College Funding Sanity Check for High School Seniors

Oh my gosh — it’s spring already! Acceptance letters and financial aid packages have been received, final decisions on which school to attend are being made, the high school counseling office is excited to be notified, and graduation is just around the corner. All in all, an exciting time for high school seniors and their families.



It is also an ideal time to take a sanity check and make sure the collegiate path chosen is one that fits not only goals and aspirations but finances as well. Each year I speak with young college graduates who feel overly burdened with student loan debt (well over $100,000 in many cases!) that I want to keep others from falling into the same trap.

College is an excellent investment. I have yet to meet anyone who graduated from college and regrets having a college degree. I don’t believe you need to know exactly what you’re going to do as a profession once you graduate. Most college graduates change majors at least once while earning their undergraduate degrees. College is a time for exploration. You develop critical thinking skills, you get to know people from a wider range of backgrounds, and you learn how to become a lifelong learner.

What concerns me is the desire among some high school students to attend a college at a cost that is way beyond their means. In the United States we have so many excellent choices for learning at widely varying price points that it is possible to get a great education at a price you can afford.

It’s natural to get swept up in the excitement of going to college. What can get lost is a thorough explanation and understanding of the financial cost of the student loans that are granted to new high school graduates. It is pretty easy for a student to borrow $25,000 per year for four years of college. This is the average cost to attend an in-state public university. In a typical loan arrangement, interest accrues but no payments are due until six months after graduation. Upon graduation, the balance due will be around $118,000 if the loans have a 6.8% interest rate. To repay this debt in 10 years, a typical repayment period, the monthly payment will be $1,358.

In certain fields such as engineering, computer science, or finance, $1,358 per month might be manageable. For others, however, such as education, psychology, or marketing, this amount eats up a third to half of the typical paycheck.
In either case, is this much debt desirable? It will certainly interfere with the ability to finance a car, condo, or just about anything else the first five years after graduating. “Saddling graduates with crippling debt limits their ability to take career risks and limits entrepreneurship,” according to Don Phillips, managing director at Morningstar. “It forces people to follow the highest-paying professions rather than their passions. It also creates generations of young people who will be severely constrained in their ability to save for their futures, thus putting a bigger drain on society.”1

Before helping your future college student sign on for this much debt I recommend three things:

1.Check out the Federal Student Aid website if you haven’t done so already. This site has information on the latest repayment plan options, sources for grants, scholarships, and work-study programs. A little research and legwork can save thousands of dollars.
2.Research the salaries in different fields of study — not just the ones your student is focused on but on some that are tangentially related — to get a feel for what it’s reasonable. A place to start is the National Association of Colleges and Employers. These surveys don’t reflect how many applicants there were for the positions hired so bear in mind that some fields are tough to break into.
3.Aim for graduating with no more than one year’s salary in student loan debt. Figure out how best to utilize other sources of funding such as savings, work-study, grants and scholarships, as well as less expensive education options to keep the debt in check.
Taking a sanity check on the cost of the college education, and balancing sources of funding against potential future salaries, means that not only can there be fun, rewarding times during college, but there will also be fun, rewarding times after graduating!

1Phillips, Don. “A Costly Education: Amid soaring prices, financial planners need a role in solving what ails U.S. Universities”, p10. Morningstar Magazine. April/May 2015.

NewRetirement.Com Article on Questions to Ask a Financial Advisor

Throughout life we face different transition points. At each transition it is important to review options and understand the trade-offs between them.  Recently I was one of several financial planners and advisors who were asked to provide input on an article for New Retirement about selecting a financial advisor.  If you are at or nearing a transition point for retirement, I think you might find some useful information here:

New Retirement: Questions to Ask a Financial Advisor

Happy Reading and, let me know what you think!


4 Green Ways to Pay Less Tax

This month, Bridget Sullivan Mermel provides a guest post. Bridget is based in Chicago and specializes in socially responsible investing. The term and its applications are broader than you might think!

