Author Topic: Baby on the Way, Looking for College Savings  (Read 1411 times)

Poosalosomous

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Baby on the Way, Looking for College Savings
« on: July 14, 2018, 01:18:14 PM »
Hello Mustachians!  Iíve been mostly lurking the forum and I find you guys generally have some sage life/money advice, so Iím turning to you for some help.  Weíve always lived below our means but were continuously frustrated to find that money was tight from month-to-month, and couldnít figure out why.  Then I stumbled onto MMM and this idea of being mindful of what you spend and spending according to your values, instead of the mindless spending we were doing.  When I first started tracking our expenses, I was flabbergasted at how much I spent on music and wine (well I think it was mostly wine) in a given year.  I love them both, but not enough to justify what we were spending.  Thatís just a couple of examples.  Weíve done much, much better in the ensuing years. 

Since then, weíve started a family and have been a family of 3 for almost 5 years now, and are expecting our second son in November, so itís time to start college planning for baby 2.  Weíd like to continue to save for retirement at our current rate, if possible, and divert as little of that as possible to college planning.  Ideally, the money will come from what we already spend.  Iíd like some outside advice on finding the money, please.


Life Situation: Married, filing jointly.  I am the sole earner (40yo) and DH is a stay at home spouse (39 yo).  1 son (soon to be 5yo).  Expecting baby #2 in November of this year.  We live in a low cost of living area. 

In our state, you get a tax credit of $200 for every $1000 contributed to the stateís 529 plan, with a maximum credit of $1000.  Historically, we have funded our sonís 529 up to $5000 yearly to obtain the maximum tax credit.  Our plan, as of now, is to continue our monthly contributions to our existing sonís 529 ($3000/year) and then begin funding our next sonís 529 at $5000 yearly (250/mo + 2000 extra) x 5 years as well, then the contributions will drop to just the monthly contributions.  In this way, we will fund each account to roughly the same level, frontloaded for maximum growth potential.

Gross Salary/Wages: $183,000 last year (includes salary, employer 401K contributions, and bonuses)

Net Salary (paid biweekly): $3460/pay, ~ $6920/mo (2 extra paychecks/year, generally put directly in savings, we plan our budget around 2 paychecks/month)

Individual amounts of each Pre-tax deductions:
HSA: $6,750
Health insurance: $8589 last year; increased in July by $84 per paycheck ($2189/year)
Dental: $1189 last year; dropped this in July
Vision: $234 yearly

Taxes:
Federal: $24,115
State/County: $6,473
FICA $7886
Medicare: $2317
Property: $2046

Current expenses: monthly - averaged over past 18 months
Mortgage (P+I): 1159.88
Home maintenance: $214 (this includes anything from repairs to outdoor projects Ė not a static monthly expenditure)
Homeowners: 109 (paid on yearly basis)
Electricity: 96
Natural Gas: 85
Trash: 63 (rates contracted by the city, no ability to change collection plans)
Water: 48
Internet: 40
Groceries: 594
Restaurants: 142
Auto maintenance: 199 (the past 18 months have been outliers due to 2 large expenses for one car, expect this to decrease over the next year)
Auto insurance: 144 (includes an umbrella policy)
Fuel: 133
Car registration: 17 (for 2 vehicles)
Student Loan: 699.44
Cell: 22 (husbandís phone, my service is paid by employer)
Life insurance (me and DH): 110
Life insurance (son): 22 (probably a facepunch; this was purchased at the urging of my father, who is in insurance and financial planning Ė his worry was that if not covered fairly continuously, it is extremely difficult to purchase life insurance later should something happen earlier in life [i.e. some sort of medical condition])
Sonís expenditures: 100
My spending allowance: 100 (clothing + other wishes)
Husbandís spending allowance: 100 (clothing + other wishes)
Preschool: 75 (this will go up as each successive year is more expensive)
Gifts: 120 (includes Christmas and other gift-giving holidays)
Personal Care: 31
Vet care for 2 pets: 117 (a little inflated because we had a third pet who we lost last year and she needed more frequent vet care over that last year)
Food/other pet expenses: 71
Doggy daycare: 12 (occasional use now, used to be more)
Tithing: 527
Other giving: 377 (has increased quite a bit over the last year, as my goal for total giving is 10% of takehome)
Vacation: 243
Entertainment: 95
Netflix: 14
Sirius: 9
Misc: 126 (includes a travel credit card fee, Prime subscription, and other uncategorized purchases throughout the year)
TOTAL: 6283

