ADVIS Financial Strategies - Woodlynde School

Step 7: All is not lost! Put your “Life on a Spreadsheet”
With only $5181 a year available to put towards the annual tuition, how will you make
up the difference not only for the first year, but for the entire 14 years of tuition?
Take $145,000 from the “combined savings assets” (CD, Stocks and Mutual Funds
— see Spreadsheet from Step 1) and add to it $100,000, which is pulled from home
equity, refinanced into a 30-year mortgage. (In some cases a no-fee 20 year home
equity loan may work better, in others no debt may be required.) With the refinancing,
the credit cards were paid off, and debt was consolidated into one payment of
$2,086 per month, or $25,037 annually in mortgage payments. Many homeowners
are averse to refinancing for fear they can lose their house if they cannot make their
mortgage payments. I recommend that you keep your money in the bank, rather
than locked up in home equity, and let your money work for you. You can always
make mortgage payments from your account.
The following spreadsheet illustrates how this money, compounded over time,
will help you achieve your dreams of independent school, college, and retirement
savings. For detailed descriptions of each column, please refer to the narrative
below.
Column A — Annual debt payments and savings — $50,400 per year. Before the
refinance, $50,400 was being spent on: $32,400 Mortgage and credit card payments
(see step 6 Budget Chart) and $18,000 for college savings (see Step 3 Savings
Chart). Now, we will take this $50,400 and use it instead to pay the new mortgage
payments (Column D) and the tuition payments (Column E).
Column B — Financial Aid, Student Loans, Scholarships, or Grandparent gifts
received. Every situation is unique, of course, but the likelihood of a family with this
income receiving some help over the course of 14 years is probable. Consider for
example, in years 12 and 13 when both children are attending college or university.
In inflation adjusted dollars, $40,000 divided among two children is a realistic amount
of money to assume a family of this income level might receive in financial aid grants,
loans or merit scholarships*.
*In 2006, one ADVIS member school alone reported 59% of the graduating students were
offered merit based incentive packages totaling nearly $4,300,000 from the colleges and universities
to which they were accepted (some from more than one school), a testament to the inherent
value many colleges place upon the high quality of an independent school education.
Column C — Tax savings generated from the refinance and asset rebalancing.
Column D — $25,037 is sum of all 12 annual mortgage payments of $2086 per month.
Column E — The tuitions for the children starting at $13,000 per year (see chart
from Step 4 for more detail).
Column F — Money in/money out column which shows you how much extra “cash”
is left each year after paying the mortgage and tuition. The years you are “in the
black” these savings will be added to your savings account (Column G) and compounded
at 8% — during the years you are (“in the red,”) this amount will be withdrawn
from interest income from the savings account. Only during years 8-12 will we have to
touch the principal.
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