Author Topic: Student loans+ daycare+ retirement+ downpayment- how are you managing expenses?  (Read 1706 times)

Millennialworkerbee

  • 5 O'Clock Shadow
  • *
  • Posts: 38
Hubby and I are in a triple financial constraint right now- growing family, student loans, and we don't yet own a home. We started our family on the younger side (I was 25 with my first and will be 27 with the second-hopefully).

Knowing the power of saving early, we are also trying to save as much as possible into our retirement accounts (we just hit the 75k mark woohoo!) because I know we'll thank ourselves later, but it is frustrating to have less cash flow to get the student loans paid off so we can take on a mortgage (monthly cash flow doesn't allow for daycare AND student loans AND mortgage.)

I'm wondering if there are others out there facing a similar dilemma, or those who are a few years down the road who can offer encouragement? Current projections show our student loans won't be paid off until 2020, and home ownership at 2021. Sometimes hubby gets a little bummed about the idea of maybe not being in our "family home" before our little guy starts school.
« Last Edit: October 23, 2017, 01:28:31 PM by Millennialworkerbee »

cantgrowone

  • 5 O'Clock Shadow
  • *
  • Posts: 75
Re: Young(ish) parents- how are you managing expenses?
« Reply #1 on: October 23, 2017, 01:16:34 PM »
One of my biggest financial regrets is not maxing out 401k when I first started working 6 years ago. I'm 29 with no kids but I'd say keep doing what you guys are doing. The 401k will pay off in the end.

There's no need to be bummed out. You're in a better situation than many who cannot fathom the idea of buying a house 4 years from now.
Get gift cards when booking business trips: https://upside.com/promocode/?promocode=rn6qvd
Bitcoin Donations: 16tbBnNsdxVpwf8ZuUXehv3PG5TEEHn5wV

JustGettingStarted1980

  • Bristles
  • ***
  • Posts: 349
On the contrary, NOW is the time to max out those 401K's and pay off those student loans as you will be too busy raising babies to worry about going out or traveling anyway!

Push off that hedonistic adaptation for a decade, and your future selves will REALLY appreciate it.

JGS

PS I'm about 6-7 years ahead of you with the kids, but miles behind you when it comes to Net Worth at the same age (I was probably -275K at your age)

mm1970

  • Magnum Stache
  • ******
  • Posts: 4816
Not in your situation and never was.  I did everything serially.

(Paid off loans first, bought a house, then had kids.  I invested in retirement along the way, but definitely put more emphasis on the SL's, because my interest rates were 8% and 10%.  I'm a dinosaur.)

But I'd put money into retirement first and pay off your loans.  Wanting a house, I get that.  But we didn't buy our house until age 34 and 36.  (and had kids LATE).

calimom

  • Bristles
  • ***
  • Posts: 480
  • Location: Northern California
Yay for you guys: good relationship, sweet baby, well educated with (presumably) good jobs and a healthy savings plan. Owning a house is nice but not mandatory. Having another baby is not mandatory. You have lots of time! If you're looking for advice, mine would be to continue paying down your debt, do well in your careers, continue maxing out 401k and Roth. Continue to rent! Are you ok with your current rental? It's likely prudent to stay there. And you don't need to follow the herd or any self imposed 'plan' you may have to have children XXX years apart. Another baby in daycare will only delay the plans you have. It can wait. Relax and enjoy the path you're on. You're doing great.

onewayfamily

  • 5 O'Clock Shadow
  • *
  • Posts: 90
Nothing to get bummed out about. You just need to do the best you can in your circumstances. Kids and family in general are more important than anything else, including the speed at which you reach FIRE.

You may be surprised as well as you go through the next few years at what additional income opportunities come into your lives which will speed up your projections.
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

chemistk

  • Stubble
  • **
  • Posts: 215
Wife and I are in exactly your situation, minus one year (I'm about to turn 26, she will be 27 next year), with a little less in the retirement account, mainly because we're not maxing that right now.

It's incredibly demoralizing to see so little $$$ go toward a down payment on a home. Every now and then the devil on my shoulder tries to tell me that an 80/10/10 would be doable or that PMI isn't that bad. Bottom line we want to not be renters bad. Trying to keep the house in good condition with a toddler (and an infant who will be on that destructive path next year) is very difficult, and despite being easy to work with our landlord's property management group has no real urgency around certain things. We were without a microwave for 2 weeks which made sanitizing bottles and reheating coffee a real pain. Oh, and our backyard is a hill without a fence into a very tick-laden patch of woods.

Some days, I open Vanguard just to try and re motivate myself. We want desperately to be closer to my job so I could walk/bike, but rent for anything similar to what we have/need is unreasonable and home prices put us at 2-3 years before buying.

Honestly, reading my thoughts above, I really just am complaining. I hope you take comfort knowing you're not the only one out there.

