The money to pay for private school may be within reach.
A financial vacuum is made up of the money that you don't think you spend every month that doesn't go towards saving or paying down debt. When I help clients manage their spending, it is not uncommon to find up to 30 per cent of take home pay going towards spending that has no significant purpose.
So if you believe that private school is an important investment in your child's future but you don't know how to pay for it, start by shrinking your financial abyss to help determine how much you can afford in tuition costs.
Now, determining the size of your family's financial vacuum starts with taking a snapshot of your current month's cash flow. You'll need to know the following information before you can use the automated Financial Black Hole calculator I created.
Monthly after-tax income– You'll want to take a pay stub and look at the amount of income you receive after taxes. If you are paid biweekly, you'll want to multiply that amount by 26 and divide that result by 12 to get your true monthly income. For people who are self-employed, you may prefer to take your after-tax yearly income and divide it by 12 to determine your monthly income.
Monthly expenses– Add up all your monthly expenses. For those expenses like groceries and eating out where it my go up and down, just estimate what you are spending on those items.
Monthly savings– Enter the total of all the money you put away in savings every month. This will include saving for retirement and special accounts like RRSPs, TFSAs, and RESPs.
Monthly debt repayments– All of your monthly debt payments should be totaled and entered here. This includes mortgage, line of credits, credit cards and car loans. Be sure not to enter your mortgage twice 3/4 both as a debt repayment and as a monthly expense.
The Money for Private School
Take the monthly financial black hole calculation and multiply it by 12 to find out how much money is lost in the year–you will quickly know whether private school is in your grasp. How close is that amount to the yearly tuition you were looking to spend for your child's private school education? For most families, there should be enough money being lost to the vacuum that they can cover most or all of private school tuition for their child.
Determining your financial vacuum doesn't mean you will have this cash available instantly. But it does show you where you can find the money for private school and hopefully it will motivate you to take steps to dramatically improve your cash flow.