Assets:
Home: 215,000 (according to Zillow, probably way underestimated based on recent sales in neighborhood)
DS 529: 31695 (contribute 250 monthly + 2000 at end of year to maximize state tax deduction)
DH IRA: 21475
Roth 401K: 178092 (max contribution each year)
My Roth IRA: 35372 (max contribution each year)
DH Roth IRA: 33589 (max contribution each year)
Taxable: 208252 (at least 650/mo contributed)
DH IRA: 9290 (Iím pretty sure itís an IRA from when DH was self-employed, not sure why he has 2 IRAís and a Roth Ė Iím pretty sure they were all set up under the guidance of my father, but I wasnít privy to those discussions)
Savings 27518 (specifically saved for upcoming renovations and expenses paid yearly, 1.73% interest)
Checking: 12422
HSA: 17624
2008 Toyota Camry: 6000
2009 Subaru Forester: 7000
TOTAL: 588544

Liabilities:
Mortgage: 143491 remaining @ 3.44% (18 year Ė maturity date 2031)
Student Loan: 119849 @ 2.88% (medical school + undergrad)
TOTAL: 263340 (weíre really not in any hurry to pay these off as weíve prioritized savings)

Specific Question(s):
Weíre looking for fresh eyes on the budget to find savings for future DSís college savings Ė at least $250/mo, and stay on track for me to get out of my current field in about 10 years (retired or not).
DH does most of the spending, as he manages the household, and I know he works at keeping spending in check and I think he does a pretty good job.  However, I often donít know what we are spending money on Ė just what category heís recorded it in and where the spending occured.  This is most often the home maintenance category.  Sometimes I fear seeming critical of his money management if I am suggesting cuts to the spending levels and try to be respectful of his spending that I think is superfluous, especially since he needs an outlet from the house from time to time.  For example, he likes to go to movies at the theater and I think they are outrageously priced and am happier watching them at home.  I also want to tread lightly because some of the larger expenditures are what I value Ė especially giving.  Our goal for charitable spending is really my goal and heís not religious, so giving to the church is clearly not a priority to him.  So, with that in mind, Iím asking for some outside opinions on what you mustachians might target for spending reduction.  Obviously, we can just take the money from extra paychecks and bonuses that are earmarked for savings, but this hurts our savings for retirement and would not be ideal, so we want to look at our existing spending and guaranteed income first.  Thanks, all!

reeshau

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Re: Baby on the Way, Looking for College Savings
« Reply #1 on: July 14, 2018, 03:32:42 PM »
Specific Question(s):
Weíre looking for fresh eyes on the budget to find savings for future DSís college savings Ė at least $250/mo, and stay on track for me to get out of my current field in about 10 years (retired or not)

Some big questions first:

You seem to have in mind that this is a child vs. retirement question, because that it what will change.  But the 529's are not the biggest rocks to your FI.  Neither your mortgage nor your student loan will be paid off in 10 years.  Are you planning to carry them after you leave your current field?  Or have you not planned that far?

To me, the visualization of what you want in retirement is the biggest motivation--the details matter.  And it doesn't sound like you have the details of the future worked out for yourself, much less with your DH.  Your net worth is only $220k, because you owe 3x your take-home pay.  That is a significant barrier for having the bravery for a single earner to go through a major change.  (Although medical is probably the best industry to attempt it, with stable employment and general availabiliy everywhere)  It is great that you want to give to others and take care of this major need for your children, but unless you have thought through your own life situation more thoroughly, you may be giving money away that you don't have.

I have said all this because you have left open the idea of retirement in 10 years.  I don't know if it would be heartbreaking to say that's not an option currently, but I do think you need to better know where you want to go, in order to steer in that direction.  There are certainly a number of things you can do with expenses, finances, and savings, but any suggestions will be shots in the dark unless we have a better picture of your goals for yourself.

Poosalosomous

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Re: Baby on the Way, Looking for College Savings
« Reply #2 on: July 14, 2018, 09:02:18 PM »
Actually, our current net worth is north of 300,000 and my take home pay is gross minus taxes and some savings in HSA and 401k, so I donít think the situation is as bad as all that. However, you raise good questions.

