Author Topic: Case Study: New Baby and saving for a Down Payment  (Read 5394 times)

BlueLesPaul

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Case Study: New Baby and saving for a Down Payment
« on: June 30, 2014, 03:45:43 PM »
Hey All

Here is the situation:

Monthly Income:

Me:
$2,248.26 (this net tax, healthcare and a 3% SIMPLE IRA with 3% match)
Spouse:
approx. $2,566 (Spouse is currently on FMLA, will get 4 weeks of 60% of salary for Short Term Disability.  Will likely resume work in 2 1/2 months from home.)

Total: $4814
 
Current expenses:

Rent: $500 (We rent from my parents who owe the duplex and they set aside $100 a month for closing cost when we move out and buy a house, they have currently set aside $4,400 for us)

Utilities:  About $60 a month for Electricity and Gas, water and garbage paid by landlords.

Internet:  $30

Phones:  $77, currently with AT&T, plan on switching to Republic in November when our contracts are up.

Food:  $200

Hygiene:  $20

Date Nights:  $40

Misc:  $120

Gas for Cars:  $100

Car Insurance:$82

Rental Insurance: $11.25

Vanguard Roth IRA:  $110

Student Loans: $525 (will pay off the student loans when we get the final hospital bill and make sure we have enough to pay of loans and pay the bill in full since we get a 10% discount to pay off the medical bill all at once)

Diapers approximately $60 (Wife does not want to do cotton diapers)

Baby Misc (Wipes, medical), $30

Donations:  $600 (will drop to $375 when wife stops working).

Total Expenses: $2,565.25 (will drop to $2,040.25 when loans are paid off)

Assets:

1998 Saturn Sedan $1,000
2006 Nissan Sentra $6,000
Bank/Checking Account: $11.042.23 (Will use money to pay off student loans and/or medical bills, the balance will be used to save for a down payment.
Vanguard IRA: $3,500
Vanguard Roth IRA: $7,024
NY Life SIMPLE IRA $2,200

Total Assets: $30,766

Liabilities:

Student Loans:  $4,484
Medical Bills:  ???? (back of the envelope calculation is around $4,200, but unsure until we get the bill)

Total Liabilities: Approximately $8,684

Goals:

Want a 10% down payment (guessing between $20,000 and $22,500 for our market).
Wife wants to quit and stay at home once we save up the down payment.
Want to start saving at least 15% of take home, including SIMPLE and match, after we buy house, (House/taxes/insurance will likely add about $500 net after we don't pay rent, and will likely save $200 a month for expenses.)

Is this feasible?  Anywhere we can cut fat?

Thanks!

« Last Edit: July 01, 2014, 05:13:45 PM by BlueLesPaul »

Jennifer in Ottawa

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #1 on: June 30, 2014, 03:50:44 PM »
Your budget looks very reasonable.  Some may quibble over 'Miscellaneous', but I know full well with children "Miscellaneous" happens every month, so budgeting for it is a smart idea.

Any possibility of making "Donations" of your time/labour/professional expertise instead of cash?

RFAAOATB

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #2 on: June 30, 2014, 04:06:55 PM »
Donations better mean $100 a plate fundraising dinners for the symphony and even then that is either an old people expense or a twice a year treat or that can wait until you are millionaires.  Why do you want to move?  If its not to a new city with a better income job, consider never moving out and talk to your parents about making the duplex a generational compound.  Is $500 market rate?  With grandparents so close you may be able to put more money towards them for babysitting allowing your wife to continue working.  Keeping money in the family might be better off for all three generations.

BlueLesPaul

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #3 on: June 30, 2014, 04:11:17 PM »
Unfortunately, no.  We tithe 10% of our gross and cash (and I believe stock) are the only form of donation available.  Donation will drop to about $375 once my wife quits working.

$500 is far below market rent, it should be closer to $700 or $800.  We have two bedrooms and an unfinished basement.  Not sure on the square footage, but my parents could easily have 4 complete bedroom and two baths in each unit of the duplex.  My only problem is that I have 5 sibling and I would feel like a mooch if I had this great benefit for several years and they did not.  Also, my wife wants to have a place of her own.