A lot of people think that green financial planning is all about investments.

I beg to differ. As a comprehensive planner, I love to talk about the good you can do without investing a dollar. One great way is to act green and save money is on your taxes. Here are four big opportunities:

1. Donate to charity
If you itemize, donating items that you don’t need is a great way to get a deduction.

When acting green, there are generally good, better and best alternatives. In this case, “good” is contributing your used clothing and household items to the charity of your choice rather than pitching it into the garbage stream.

Even better: you can also contribute used TVs and electronic items to charities that will recycle them.

And best is finding charities that will actually reuse your electronic items. Domestic violence shelters use cell phones. Other charities refurbish your old electronics and send them to schools and developing countries that need them. One time I even donated an old mountain bike to a charity that sends them overseas.

Here’s a nationwide website that connects you with local charity pickup services. You might have to scan the listings of each individual charity to figure out which accept items like mattresses and TVs that some charities won’t accept:

Here’s a Chicago charity that accepts electronics for re-use called FreeGeek. They have a resale shop and accept drop-offs:

Here’s a handy list of Chicago charitable organizations that details what each organization is looking for and what they do with it:

And here’s where I donated my bike:

Common sense caution applies. Donating a computer with a hard drive full of personal information? Make sure you are comfortable with programs that wipe it clean before setting up your pick-up. Even if you don’t want to donate your hard drive, giving away old printers, scanners and cords don’t offer security challenges.

2. Improve your home
These purchases get you a tax credit through 12/31/2013 if your purchases meet energy star criteria:

1. Insulation
2. Roofs (metal and asphalt)
3. Water heaters (non-solar)
4. HVAC systems
5. Windows and doors
6. Biomass stoves HVAC systems (I’ve got to admit that I didn’t even know what these were!)

Doing a more ambitious project to either your principal residence OR your second home? Consider following energy star guidelines and get a tax credit. The credit for these expires 12/31/2016:

1. Geothermal Heat Pumps
2. Small Wind Turbines (Residential)
3. Solar Energy Systems

Also for your principal residence (sorry, no second homes here) if you get one of these bad boys before 2016, you can get a credit:

1. Fuel Cells (Residential Fuel Cell and Microturbine System)

You can find more details about all the above credits here:

3. Buy a Plug-in Car
The credit for hybrid cars is gone, but there are still some credits left for buying a plug-in. Here’s the link:

4. Get money from your state
Finally, most states have green tax incentives. Here’s the website to help you look up your state:

I looked over Illinois’ list and it seemed to be primarily incentives that relate to the construction industry. However Illinois is in a fiscal-crisis-mode, not a dolling-out-tax-incentives mode at the moment. Other states are more promising.

By Bridget Sullivan Mermel

Rwanda: A Gem Waiting to Shine

As you may recall from earlier newsletters, the entire McNary family visited Rwanda in July of this year.  While the visit had a certain amount of apprehension to it, we all left with a newfound appreciation for a nation that is truly working towards a bright future.  Following the horrifying events of the genocide in 1994, Rwanda has felt a surge of unity under the leadership of Paul Kagame that is aimed at transforming the country from third-world to first-world in just one generation.  Although this goal is certainly a lofty one and may be out of reach for the time being, the nation has totally altered its’ identity and is now a place of hope, acceptance, and desire.