I actually do plan on carrying the loans into possible retirement, if thatís what I do. Our target would include the continuation of those payments for the few years that would be left.  We decided that because the gains in the market are likely to be more than than interest saved by paying off the loans early at their low interest rates.  I know many would prefer to pay off loans prior to saving, but I feel we would have given up too much staying out of the market.

I donít know that I would retire, as much as maybe have the freedom to find something else to do. I love my job for the most part, however, the burnout is real sometimes. So, I do want to move away from it as soon as I can. My DH plans on going to back to work once the kids are in school ( about 5 years), however, his earning potential is up in the air due to the myriad things he likes to do. I donít know what heíll settle on, but heís always been resourceful. He made a good living in photography just prior to the arrival of our first son. Whatever he brings in at thatís point is basically all savings, so we have that to look forward to as well.

reeshau

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Re: Baby on the Way, Looking for College Savings
« Reply #3 on: July 15, 2018, 01:02:27 AM »
You're right, my math was off for net worth, serves me right for reading forums late at night.  But you have the typical doctor scenario:  big income, big debts.  Carrying them is your choice, but the main reason not to do so is not mathematical, but psychological.  You are counting on everything going right for a couple of decades.  Things can happen, and both those debts make you less flexible.

Numerically, the low interest rate is kind of like pricing a house by the square foot:  it might be low, but with a big house, it's still big.  Even just with simple interest, the house costs you $4,936 in interest this year, and the student loan costs $3,451.  Either one of those is around the money you are talking about.  Planning to address both might get you all of the above, rather than either or.

It is a good detail that your husband wants to go back to work.  Photography is the kind of occupation that he could ease back into.  Any slack he picks up brings you options.

For details:  what makes up your son's expenditures?  Why is his fun money as much as you and your husband's?  Assuming you aren't subdividing his food, etc. here, I assume it's mostly clothes.  Kid's clothes are ridiculous.  Find a neighborhood group to swap or sell.  The going rate in Michigan is $1 per item.  And if you are inclined, you sell it baack in when you have outgrown it.  So, it's a free rental, minus some attrition.  The only thing that needs to be new are shoes.  A baby will have a number of other things (which I don't see a provision for here) but at 5, there should be a lot that is free.

Speaking of the baby, what are your plans in the short term as #2 comes due?  You having your savings earmarked for other things, but are you looking for an extended leave?  I am sure you can work through it, but I think adjusting for living with the baby also needs to be part of the budget you are working on now, not just college.

YttriumNitrate

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Re: Baby on the Way, Looking for College Savings
« Reply #4 on: July 15, 2018, 06:50:50 AM »
In our state, you get a tax credit of $200 for every $1000 contributed to the stateís 529 plan, with a maximum credit of $1000.  Historically, we have funded our sonís 529 up to $5000 yearly to obtain the maximum tax credit.  Our plan, as of now, is to continue our monthly contributions to our existing sonís 529 ($3000/year) and then begin funding our next sonís 529 at $5000 yearly (250/mo + 2000 extra) x 5 years as well, then the contributions will drop to just the monthly contributions.  In this way, we will fund each account to roughly the same level, frontloaded for maximum growth potential.

Hello fellow Hoosier. My three year old has about six years of maxed out 529 contributions, and my second just arrived this spring, so I also went through the "what is fair?" debate for future allocations. Ultimately, I decided that the precise formula I use now for divvying up contributions doesn't really matter since I don't believe they should be rewarded (or punished) for being born during a time of high growth (or bust). My plan is to re-balance the two accounts when my oldest is in high school so that they both receive about the same amount for college.

YttriumNitrate

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Re: Baby on the Way, Looking for College Savings
« Reply #5 on: July 15, 2018, 07:05:10 AM »
Gross Salary/Wages: $183,000 last year (includes salary, employer 401K contributions, and bonuses)

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Assets:
Roth 401K: 178092 (max contribution each year)

        ****

Weíre looking for fresh eyes on the budget to find savings for future DSís college savings Ė at least $250/mo, and stay on track for me to get out of my current field in about 10 years (retired or not).
Why are you using a Roth 401k instead of a regular 401k?