Realistically, our plan is just to keep moving along, being aggressive about the loans and progressively increasing 401k contributions. It just stinks that the responsible path to home ownership is a long journey.

Well, the one other thing that gives me a spark of hope is the thought of the economy taking a little downturn and housing prices dropping a significant amount. I don not want to take joy in others' pain but a bad break for most would be a great opportunity for our family...

galliver

  • Handlebar Stache
  • *****
  • Posts: 1565
You and your husband should drill down into why having a family home, particularly by a particular deadline/milestone, matters so much to him (and possibly you). As someone who grew up in rental apartments, I find the "you must have a house to raise kids" attitude to be mostly marketing. Before age 8 or so, the housing situation I was in was what was "normal", after that I wanted my own room sometimes, or to have non-white walls. I'm not saying it's not nice to have a family home, or that I didn't dream of it in middle/high school, but it wasn't an option for us and I turned out just fine. The important part, I think, is the stability of knowing you will have a roof over your head, not how it's achieved (through homeownership or savings in the bank). Furthermore, neither I not my 2 sisters experienced any significant effects from moves before we were ~10yo. As long as we were with family, things were fine. (Older than 10, missing friends and changing schools became more of an issue...still totally survivable though!!)

PS for those worried about the walls...I don't think I've ever, as a child or adult, started off in an apartment that wasn't freshly repainted...

And my second thought, at 29 I'm not hitting any of those yet due to getting stuck in grad school and still working my way out. You're doing just fine, keep chugging along!! :)

Sent from my SM-G900V using Tapatalk


jezebel

  • Handlebar Stache
  • *****
  • Posts: 1341
I can't really help because we were the mid 20s couple with a baby who prioritized buying a house over paying down debt and saving for retirement.  I wouldn't change that if I could (we live in a low cost housing market where buying wins out on the rent/buy debate) even though we put down a minimal payment and paid PMI for a few years before we refinanced into a conventional mortgage.  It was ultimately a good finanial move based on our particular circumstances at the time. 

BUT I do wish we had started saving something retirement during that time.  And if we had lived in an expensive housing market, I definitely would have rented for longer and worked on paying down debt.

tthree

  • Bristles
  • ***
  • Posts: 407
  • Location: Canada
There is no "right" order.  In my case it was house at 23, kid #1 at 27, and DH's student loan finally paid off at 29 (when we sold the house).  In retrospect, the thing I did wrong was not buy two houses at 23;)  If I had bought two houses I would be FIREd now.

Millennialworkerbee

  • 5 O'Clock Shadow
  • *
  • Posts: 38
Thanks everyone for the replies and encouragement! I've been digesting for a few days. To respond to some of your questions:

The reason Hubby values home ownership so much is because he did not have the best financial literacy education- he grew up thinking that home ownership was really the only way to wealth/retirement/FI and knew 0% about the sock market before he met me. The tide is changing, but it is still super important to him. I don't totally agree with it, but marriage is a compromise, right? :)

We have a one of a kind deal on the house we rent, we rent from a family member so they charge us much less than the going rate ($500 for a 2br 2ba 1000 sq ft house). With a growing family, and frequent visitors (my family lives out of town and comes to visit approx every 6-8 weeks), 2 bedrooms is going to be too small to stay here permanently. But we are trying to make it work as long as we can!

Wife and I are in exactly your situation, minus one year (I'm about to turn 26, she will be 27 next year), with a little less in the retirement account, mainly because we're not maxing that right now.

It's incredibly demoralizing to see so little $$$ go toward a down payment on a home. Every now and then the devil on my shoulder tries to tell me that an 80/10/10 would be doable or that PMI isn't that bad. Bottom line we want to not be renters bad. Trying to keep the house in good condition with a toddler (and an infant who will be on that destructive path next year) is very difficult, and despite being easy to work with our landlord's property management group has no real urgency around certain things. We were without a microwave for 2 weeks which made sanitizing bottles and reheating coffee a real pain. Oh, and our backyard is a hill without a fence into a very tick-laden patch of woods.

Some days, I open Vanguard just to try and re motivate myself. We want desperately to be closer to my job so I could walk/bike, but rent for anything similar to what we have/need is unreasonable and home prices put us at 2-3 years before buying.

Honestly, reading my thoughts above, I really just am complaining. I hope you take comfort knowing you're not the only one out there.

Thank you!! I think more than anything I just needed to commiserate with someone else in our shoes. We are happy with the choices we've made- with the exception is taking out so many student loans. We pay $750 a month towards them. I realize how fortunate we are to be able to pay that bill without stress, as a lot of other people our age have bills like that and can't make the payments.

Also to be clear, our net worth isn't 75k.. just our retirement accounts. But our net worth did turn positive this year which was an awesome feeling!
« Last Edit: October 27, 2017, 08:24:17 AM by Millennialworkerbee »

trollwithamustache

  • Bristles
  • ***
  • Posts: 322
Another vote for asking why is the house such a priority?

seriously this is a general MMM question. everyone is super into frugality here, but totally OK buying relatively big houses when a cheap apartment is fine for many.

