Do you allocate each paycheck determining in advance where the money goes? Do

you like to balance your checkbook? Do you know your credit card totals?

Do you have six months of income set aside just in case of unexpected

problems? Have you created a plan for retirement? If you have sheepishly

answered "No" to any (or most) of these questions, then you are like most

people with whom we work.

The most crucial question to ask is "What have I saved to pay for college?"

Though most of us don't have the thousands and thousands of dollars set

aside, even a little bit will help in this process. A financial evaluation

includes not only college savings, but all assets, income, and reality.

Identify the resources you can use to pay for college. Can you sell a

property? Can you cash in financial investments? Can you get a second job?

Can a spouse previously not working or only working part time increase their

work hours? All of these resources can be used to pay for college.

Now identify what you can reasonably use from your monthly budget. Can you

dedicate $200 per month or maybe $500 per month (consider giving up lattes,

packing lunch, and carpooling)?

With this college budget in mind, try to figure out about how much you can

afford per year to contribute to your student's college education. You'll

notice we say "contribute". A college education primarily belongs to the

student. The student needs to take an active role in paying for this

privilege.

Now sit down with your student and show them what you can contribute. Ask

your student to consider what they can contribute: summer job, money from

grandparents, a savings account, reduced spending.

Now that you have a budget, investigate financial aid opportunities. These

include money from the federal government, state government, the colleges or

universities themselves, and community scholarships. Though you cannot

predict to the penny what will be offered in your financial aid package, with

some research, you can create a pretty good estimate.

Finally, evaluate the tax consequences. Will you be eligible for the tuition

deduction or the tax credit? How much will this add to your tax refund that

can be used to pay for college?

With all this information you can now start to choose colleges whose costs

are close to your budget. Don't forget to add in the variable expenses like

books, supplies, personal expenses (I call this laundry and pizza money), and

transportation. Another method of bringing these costs closer to your budget

is to figure out where you can cut the cost of college.

Does your student really need the latest, greatest wonder computer or will a

refurbished computer work just as well? Can your student live at home and

commute to college? Can your student manage a part time job during the school

year?

Based on your research and financial evaluation, you and your student need to

have a heart to heart discussion. You may be heart-sick when you realize that

Dream College Number One is not in your budget.

But better your student see early rather than later why this college is a

challenge. This allows your student time to find an acceptable college that

meets the budget. Don't be afraid to dream and apply big, but be sure you

have a financial "Plan B" waiting just in case you need it.