My wife staying home is more a personal preference for her and I am more than willing to accommodate her.  She plans on doing some side work in the future, but not sure if that will happen when we are done having kids and the kids are in school or sooner.
« Last Edit: June 30, 2014, 05:10:08 PM by BlueLesPaul »

Scandium

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #4 on: June 30, 2014, 04:34:32 PM »
Car insurance seem high. Our cars are newer than yours and we pay $50/month for two cars (Geico). Collision on one of them. Look into upping your deductible and remove any collision coverage you don't need.

BlueLesPaul

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #5 on: June 30, 2014, 04:37:20 PM »
Car insurance seem high. Our cars are newer than yours and we pay $50/month for two cars (Geico). Collision on one of them. Look into upping your deductible and remove any collision coverage you don't need.

Point taken.  We are currently with Progressive and I have noticed that Geico and Esurance are cheaper.  I don't know anyone that has used Esurance, so I am hesitant to use them, even though they had the lowest premium.

Scandium

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #6 on: July 01, 2014, 06:34:54 AM »
Car insurance seem high. Our cars are newer than yours and we pay $50/month for two cars (Geico). Collision on one of them. Look into upping your deductible and remove any collision coverage you don't need.

Point taken.  We are currently with Progressive and I have noticed that Geico and Esurance are cheaper.  I don't know anyone that has used Esurance, so I am hesitant to use them, even though they had the lowest premium.
I've never used Esurance so can't comment, but Geico seems good enough. I've never had a claim so wouldn't know how that is however.. Also look into bundling your car and rental insurance. Saved a bunch by having cars and homeowners bundled. I've found property insurance cheaper elsewhere, but the total cost would be higher due to the bundle discounts.

HairyUpperLip

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #7 on: July 01, 2014, 08:55:22 AM »
Try to save up more than 10%... at least 20% and then it will be a lot easier on you guys when your wife stops working.

<--- has a 10 month old baby

BlueLesPaul

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #8 on: July 01, 2014, 12:28:11 PM »
Try to save up more than 10%... at least 20% and then it will be a lot easier on you guys when your wife stops working.

That was our original plan, but we recently decided to pay off my student loans (we had whittled it down from $60,000 to $30,000 with some savings and aggressive payments and now we used the $30,000 that we had saved for a down payment to pay the rest of them off).  I am more inclined to wait until 20%, but my wife is more in line with 10%.  I refuse to get a FHA since I currently work for a lender/servicer and I know the points and fees associated with FHA are outrageous, so 10% Conventional is a happy medium between me and my wife, although knowing that saving an extra $20,000 would save about $160 a month on our bill really makes it hard to swallow.

AlfC

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #9 on: July 01, 2014, 12:49:38 PM »
You can take 10k from the Roth IRA penalty free for your first home purchase. That would get you to about 15% down payment.  Maybe your parents can you lend you the final 10k that would get you to 20%. Pay them half what you would pay for PMI as interest?


PloddingInsight

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #10 on: July 01, 2014, 01:14:10 PM »
You are already frugal enough that I think the best way to increase your savings is to increase your income.

What do you do for a living?  Do you have an upward path available in your current career?  Are there higher paying options for your skill set?

okashira

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #11 on: July 01, 2014, 01:30:35 PM »
I think you should hash out your plan a little more.

You're paying cheap rent, yet you are rushing into a house with 10% down.

10% down only makes sense if buying is so much better financially (ie rent is expensive)

Milk the cheap rent gravytrain until you have 20%.

And the donations are insane ... cut them until you are out of debt.

ADK_Junkie

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #12 on: July 01, 2014, 01:46:31 PM »
I don't see any fat you can cut.  You may find the Baby Misc is too low.

Honestly, the best things you can do, are:
1) Pay off student loans.
2) Stay in the duplex as long as you can keep your sanity (wife will probably want a "home" for the baby, but you have time, it's about the people not the place).
3) Practice the "House" living expenses, take the extra $700 ($500 + $200) and stash it in a high yield savings account.
4) Prepare for at least 20% down (30% or more would be the Frugal-way), it will pay dividends in the future.

Good luck, and congrats on the new baby!

