We have made major changes to facilitate our path to financial freedom by 2026. We are also excited that Child No. 2 is on the way. Of course we can afford the child, but the main expense associated with having a young child, child care, still daunts me. It is $7,540/year for the option that works best for us in our area. Of course the dependent care FSA is something we are already maxing out.
I am going to post our stats and see if anyone has suggestions for how we can do things better. I really don't want to slow down on the path to FI! If you need clarification, let me know.
Thanks!
Salaries and deductions:
Spouse 1: $85,500 (3% only likely increase--public/nonprofit sector)
Exemptions claimed: 2
Health insurance deducted/year: $10,992 (employee and ALL children; our only choice)
Mandatory retirement deduction: 7% ($5,985)--this is vested (and double matched) after 8 years of employment; no option to increase this modified pension
Voluntary 457 Contribution: $14,400 annually (same limit as 401k)
Flexible spending account: $7,500 ($2,500 health, $5,000 dependent care)
Spouse 2: $33,000 (20 hours/week), will have opportunity to earn more this year in commission work but will be unpredictable for 3 years; we are not budgeting any extra to be on the safe side
Exemptions claimed: 1
Deductions: none available
After all these deductions our estimated take home is $63K; Last year we were effective tax rate 11% and paid about $7K in income taxes.
Annual Debts Total:
Mortgage $8,340 (paying the minimum; 3.75% on a 15 year note with $52,000 balance) VERY LOW COL AREA!
Student Loan 1 $3,195 (paying minimum at 6.5%; $21,000 balance)
Student Loan 2 $4,561 (this is the minimum at 6.8% $16,000 balance)
Extra Debt Payment $3,000 (now being applied to student loan 2)
Basics
Child Care $2540 (Balance for one child that isn't covered by FSA; total for one child home care is $7,540)
Internet $720
Natural Gas $600
Water $1300 (yep; high water cost area with NO WATERING)
Cell phones $960 (Cricket)
Auto Insurance $1080 (2 vehicles; 30 miles/day total)
Cleaning $1950 (yep, a luxury every 2 weeks; good for the marriage)
Electricity $1,680
Emergency Savings $7,000
Car Savings $1,800
Disability Insurance $2,200 (on spouse no. 1)
Charity $3000 ($115 biweekly to church where spouse is officer)
Life Insurance $700 ($500K on each spouse)
Extras
Entertainment/Eating Out $2850
Household Expenses $2,850 (usually bust this one)
Gas $3,600
Food $4,800 (we don't bust this one)
Allowance $3,600 (spousal mad money also good for marriage; you get it if you work out 10 times a month)
Account balances:
- Roth: $14K
- Traditional IRA: $20K
- 457: $11k
- Pension: $18K
- Savings (car and household): $8K (4K each)
- Checking about $2,500 rolling
One thought we had was to take the extra debt payments and put it to the child care, covering nearly half, since we get the maximum student loan interest deduction . We are also going to ask the provider for a 2-child discount. I suspect we'll also face criticism for giving ourselves allowances, giving to charity, and having our house cleaned :/
You may or may not want to be kind, but I'd love you suggestions for how to best fit the new child care expense into our budget and any other things we can do to reach FI in a timely fashion.
You may also want to know how the heck we plan to reach FI in 2026. In 3 years Spouse No. 2's income will be predictably higher and we anticipate in 2019-2026 maxing out Roths and funding a taxable account at $30,000. Spouse's pension kicks in at 2036 if he retires early so we only have to totally fund about 10 years from 457/Taxable account. We won't be old enough to touch the Roths.
Current ages are 37 and 40.
Best :)
