Calculating How Much To Save For College: Focusing on the Family Budget

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At some point early in your children's lives, you need to calculate how much you think that you'll need to see your children through school and figure out who's going to be paying when the time comes. Essentially, you're defining the size of the problem.

Now, your biggest concern is finding a solution. Because, as much as you realize you need to save money, you're not saving money! You're sure you have the will, the desire, and the need — you just seem to be lacking the cash. This article dissects your life and your spending habits (just a little bit). It shows you that adding more money to this equation isn't the only way you can ever increase the amount of cash you save. Although finding additional money is always nice, you can use a variety of methods to carve some savings out of what you already have.

You can call it a budget, a financial plan, microeconomics, or a good excuse to pig out on a pint of ice cream every month, but whatever name you give it, the most important part of the family economic dynamic isn't how much money you have, but rather how you spend the money you have. And if you focus attention on budgeting, you can gain control over your family's finances and find that extra money you need to start saving for college.

The mechanics of your family's budget are fairly straightforward — you bring in a certain amount of money, through work, entitlement programs such as Social Security or other pensions, or investments. From that money, or income, you need to pay for the basic needs of your family — housing and utility costs, food, clothing, transportation, insurance, and so on — and for the frills your family has come to expect — cable television, vacations, and fancy gifts at birthdays and holidays.

While that sounds simple enough, you may find that your family's needs and expectations slightly exceed your income. You may also want to save a significant piece of your income each month, but when the end of the month comes, you find that you're a bit short. If you find yourself in either situation, thinking that saving money for college is impossible, put that pint of ice cream back in the freezer and check out my tips on how to dig for the dollars you need in your monthly budget to start saving for college.

Eliminating Most Of The Fat

The first step in gaining control over your family's finances is not to cut off the cable television or the Internet connection or take the family dog to the pound. You need to take a step back and look at the big picture — you need to know not only how much money you have coming in but also how much is going out and where that money is headed.

Making Lists Of Where You Are Now

Before you can start making changes to your family's finances, you need to understand what you have right now, at this moment. Sit down and make a list of your monthly income and, if your income tends to be seasonal at all, your yearly income (and then divide that by 12). List all your income, from every source. Don't declare this account or that resource as off-limits. Every income item needs to be on the table (no, the IRS isn't looking over your shoulder).

Your next list needs to be those payments that you absolutely, positively, need to make, including the following:

• Rent or mortgage (plus necessary repairs)
• Food
• Utilities (not including cable)
• Insurance (life, disability, medical, homeowners/renters, and car)
• Car and other transportation costs
• Student loan payments
• Taxes
• Charitable contributions
• Annual clothing costs for your family

Once again, if amounts change seasonally, add up a year's worth of bills and expenses and then divide by 12.