After our brief visit in July, I (Tom) was truly riveted by what I saw the last time I was there, and thus was inspired to figure out some way to return.  I achieved this by signing up with a global volunteering agency to go back to Rwanda for the first few weeks of this October.  I was at first very nervous, for despite the praise Rwanda has received I was still not completely sold on the idea of being on my own in a third-world country without my family.  What I was met with completely blew me away and I am certain now that I have left a part of my heart there.  From day one I was greeted with smiles and open arms, not only by the workers of the volunteering cooperative, but by anyone and everyone whom I greeted on the street.  The people are friendly, outgoing, and brimming with a thirst for knowledge about the world around them.
This welcoming attitude was manifested perfectly on the first sunday I was there, in the town of Gisenyi which is right on the border with the Democratic Republic of the Congo.  As I was walking to the market that morning with a few other volunteers, we passed a church in session.  Curious, we peeked our heads in to see the sermon being delivered and we were immediately greeted and beckoned to join the churchgoers.  Two men who had a fair handle on English were assigned to us and they provided us with seats near the front of the church.  The two men were thrilled to have us in their church and to have a chance to try out their English, and so we received a full translation of the sermon.  Eventually as the sermon drew to a close, we were invited to stand up in front of the church of 300 and introduce ourselves.  While standing in front of a large crowd might have been daunting under different circumstances, I felt a sense of calm and acceptance as we told them who we were and where we were from.  Following our introductions we received a rousing round of applause and after the service ended for the day we spent almost an hour meeting with various members of the church and discussing our business for being in Rwanda as well as our thoughts on the country and people. This interaction left me smiling and I exchanged contact information with a number of the people who came to speak with us.

I am still blown away at how openly we were accepted into what some might consider sacred or private ground, and it was exciting to see our hosts boasting prideful smiles as they discussed their church and country.  This experience also showed me the impact that people like me could have by simply being there.  Most of the work I did consisted of building house foundations or gardening, but even then I was usually shooed out of the way by a tough Rwandan woman who would laugh at my pitiful attempts to till the soil.  Even though after most days I wasn’t sure if I had really done anything, I was reassured one day when all of the volunteers were invited to a celebration at the home of one woman in a village near Gisenyi.

The celebration consisted of about 20 women singing and dancing for us, while also cooking us a meal.  I was not the only one who was taken aback at what they had done for us, but the women then explained through a translator that before the volunteering program I was part of had been established, their lives had been a struggle.  Although almost every woman there lived in a tiny house with a floor composed of rocks filled in with soil, they were glowing with pride as they told us how their exposure to our volunteering agency had them going from living off of potatoes and kidney beans to now owning their own cows, chickens, cell phones, and even in some cases increasing the size of their homes.  The fact that we were willing to help out pleased them, but our impact was larger to them because we represented a channel to the outer world (or even out of their village) that allowed them to dramatically increase the quality of their lives.

When my few weeks there were up, I was surprised at how disappointed I was to be going home.  I had felt like I had integrated seamlessly into the culture there, and despite the occasional good-natured haranguing about my skin color (the term for which is umuzungu in the local language) I felt incredibly comfortable in a place where a troubled past clouts the beauty and unequivocal acceptance of the people who live there.  The main point of my writing this is to expose a nation that is truly on the right path and has thrown itself wholeheartedly into building a better future, and one that is free of corruption and violence at that.  While many people have a certain stigma that comes to mind when they think of Africa and especially Rwanda (I won’t deny that I did), the generalization could not be farther from the truth.  I hope in the future to build a lasting relationship with the people and the country, as it is a place where you really can feel the impact of your actions and see the change as it happens.

If you are interested in doing something like this or have a family member that is itching to make a difference or see this beautiful country do not hesitate to contact me as I would love to share more about my time there.  I have also heard from a reliable financial planner that sponsoring a volunteer to go do something like this is tax-deductible, so if you are reading this and wanted to help me make a return visit, I’m sure I could help you out there as well.  For any questions or comments you can reach me at and I thank you if you have read this far!

Tom McNary

Athletic Scholarships – I Want One!

I admit it; I’m an Olympics junkie.  Winter, summer, doesn’t matter, I love watching the games. This past week as I’ve watched the Olympic trials I’ve heard the commentators talk about how many of the athletes were on college scholarships. What are the odds of getting an athletic scholarship?  Turns out, they are pretty long.