CindyBS

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Re: Baby on the Way, Looking for College Savings
« Reply #6 on: July 15, 2018, 08:11:41 AM »
A couple thoughts on the 529's

1) how do grandparents and other relatives fit into this?  Would they give to it?  My parents make a significant contribution to my kids' 529's and then a small token gift to open on birthdays.  As your kids get older they understand and appreciate this type of gift a lot more.  I'm glad we started this b/c as the kids have aged they want more digital downloads or really big items - both of which don't work well for a present opening situation.   My parents appreciate not giving the kids another piece of plastic that they won't care about in a week as well.   My parents write the check and take the tax deduction for their contributions.

2) I know a kid who did really well in school and got a free ride - tuition + room and board - to college.  His parents have a fairly substantial 529 for him and unless he goes to grad school, I'm not sure how they will use it all without withdrawing it with a penalty.  They have no other children so they can't transfer it.  This is a rare situation and not one to depend on, but if your 5 year old already has $31K ish in a 529, at the rate you are saving, it could have a substantial amount of money in it by the time he graduates.  You can't assume he will go to college at all, much less grad school or further.  The same amount of money in something like a retirement account or even paying down debts is a lot more flexible.  If you have a paid off house and/or student loans, or a big stache, instead of locking up money in a 529, that can be used so many ways.  You should not count on always being able to work.   If your DH could not bring in the level of income you do, consider that he may not be able to pay the loans or the mortgage in a long term emergency situation.


ZMonet

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Re: Baby on the Way, Looking for College Savings
« Reply #7 on: July 15, 2018, 11:36:11 AM »
A couple thoughts on the 529's
2) I know a kid who did really well in school and got a free ride - tuition + room and board - to college.  His parents have a fairly substantial 529 for him and unless he goes to grad school, I'm not sure how they will use it all without withdrawing it with a penalty. 

I believe in this instance they can take out up to the amount of the free ride penalty free.  Good point though about you can't be sure that a kid will even go on to college or grad school. 

Poosalosomous

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Re: Baby on the Way, Looking for College Savings
« Reply #8 on: July 15, 2018, 12:49:33 PM »
You're right, my math was off for net worth, serves me right for reading forums late at night.  But you have the typical doctor scenario:  big income, big debts.  Carrying them is your choice, but the main reason not to do so is not mathematical, but psychological.  You are counting on everything going right for a couple of decades.  Things can happen, and both those debts make you less flexible.

Numerically, the low interest rate is kind of like pricing a house by the square foot:  it might be low, but with a big house, it's still big.  Even just with simple interest, the house costs you $4,936 in interest this year, and the student loan costs $3,451.  Either one of those is around the money you are talking about.  Planning to address both might get you all of the above, rather than either or.

It is a good detail that your husband wants to go back to work.  Photography is the kind of occupation that he could ease back into.  Any slack he picks up brings you options.

For details:  what makes up your son's expenditures?  Why is his fun money as much as you and your husband's?  Assuming you aren't subdividing his food, etc. here, I assume it's mostly clothes.  Kid's clothes are ridiculous.  Find a neighborhood group to swap or sell.  The going rate in Michigan is $1 per item.  And if you are inclined, you sell it baack in when you have outgrown it.  So, it's a free rental, minus some attrition.  The only thing that needs to be new are shoes.  A baby will have a number of other things (which I don't see a provision for here) but at 5, there should be a lot that is free.

Speaking of the baby, what are your plans in the short term as #2 comes due?  You having your savings earmarked for other things, but are you looking for an extended leave?  I am sure you can work through it, but I think adjusting for living with the baby also needs to be part of the budget you are working on now, not just college.

Sonís expenditures vary quite a bit from month to month. Much to my chagrin heís still in diapers at night, but thatís really the only recurring monthly expense for him. Otherwise, itís swim lessons and he tried t-ball this year, clothes, some toys, plenty of random stuff as well. All clothes have generally been second-hand, though not quite as inexpensive as $1 per item.

Once DS2 comes along, Iíll be at home for about 8 weeks, and this is most likely paid leave, though Iím saving up most of my vacation time just in case. I worked for the same employer when I had DS1 and leave was paid. By then, Iíll be itching to get back out of the house. We have pretty much have everything still from DS1ís infancy (currently on loan to my 6-week old nephew), including cloth diapers, clothes, crib, bassinet (made by DH), swing, toys, car seat, stroller, etc.  So, budget-wise, the changes should be fairly minimal, unless he has some special circumstances.

