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The expenses for groceries and the car are far higher than what someone making $130k a year would pay. $12,659 per year on groceries works out to roughly $240

The expenses for groceries and the car are far higher than what someone making $130k a year would pay. $12,659 per year on groceries works out to roughly $240 per week. While it is possible to reach that (e.g. by shopping exclusively at high-end specialty grocers and avoiding coupons), most families would pay far less. A family with access to a supermarket would probably spend around $80-$120 per week on groceries, or $4200-$6300 per year. The car expenses assume a very large fuel-hungry vehicle, and appear to assume the vehicle will be purchased on a high-interest loan. A five-seat sedan would work just as well, and would result in expenses of about $3000 per year ($10k amortized over a ten-year operating lifetime, plus $2k per year in fuel). Similar issues exist with the other large expenses. For example, the author's chosen goal for college savings is higher than the cost of a four-year degree at Stanford (according to the stanford.edu Net Price Calculator) and is far more than tuition costs at a normal school.

dragonwriter 12y ago
> A five-seat sedan would work just as well, and would result in expenses of about $3000 per year ($10k amortized over a ten-year operating lifetime, plus $2k per year in fuel). (1) automobile costs include more than amortized purchase costs and fuel (such as maintenance) -- especially if you are going to keep it operational for a decade. (2) what 5 seat sedan has a $10K new price? > For example, the author's chosen goal for college savings is higher than the cost of a four-year degree at Stanford (according to the stanford.edu Net Price Calculator) and is far more than tuition costs at a normal school. The savings target for college savings shouldn't be compared against the current cost, but against the expected cost at the time the student will be attending college.
- jmillikin 12y ago
  > automobile costs include more than amortized purchase > costs and fuel (such as maintenance) For modern cars, maintenance is not a significant expense compared to the purchase price and fuel. Insurance is cheap if one's not driving an expensive truck. > what 5 seat sedan has a $10K new price? No need to buy new, let some other sucker eat the depreciation. A 3-4 year old Corolla (or equivalent) shouldn't cost more than $10k. > The savings target for college savings shouldn't be > compared against the current cost, but against the > expected cost at the time the student will be > attending college. Inflation isn't going to be a significant factor, since long-term savings are going to be placed in something like a TIPS bond. It is possible that the total cost will increase, but what are the chances it'll cost more for a regular school then than it does for a top-tier school now?
  - dragonwriter 12y ago
    > For modern cars, maintenance is not a significant expense compared to the purchase price and fuel Its certainly not in the first few years (which is why some companies offer prepaid routine maintenance) -- in the latter several years of a 10 year life, that's far less the case. > No need to buy new, let some other sucker eat the depreciation. A 3-4 year old Corolla (or equivalent) shouldn't cost more than $10k. A 3-4 year old Corolla or other economy car is going to be spending more of the 10 year life you propose in the part of its lifespan where the "maintenance is not a significant expense compared to the purchase price and fuel" argument is invalid than a new car. > Inflation isn't going to be a significant factor, since long-term savings are going to be placed in something like a TIPS bond. A TIPS bond is indexed to general inflation, inflation of higher education costs has been much higher than the general inflation for quite a long time. So, yes, for college savings, inflation is likely to be significant factor, even if you use an investment vehicle protected against general inflation. > It is possible that the total cost will increase, but what are the chances it'll cost more for a regular school then than it does for a top-tier school now? Quite good. Using reference points I'm familiar with, the tuition for a UC now are higher than the tuition at Caltech in the early 1990s, and the ratio of college tuition inflation to general inflation has been higher in the second half of that interval at the first, having stabilized at around 2.0 from the late 1990s on, where it had been at around 1.5 in the early 1990s. So
  - Teckla 12y ago
    For modern cars, maintenance is not a significant expense compared to the purchase price and fuel. Insurance is cheap if one's not driving an expensive truck. I disagree with both of these assertions. No need to buy new, let some other sucker eat the depreciation. A 3-4 year old Corolla (or equivalent) shouldn't cost more than $10k. According to edmunds.com, your typical 4 year old Toyota Corolla will cost closer to $15k+.
woebtz 12y ago
Saving $2500/year @ 10% compounded annually over 18 years is a little over $120K. Not qualifying for financial aid, the total cost (tuition, room, books) per year @ Stanford will run you $50-60K--easily $200K+ for four years. If this tuition history chart (http://www.collegecalc.org/colleges/california/stanford-university/ http://www.collegecalc.org/colleges/california/stanford-univ...) is any indication of the future, four years at Stanford or any prestigious college in 2032 will set you back a ~half million USD! I suppose the parents can bet on the smarter of the two kids...
- jmillikin 12y ago
  > Saving $2500/year @ 10% compounded annually over 18 > years is a little over $120K. 10% is not realistic; 2-3% is more likely, since a college fund isn't the sort of thing you'd want to gamble on stocks with. > Not qualifying for financial aid Always factor in financial aid when calculating college costs. According to stanford.edu's Net Price Calculator, a gross income of $130k with the specified income tax rates will receive sufficient financial aid to reduce the net cost to about $11k per year. This is still pretty high for undergrad, but it's not financially ruinous.