Sure, our OP may actually legit need a house with multiple kids in the plan since in America its hard to find/rent 3 or 4 bedroom apartments. but you can still rent houses!


jezebel

  • Handlebar Stache
  • *****
  • Posts: 1341
Another vote for asking why is the house such a priority?

seriously this is a general MMM question. everyone is super into frugality here, but totally OK buying relatively big houses when a cheap apartment is fine for many.

Sure, our OP may actually legit need a house with multiple kids in the plan since in America its hard to find/rent 3 or 4 bedroom apartments. but you can still rent houses!

For myself, and many others I noticed on MMM, a small house works fine.  And in many communities around the country, including mine, it actually make legit financial sense to buy instead of rent.  You can't make sweeping generalizations.

ysette9

  • Handlebar Stache
  • *****
  • Posts: 1884
  • Location: Bay Area, CA
I understand the desire to own your own place, but the key to FIRE and financial success in general is a combination of delayed gratification and an objective, hard look at what the numbers actually say. We rented for a long time and I complained all the time about the lack of insulation, how the house was cold in the winter and hot in the summer, the single bathroom, the fact we could see sunlight through the gaps in the front door, etc. etc. But we were getting an amazing deal in rent (which it sounds like you are as well), so we kept plugging away at it. We maxxed out our retirement accounts and put healthy amounts into taxable investments and kept waiting until the time was right. We finally bought our family home earlier this year just before our second kid came (me 35, him 36). We are pleased with what we got and in a very comfortable financial situation because of waiting.

I did spend time online here venting about our old house situation, so do that if it helps blow off steam and stay focused.
"It'll be great!"

therethere

  • Bristles
  • ***
  • Posts: 459
I can understand why you're bummed. Your money is stretching everywhere with big payments and you want MORE. Fact is though you can't have everything all at once.  You need to work for it. The problem isn't cashflow. The problem is the wanting. You should be proud of what you have worked to do. 75k in retirement at your age is wonderful!

Choose your priorities and remind yourself of them. If you want a house now just accept that student loans will be on the back burner. If you want the loans gone ASAP, then you need to accept that you can't contribute tons to a downpayment or retirement. Etc.

If it makes you feel better I'm 35, have never owned a home, no kids, still have student loans, and can't come up with a downpayment either! But I'm prioritizing my retirement savings instead of home ownership. Even though I desperately want a home for the long term stability. Priorities.

I refinanced my student loans with Earnest and cut 1% off my rate. PM me for a referral with $200 credit.

Lumberjack

  • 5 O'Clock Shadow
  • *
  • Posts: 16
DW is an academic, and I had student loans, so we didn't want to have kids or buy a home until we were clear of the loans and had settled wherever she was going to land. It was really hard to watch our friends buy homes and start families, but we knew that we were on a different course and, if we stuck to the plan, things were going to be good. We're 33 now, we have no debt, a very manageable mortgage, and a 20 month old.

You're on track to get everything you want. Stick to the plan!

cats

  • Pencil Stache
  • ****
  • Posts: 743
Another 3-4 years is really not that long--it will pass before you know it.  And you never know what will happen in the interim.  Maybe one or both of you will get a nice raise, speeding up the savings process.  Maybe the housing market will take a big dip in 2020, allowing you to scoop up your dream home at a bargain price.

We're also renting with a kid.  The housing market is pretty insane in our area, so we will likely be renting until we FIRE to a cheaper part of the country.  Some days renting gets pretty old and I feel really frustrated by it, but there are advantages also--an apartment is much less work to keep clean/tidy than a house, since we don't own we aren't really responsible for maintenance or repairs, in our area once you've stayed in a place for several years all sorts of minor damage is considered reasonable use so it's actually less of a big deal that I have a toddler running around being somewhat destructive than it would be if we were homeowners, heh (this may not be the case if you are renting from family). 

nottoolatetostart

  • Bristles
  • ***
  • Posts: 424
We did things backwards a bit. We bought a house (5% of our gross), paid off student loans a year later, and then had a baby. We always contributed to our 401ks, but didn't really max them out until 2013 (what I would not give to have maxed them out back in 2008 after leaving grad school).

The order you are doing everything is smart. You are so young still.

Houses are expensive. It's not just the mortgage and taxes. Stuff breaks, pipes leak, etc. Just this year we have had to tuckpoint our chimney, put in insulation into our attic (there was none and we got bad ice damning), lawn mower broke, and fix a leaky pipe in basement. We routinely set aside at least 250/month for these things. At least with renting, all this stuff is included for a fixed fee in your rental. Having a home is a luxury.

2020 will be here before you know it, especially if you have little ones. Also, your daycare expenses will be going up shortly if you have second baby, right?

Hope that helps