Poosalosomous

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Re: Baby on the Way, Looking for College Savings
« Reply #9 on: July 15, 2018, 12:51:34 PM »
In our state, you get a tax credit of $200 for every $1000 contributed to the stateís 529 plan, with a maximum credit of $1000.  Historically, we have funded our sonís 529 up to $5000 yearly to obtain the maximum tax credit.  Our plan, as of now, is to continue our monthly contributions to our existing sonís 529 ($3000/year) and then begin funding our next sonís 529 at $5000 yearly (250/mo + 2000 extra) x 5 years as well, then the contributions will drop to just the monthly contributions.  In this way, we will fund each account to roughly the same level, frontloaded for maximum growth potential.

Hello fellow Hoosier. My three year old has about six years of maxed out 529 contributions, and my second just arrived this spring, so I also went through the "what is fair?" debate for future allocations. Ultimately, I decided that the precise formula I use now for divvying up contributions doesn't really matter since I don't believe they should be rewarded (or punished) for being born during a time of high growth (or bust). My plan is to re-balance the two accounts when my oldest is in high school so that they both receive about the same amount for college.

Thatís a good idea to rebalance the accounts closer to college to try to provide about the same level of funding.

Poosalosomous

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Re: Baby on the Way, Looking for College Savings
« Reply #10 on: July 15, 2018, 01:07:00 PM »
Gross Salary/Wages: $183,000 last year (includes salary, employer 401K contributions, and bonuses)

        ****

Assets:
Roth 401K: 178092 (max contribution each year)

        ****

Weíre looking for fresh eyes on the budget to find savings for future DSís college savings Ė at least $250/mo, and stay on track for me to get out of my current field in about 10 years (retired or not).
Why are you using a Roth 401k instead of a regular 401k?

Honestly, because at the time it was set up, I was really reliant on my financial advisor/father and thatís what he advised. The advisor our practice uses agreed with him, so Roth it was. At the time, everyone was operating under the assumption that I would end up in a higher tax bracket come retirement time and with RMDís, it would be beneficial to have the money tax free. No one was thinking about moving out of this career on the early side, and, I guess the assumption was that as income rises, so does spending, so Iíd be withdrawing more the older I got. Now that weíre several years into it, I just feel like starting over with a traditional 401k makes my financial picture a little more complicated and Iíd really like it to be simpler. It also gives me one less thing to think about tax-wise when Iím ready to make withdrawals, so thereís that.

Not doing all this myself for several years is a hinderance to me now. Following the advice of my father, our accounts are made up of all kinds of mutual funds and I donít really know why weíve ended up with so many different accounts - mostly with regards to my husbandís accounts. Iíd really like things to be simpler and mostly index funds (my allocation in my roth401k is under only my control and itís just index funds at this time). Our accounts have generally fared well, but could be better and Iím sure some of the fees are higher than I would like. When we discuss it, my father has all kinds of reasons why heís right, so weíve been compromising the past 2-3 years. I thought heíd be retiring and Iíd take it all back from him and get it all just the way I like it, but he just keeps going (heís 72 and has no reason to continue working other than he really likes it). I have been putting my foot down more with him, gently, and he has been respecting my wishes to allocate new deposits into index funds so I continue to encourage him to retire.

Poosalosomous

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Re: Baby on the Way, Looking for College Savings
« Reply #11 on: July 15, 2018, 01:21:40 PM »
A couple thoughts on the 529's

1) how do grandparents and other relatives fit into this?  Would they give to it?  My parents make a significant contribution to my kids' 529's and then a small token gift to open on birthdays.  As your kids get older they understand and appreciate this type of gift a lot more.  I'm glad we started this b/c as the kids have aged they want more digital downloads or really big items - both of which don't work well for a present opening situation.   My parents appreciate not giving the kids another piece of plastic that they won't care about in a week as well.   My parents write the check and take the tax deduction for their contributions.

2) I know a kid who did really well in school and got a free ride - tuition + room and board - to college.  His parents have a fairly substantial 529 for him and unless he goes to grad school, I'm not sure how they will use it all without withdrawing it with a penalty.  They have no other children so they can't transfer it.  This is a rare situation and not one to depend on, but if your 5 year old already has $31K ish in a 529, at the rate you are saving, it could have a substantial amount of money in it by the time he graduates.  You can't assume he will go to college at all, much less grad school or further.  The same amount of money in something like a retirement account or even paying down debts is a lot more flexible.  If you have a paid off house and/or student loans, or a big stache, instead of locking up money in a 529, that can be used so many ways.  You should not count on always being able to work.   If your DH could not bring in the level of income you do, consider that he may not be able to pay the loans or the mortgage in a long term emergency situation.