Athletic scholarships, especially the coveted full ride, are rare. In 2011, there were 19.7 million college students, according to the National Center for Education Statistics.  According to the National Collegiate Athletic Association (NCAA) website, $2 billion is provided annually to 126,000 student athletes at its Division I and II schools.  Division III schools technically can’t award athletic scholarships though they do offer athletes merit or leadership scholarships. The National Association of Intercollegiate Athletics provides $450,000 annually to 60,000 student athletes.  Very few of the scholarships are full rides; most are divided among several athletes to subsidize tuition, books, or fees.

If you put all those numbers together, less than 1% of those students are attending college on athletic scholarships.  If you have that one-in-a-hundred child who has the right combination of ability, drive, and passion, there’s a chance he or she can earn a partial scholarship but you need to have a plan for covering the rest of the cost of college. Here are some suggestions:

  1. When your child is young, establish a college fund using a 529 plan and set up monthly automatic payments to it.  Even if the amounts are small, say $50 per month to start, the most important thing is to start.  For Colorado, is the place to begin.
  2. Control your spending on those sports activities.  Between clinics and off-season camps, private coaching, gear, and travel tournaments you can easily spend thousands per year for your child.   Take advantage of your team’s fundraising opportunities to keep those costs down.  I promise I’ll buy Butter Braids, pies, coupon books or tickets to spaghetti dinners if your athlete asks me.  Share travel expenses, make it as efficient as you can.  And, sometimes, say no.
  3. Maximize your own retirement funding.  Contributions you make to a Roth IRA can be withdrawn free of tax to pay for college if needed. But don’t sacrifice your own retirement for your child’s sports.
  4. Focus on academics.  In college recruiting, a great student who is a really good athlete stands a better chance of being awarded a scholarship than a great athlete who is a marginal student.
  5. Make sure that it’s your child who wants to play sports in college, not you.  It can be tremendously rewarding but it is a lot of work and a lot of pressure.

Later this month when the London Olympics begin, I hope you enjoy watching. If your child is inspired to train for the 2020 games or beyond, that’s great. Just make sure to tuck funds aside for college, too.

New Healthcare Tax – Tell Me Doc, Is it Going to Hurt?

Last week the U.S. Supreme Court upheld the constitutionality of President Obama’s healthcare reform legislation which means we’ll see a couple new taxes take effect in 2013.  Overall, I think the impact of these taxes is small, though we’ll want to manage them as best we can.

The first tax is an increase of the Medicare tax .9% on earned income above $200,000 for individuals or $250,000 for married couples.  As an example, let’s say one spouse earns $200,000 and the other earns $150,000 for total earnings of $350,000.    The couple will owe $900.

The second tax is on investment income and, again, targets high-earners.  It is a 3.8% tax on investment income above the $200,000/$250,000 threshold. It includes capital gains, royalties, interest, rents, and other nonwage income.  It doesn’t include life insurance proceeds, IRA distributions, pensions, or Social Security income.  If, for example, an individual taxpayer earns $210,000 and has $10,000 in long term capital gains, the taxpayer will owe $380 of additional tax.

Details and final guidance from the Internal Revenue Service won’t be available until later this year but it’s important to note that there are two other tax changes happening that will have a far bigger impact.  The first is the scheduled expiration of the Bush tax cuts.  If the cuts expire, everyone’s taxes will increase, not just those of high-earners.  Dividends will be taxed at ordinary income rates; long term capital gains will be taxed at 20%.  The second is the scheduled expiration of the estate tax cuts.  Unless new legislation is enacted, in 2013 estates above $1M will be taxed at 55%.  Ouch!

On the bright side, there’s a lot of good stuff in the healthcare reform.  Keeping adult dependents on family policies up to age 26 already is helping millions of parents sleep better at night.  Beginning 2014, insurers can no longer drop an individual if he or she becomes sick, can’t refuse coverage for pre-existing conditions, and can’t set annual or lifetime limits on care.  And as states set up insurance exchanges we may finally have an affordable health care option for early retirees.

