reducing your monthly payments. Also, if you are renewing your mortgage, get a mortgage with some flexibility in how you pay. Don't commit to the maximum amount of repayment, but be sure that you can make extra payments when you have the cash flow. Also, if you move and purchase another home, remember that what the mortgage lender or bank offers you is the maximum you qualify for, not what you should borrow. Decide on home purchase amount that allows you to cover the cost of private school tuition and save for retirement.
How many cell phones are in your home? I know, they seem like a necessity, however, it is important to think about how your family uses cell phones. Your children may spend their time texting, using the mobile web and playing games. Rather than locking into a 3-year expensive talk and data contract for the latest iPhone or Android phone, get your child an iPod Touch. The iPod Touch does just about everything (including text messaging) but does not make cell phone calls; voice communication can still be made through Facetime to their friends. For $200 there is no contract, no monthly fees, and your child can do just about everything the iPhone can. A cheap pay-as-you go phone can be their emergency phone, should you need to reach them.
The cost of vacations for your family really can range greatly. It is not necessary to remove vacations totally from your family just so you can send your child to private school. However, it may mean travelling to places within driving distance, renting a place for a week (perhaps splitting a larger place with another family), and cooking your meals instead of eating out every day. Since vacations are often planned many months or even years in advance, the vacation choices you make today may hamper your ability to cover private school tuition costs when your child is ready to attend.
If you owe money, especially through a line of credit or credit card, you have to pay that back before paying for private school. Otherwise you run a huge risk of your debt spiraling out of control, resulting in you no longer being able to afford private school for your child. You should also explore debt unification strategies with your financial advisor to more effectively pay off your debts. Use the above spending tips to find extra money to pay back what you owe faster. If you don't have debt, try to keep it that way. I know that may mean postponing a renovation or other expense, but if you do take loans remember that money has to be paid back and you may not have any control as to how much you need to repay every month. Therefore, by taking on debt now, you lose the flexibility to use that money towards private school tuition. Just by looking over what you spend in a year on the above five items, you may discover your ability to pay for private school costs are more manageable than you think. Making changes to your mortgage, car, vacations, cell phones and debts are the long-term big steps to organizing your household budget to include private school tuition.
—David Field, WSC Insurance Group in Oakville, Ontario