1) My parents are planning on contributing, but I donít know the amount. Iím not sure if itís going to be a one-time contribution or ongoing contributions. I donít think itís a thing in my husbandís family to contribute to college funds. At least, itís not anything that would be likely to cross my FILís mind.  If I could persuade him to contribute to the 529 instead of buying gifts, that would be awesome, but heís a gift-giver and finds even giving gift cards joyless.

2) Itís true that he may not go to college, but if he canít use it, the money can be transferred to someone else, so we donít feel itís too big a risk. Hopefully, it will be useful in some manner to him.

As far as not being able to assume we will always have this income level, I have a disability policy through my employer (I need to review that as I always forget the particulars) and weíre pretty flexible. I think weíd be quick to downsize and reduce housing costs, so that would help. The biggest issue would be the student loan payment. This sucker is with us for another 19 years at this point. That would definitely be a concern if DH wasnít able to earn at his most recent level (the last year with his photography job he pulled in 80k, you could have knocked me over with a feather).

Poosalosomous

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Re: Baby on the Way, Looking for College Savings
« Reply #12 on: July 17, 2018, 07:22:13 PM »
Thanks for the replies so far. Does anyone have any thoughts on other targets in the budget where savings might be found?

MrThatsDifferent

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Re: Baby on the Way, Looking for College Savings
« Reply #13 on: July 18, 2018, 01:24:14 PM »
Thanks for the replies so far. Does anyone have any thoughts on other targets in the budget where savings might be found?

I think you and your family are doing really well, especially on 1 income with a fourth person about to be added. I understand that temptation to want to cut and cut but really, your life isnít extravagant and your family is getting maximum benefits. The only thing I would cut, is the one thing you probably donít want to touch, the extra giving. I personally am not fan of giving to churches when they have so. I hope and their leaders are living like millionaires, but thatís my personal bias. I get the tithing, if thatís your belief system. But the extra giving seems like something you could put on hold for 5 years, funnel that money to your son and then resume again when your DH starts working again. Hereís the thing, you canít have it all and this really is an extra want, not need. You donít want to take away your husbandís movie time when heís got the kids all day or get into silly fights about a penny here or their. Family systems are so fragile, do whatever you can to make them peaceful and stress free. Your tithing is giving, so youíre still achieving that but the extra giving might be a bit much for the higher priorities you have right now. And if that bothers you, consider giving physical aid to charities through volunteer work in some way that makes you feel good, it doesnít have to be money. Maybe your practice can offer some free medical services to low income people or the homeless in your area?

Just my 2 cents, nothing for you to defend or explain, itís all deeply personal.

reeshau

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Re: Baby on the Way, Looking for College Savings
« Reply #14 on: July 18, 2018, 03:33:51 PM »
Since you asked, some follow-up on the discussion on insurance / investing...

Not doing all this myself for several years is a hinderance to me now. Following the advice of my father, our accounts are made up of all kinds of mutual funds and I donít really know why weíve ended up with so many different accounts - mostly with regards to my husbandís accounts. Iíd really like things to be simpler and mostly index funds (my allocation in my roth401k is under only my control and itís just index funds at this time). Our accounts have generally fared well, but could be better and Iím sure some of the fees are higher than I would like. When we discuss it, my father has all kinds of reasons why heís right, so weíve been compromising the past 2-3 years. I thought heíd be retiring and Iíd take it all back from him and get it all just the way I like it, but he just keeps going (heís 72 and has no reason to continue working other than he really likes it). I have been putting my foot down more with him, gently, and he has been respecting my wishes to allocate new deposits into index funds so I continue to encourage him to retire.

The simple answer is that no index fund pays sales commissions.  I'm making the assumption that your father did not just advise you on these accounts, but that you actually opened them through his company.  I don't know at this point if there is any chance to talk him out of it--he has been hearing his point of view for a very long time, and since a time before other alternatives even existed.  I'd beware of just what kind of funds he got you in:  anything stating Class A, B, or C are immediate tip-offs that these funds carry a sales load.  And, of course, they also carry high annual fees.