dragonwriter 12y ago

> A five-seat sedan would work just as well, and would result in expenses of about $3000 per year ($10k amortized over a ten-year operating lifetime, plus $2k per year in fuel). (1) automobile costs include more than amortized purchase costs and fuel (such as maintenance) -- especially if you are going to keep it operational for a decade. (2) what 5 seat sedan has a $10K new price? > For example, the author's chosen goal for college savings is higher than the cost of a four-year degree at Stanford (according to the stanford.edu Net Price Calculator) and is far more than tuition costs at a normal school. The savings target for college savings shouldn't be compared against the current cost, but against the expected cost at the time the student will be attending college.

jmillikin 12y ago
> automobile costs include more than amortized purchase > costs and fuel (such as maintenance) For modern cars, maintenance is not a significant expense compared to the purchase price and fuel. Insurance is cheap if one's not driving an expensive truck. > what 5 seat sedan has a $10K new price? No need to buy new, let some other sucker eat the depreciation. A 3-4 year old Corolla (or equivalent) shouldn't cost more than $10k. > The savings target for college savings shouldn't be > compared against the current cost, but against the > expected cost at the time the student will be > attending college. Inflation isn't going to be a significant factor, since long-term savings are going to be placed in something like a TIPS bond. It is possible that the total cost will increase, but what are the chances it'll cost more for a regular school then than it does for a top-tier school now?
- dragonwriter 12y ago
  > For modern cars, maintenance is not a significant expense compared to the purchase price and fuel Its certainly not in the first few years (which is why some companies offer prepaid routine maintenance) -- in the latter several years of a 10 year life, that's far less the case. > No need to buy new, let some other sucker eat the depreciation. A 3-4 year old Corolla (or equivalent) shouldn't cost more than $10k. A 3-4 year old Corolla or other economy car is going to be spending more of the 10 year life you propose in the part of its lifespan where the "maintenance is not a significant expense compared to the purchase price and fuel" argument is invalid than a new car. > Inflation isn't going to be a significant factor, since long-term savings are going to be placed in something like a TIPS bond. A TIPS bond is indexed to general inflation, inflation of higher education costs has been much higher than the general inflation for quite a long time. So, yes, for college savings, inflation is likely to be significant factor, even if you use an investment vehicle protected against general inflation. > It is possible that the total cost will increase, but what are the chances it'll cost more for a regular school then than it does for a top-tier school now? Quite good. Using reference points I'm familiar with, the tuition for a UC now are higher than the tuition at Caltech in the early 1990s, and the ratio of college tuition inflation to general inflation has been higher in the second half of that interval at the first, having stabilized at around 2.0 from the late 1990s on, where it had been at around 1.5 in the early 1990s. So
- Teckla 12y ago
  For modern cars, maintenance is not a significant expense compared to the purchase price and fuel. Insurance is cheap if one's not driving an expensive truck. I disagree with both of these assertions. No need to buy new, let some other sucker eat the depreciation. A 3-4 year old Corolla (or equivalent) shouldn't cost more than $10k. According to edmunds.com, your typical 4 year old Toyota Corolla will cost closer to $15k+.

woebtz 12y ago

Saving $2500/year @ 10% compounded annually over 18 years is a little over $120K. Not qualifying for financial aid, the total cost (tuition, room, books) per year @ Stanford will run you $50-60K--easily $200K+ for four years. If this tuition history chart (http://www.collegecalc.org/colleges/california/stanford-university/ http://www.collegecalc.org/colleges/california/stanford-univ...) is any indication of the future, four years at Stanford or any prestigious college in 2032 will set you back a ~half million USD! I suppose the parents can bet on the smarter of the two kids...

jmillikin 12y ago
> Saving $2500/year @ 10% compounded annually over 18 > years is a little over $120K. 10% is not realistic; 2-3% is more likely, since a college fund isn't the sort of thing you'd want to gamble on stocks with. > Not qualifying for financial aid Always factor in financial aid when calculating college costs. According to stanford.edu's Net Price Calculator, a gross income of $130k with the specified income tax rates will receive sufficient financial aid to reduce the net cost to about $11k per year. This is still pretty high for undergrad, but it's not financially ruinous.