BlueLesPaul

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #13 on: July 01, 2014, 02:14:35 PM »
You are already frugal enough that I think the best way to increase your savings is to increase your income.

What do you do for a living?  Do you have an upward path available in your current career?  Are there higher paying options for your skill set?

I am an underemployed attorney working at a Mortgage Lender/Servicer.  I am technically their compliance officer, but they have another attorney on staff, so I end up doing a lot of processing.  I have been working here for little over a year and have been looking for a different job since I started my current job.  I make $45,000 now, but I know I can make at least $60,000 if I was working at a firm.  Wife is a Registrar at a university and make about $36,400 annualized. 

I think you should hash out your plan a little more.

You're paying cheap rent, yet you are rushing into a house with 10% down.

10% down only makes sense if buying is so much better financially (ie rent is expensive)

Milk the cheap rent gravytrain until you have 20%.

And the donations are insane ... cut them until you are out of debt.

What other detail would be helpful to know?

Reducing donations are a no go, although I see your point that they seem excessive. 
I guess my best option would be to save for a 20% down, but I already talked the wife into using our current down payment to pay off the loan and I am not sure if should could stand waiting another year for a home.
« Last Edit: July 01, 2014, 03:05:30 PM by BlueLesPaul »

ch12

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #14 on: July 01, 2014, 02:54:26 PM »
I am an underemployed attorney working at a Mortgage Lender/Servicer. I make $45,000 now, but I now I can make at least $60,000 if I was working at a firm.  Wife is a Registrar at a university and make about $36,400 annualized. 

I think you should hash out your plan a little more.

You're paying cheap rent, yet you are rushing into a house with 10% down.

10% down only makes sense if buying is so much better financially (ie rent is expensive)

Milk the cheap rent gravytrain until you have 20%.

I guess my best option would be to save for a 20% down, but I already talked the wife into using our current down payment to pay off the loan and I am not sure if should could stand waiting another year for a home.

Is it working or buying a house that she's eager for? You said earlier that she's going to work until you hit the 10% down payment. She could quit earlier than that, if she was fine with waiting longer for a home. Is her job as a registrar so onerous that she really needs to get out? It seems like a decent gig if she can work from home, but that's as a 3rd party on the Internet.

BlueLesPaul

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #15 on: July 01, 2014, 03:47:47 PM »
I am an underemployed attorney working at a Mortgage Lender/Servicer. I make $45,000 now, but I now I can make at least $60,000 if I was working at a firm.  Wife is a Registrar at a university and make about $36,400 annualized. 

I think you should hash out your plan a little more.

You're paying cheap rent, yet you are rushing into a house with 10% down.

10% down only makes sense if buying is so much better financially (ie rent is expensive)

Milk the cheap rent gravytrain until you have 20%.

I guess my best option would be to save for a 20% down, but I already talked the wife into using our current down payment to pay off the loan and I am not sure if should could stand waiting another year for a home.

Is it working or buying a house that she's eager for? You said earlier that she's going to work until you hit the 10% down payment. She could quit earlier than that, if she was fine with waiting longer for a home. Is her job as a registrar so onerous that she really needs to get out? It seems like a decent gig if she can work from home, but that's as a 3rd party on the Internet.

Yeah, ideally I would have her work or wait for a 20% down or both, but she wants to be a stay-at-home mom and I can't fault her for that.  Personally, I am hoping that in the next year while we save up for the 10% down I get a better paying job (or at least a sizable raise) and a lot of the math will work itself out.  I also plan to do some part time tax work in January-April 2015, so hopefully that will bring in a few thousand.

PloddingInsight

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #16 on: July 02, 2014, 07:20:06 AM »
Don't forget to adjust your tax withholdings when your wife stops working.  You don't want to give the government a big interest-free loan.

Little House

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Re: Case Study: New Baby and saving for a Down Payment
« Reply #17 on: July 02, 2014, 08:12:44 AM »
I used Esurance for a few years and they were fine. Of course, I never had to file a claim so my comment is based on the ease of signing up for a policy and getting a low-cost policy that included full coverage. The only reason I switched is to bundle my renters and auto insurance with USAA (which I love). Hope that helps.