Life insurance (son): 22 (probably a facepunch; this was purchased at the urging of my father, who is in insurance and financial planning Ė his worry was that if not covered fairly continuously, it is extremely difficult to purchase life insurance later should something happen earlier in life [i.e. some sort of medical condition])
 

Same thing with the baby life insurance.  I assume this is a whole life policy?  Again, it's well known these are not good investments, financially speaking.  But if you have to face your father to stop them, I would ask two questions:

1)  In his career, how many times did someone have to invoke this "protection" to gain life insurance?  What is that, expressed as a percent of policyholders in his lifetime?
2)  Is this a policy for $1,000,000?  It might provide insurance continuity, but if there is truly some kind of risk-limit event, there's no insurance company that will then magnify their risk by writing a policy for a recommended 10x - 12x of income.  (or net spending / needs)  If this is some $10k / $20k policy, what good would that really do an adult family?

It's hard to deal with a situation where your own eyes are open, but your past advice, now known as wrong or limiting, is given by someone close.  My brother faced a similar situation, but with much lower amounts.  My brother, a talented manager with a business degree, still makes a lot of personal decisions on an emotional or relationship basis.  He had a small amount of money, with which he wanted to open an IRA.  He went to his insurance broker, who also happens to be our uncle and who also was his high school basketball coach.  They were very close.  Fast forward 5 years where he was now investing in his company's 401k, and reviewing the investment choices with me, when this little account comes up.  The deposit he made was about $2,000.  I looked at the funds, all Class A with front-end loads, and asked him what he thought those investments cost him upfront to buy.  His answer was "nothing."  I told him, when I tallied it up, it was about $300.  Brother nearly went through the roof with rage, feeling betrayed.  (remember, this is not an earth-shattering amount of money.  But, he felt he was led into a situation without full disclosure)  As I looked to calm him down, I said: "Look, our Uncle is the last person to try and scam you.  He has every reason to love and support you.  But he is an insurance agent.  You went to him, and his universe is this type of stuff.  The mistake was limiting the universe in the first place.  Once you were there, of course this is what you get.  They are just that type of animal."

Brother calmed down, and his eyes were now open--nothing like a good shot of adrenaline to keep you remembering.  Fortunately, he also took my statement to heart, and did not hold it against our uncle.  But, as far as I know, he has never asked him for financial advice again.  Clearly, your father has been, and probably expects to be, involved.  But you already know that this advice is costing you money, even if you haven't calculated it out.
« Last Edit: July 19, 2018, 01:23:41 AM by reeshau »

reeshau

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Re: Baby on the Way, Looking for College Savings
« Reply #15 on: July 18, 2018, 03:46:13 PM »
More directly answering your recent question, and building on MrThatsDifferent's point on the extra giving...

Sometimes people are so organized, they get to where you can't see the forest for the trees.  Try grouping your expenses into "wants" and "needs."  Here's a cut at it:

Restaurants: 142
Life insurance (son): 22
Sonís expenditures: 100
My spending allowance: 100 (clothing + other wishes)
Husbandís spending allowance: 100 (clothing + other wishes)
Gifts: 120 (includes Christmas and other gift-giving holidays)
Personal Care: 31
Other giving: 377 (has increased quite a bit over the last year, as my goal for total giving is 10% of takehome)
Vacation: 243
Entertainment: 95
Netflix: 14
Sirius: 9
Misc: 126 (includes a travel credit card fee, Prime subscription, and other uncategorized purchases throughout the year)
Total wants:  $1,479

So, you can easily find $250 in this pile.  How you do it can be a million different ways, but look and see first that there is plenty of room.

Personally, it's easy to see that Sirius + Netflix + Prime is redundant.  I had a serious Sirius habit, but killed it with podcasts of *the same content*.  Netflix is interesting, as your husband is pulling for theater shows anyway:  is this a case of winning the battle, but losing the war?

Anything else has to come from you and your family talking about your priorities.  Maybe you swear off traveling for vacations for a few years?  Maybe you try traveling once with two little ones, and find it's too much of a horror show, anyway.  Maybe you commit to no restaurants, or maybe the second exhausts you to the point of "takeout or starve."  If you commit to banishing or absorbing Misc. into the other "free spending" categories, that's half the goal right there.  Cut every category by 17%.  Maybe you do compromise on your giving goal until your child's education is set--put on your own oxygen mask first, before helping others.  But there is a lot to work with here, however you slice and dice it.
« Last Edit: July 19, 2018, 01:26:14 AM by reeshau »