As the year progresses, we’ll work together to take the appropriate steps to minimize your tax obligation wherever we can.  If you have specific questions on these new taxes please don’t hesitate to email or call.

Moving Forward on Your Own – Kathleen Rehl

Moving Forward on Your Own – Workshop for Widows & Those Who Care

Saturday, August 4, 2012 from 2:00–4:00 PM
at the First Evangelical Lutheran Church of Longmont

803 Third Avenue, Longmont CO  80501

Light refreshments available at 2:00 PM

There is no charge to attendees, but advance registration is required.
Call 1-800-579-9496 or email

Join us for a special presentation by Kathleen M. Rehl, Ph.D., CFP®, award winning author and speaker. She presents practical information in an engaging and entertaining manner, along with issues of the heart. The workshop is open to all . . . although it’s especially designed for women. So, bring your gal friends for an enjoyable afternoon out together.

Disaster Preparedness

So far this year over 600 families have lost their homes to wildfires here in Colorado.  When disaster strikes, whether it a hailstorm, tornado, hurricane, earthquake, or wildfire, the process of filing insurance claims and rebuilding can be lengthy and frustrating. With good records claims are processed more quickly and with higher payouts than without.  During our Insurance Review, we discuss the importance of documenting your possessions and I thought now was a good time for a reminder.

If you haven’t any records of your possessions, please take time this evening to take digital photos or video of what you own.  Just 30 minutes – that’s all I’m asking! Walk through your home, room by room, and take a picture of everything you see.  Open drawers and closets to photograph items that are out of sight. You can also probably skip taking pictures of items in your house that are not of much value; for instance, teenagers. (I’m joking, we know they are priceless).  Don’t forget the garage and the deck.  Make a copy of the photos or video and store it in a safe deposit box or somewhere safely offsite.

If you have recently made photographic records, great! Now, I encourage you to take the next step – a written home inventory.  Create a spreadsheet and, room by room, list each item, its purchase date and cost. Start at the top of the house and work your way down. Store a copy of this offsite with the photographic records.  And, if you never need to file a claim, consider yourself fortunate!

Lastly, make sure your homeowner’s policy is for guaranteed replacement cost, rather than actual cash value.  It will cost 10-15% more but it’s well worth it.


churn (chûrn) n. A vessel or device in which cream or milk is agitated to separate the oily globules from the caseous and serous parts, used to make butter.v. churned, churn·ing, churns a. To agitate or stir (milk or cream) in order to make butter.b. To make by the agitation of milk or cream: churn butter.2. To shake or agitate vigorously: wind churning up the piles of leaves. See Synonyms at agitate.
3. To buy and sell (a client’s securities) frequently, especially in order to generate commissions.

Who wouldn’t enjoy tasting freshly churned butter?  Slather it on a thick slice of warm, homemade bread for a taste of nostalgia so good you can almost smell it.  Sad to think that such a warm, homey word has such an unpleasant meaning when used in the world of investments.

Stockbrokers generally earn a commission when they purchase an investment for you.  They also earn a commission when they sell an investment for you.  So when a broker buys, he makes money, when he sells, he makes money.  The more transactions, the better for him, but not for you because you’re paying those commissions.  The term for it is ‘churning’ and it’s against the law – though not necessarily easy to prove.

So what can you do?  Avoid the churn.  If you have someone managing your investments, make sure you pay attention to what is happening with your money.  Make sure you know how your investment manager is compensated.  Is there a fixed fee?  Or is he/she paid commissions?  These are often called ‘loads’ or ‘sales charges’. Don’t be intimidated if you get an answer that doesn’t make sense; ask again until you’re satisfied.  And if you get an answer you don’t like, don’t get agitated (see definition #1 above).Take charge and find someone to work with who will put your interests ahead of theirs.   After all, it’s your money.

The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company. All rights reserved.