Author Topic: Married Mil to Mil, No debt w/kid, $9 K windfall....  (Read 5503 times)

anyoneanywhere

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Married Mil to Mil, No debt w/kid, $9 K windfall....
« on: June 12, 2013, 08:28:32 PM »
Hey Everyone,

Posted a few months ago about my budget, thanks to everyone who replied. The hubby and I are now debt free, down to one horse and in the process of getting out of them.  (60k paid off in two years!) I have two questions below that I知 looking for feedback on.

I recently sold my horse trailer and am trying to figure out what to do with the money ($9K)for the next 4-5 years.  The short-term plan is to deposit all of it into the Savings Deposit Program while he is deployed (10% guaranteed return). Afterwards, I want to move the money into an S&P index fund with Vanguard. Hubby wants to keep it sitting in the bank (in a savings acct no less!) as the beginning of our emergency fund. Given that he is  contracted for 10+ years  and I知 contracted for the next 2 years I知 not worried about having an immediate EM fund. (We also have 5k sitting in our savings acct.)

What do you recommend I do with the money?

Now, I知 getting tired of my job and am interested in getting out to raise our daughter (with plans to have a second kid in the next year). But, I like the idea of going into the reserves ( I would get abt $800 on drill weekends) to earn a bit of extra money. While I raise our kids at  home, I知 interested in opening an in-home day care to make up for the loss of my income. (We currently bring in 8k/month (after taxes), we池e working on trying to save 5k/month, but rent(1375/month)+child care (1100/month) are our biggest expenses.

Besides trying to save as much as possible in 2 years, what would you do/advise knowing that your income is going to drop by half so that you can stay home to raise 2 kids?

George_PA

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #1 on: June 12, 2013, 08:44:02 PM »
You should stay at home with your kids; First of all, you will no longer have to pay for childcare; You are saving so much, that you could probably quit tomorrow if you wanted to; Also you will only get this chance probably once in your life, take advantage of it now or regret it forever;  You will then have extra time which you can use to find ways to cut your existing expenses even further.

As for your emergency fund, I recommend you listen to your husband and have 10k saved at all times for this.  Even if his work has a contract, nothing in this world is a sure thing, emergencies are things did not know were coming, you know surprises.  Once you have 10k in a savings account, use any additional money to build up investments and put it things that will pay you interest or dividends.


davisgang90

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #2 on: June 13, 2013, 04:13:54 AM »
Congrats on your success so far! 

If you have a chance to go into the reserves, do it.  Big payoff when you hit 60 which makes your timeline for ER move up.  Hard to beat the inflation adjusted government pension.

The day care sounds like a good option but is a lot of work, make sure you are up for it and recognize you lose a lot of freedom to do stuff with your own kids while you are watching others.

Good luck!

tomsang

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #3 on: June 13, 2013, 12:32:16 PM »
What would happen if instead of a weekend in the reserve you are called up for a year or more?  I know a lot of families that this occured and they were in a world of hurt.  They only signed on for a weekend a month or whatever, and the government had other ideas. 

Regarding the day care.  This isn't easy money for a lot of people. I think this is an area that you need to really think hard about before jumping in. What happens when you go on vacation, what happens if you are sick, what happens if you can't be there, do you like taking care of other people's kids, etc.  People are depending on you for a service.  Make sure you can deliver. 

Sounds like you are doing great!


rockstache

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #4 on: June 13, 2013, 01:13:15 PM »
Just want to second what Tomsang said. Do NOT go into the reserves thinking that all you have to do is one weekend a month and two weeks a year. Reserve units are every bit as deployable as active ones. If you sign up, expect that you will have at least one 6-12 month deployment in your 4 years. Most people don't realize it, but active duty is designed to respond to initial crises around the world, but reserves are specifically for sustainment after the initial surge. Meaning almost everyone gets deployed at some point. If you are ok with that, then by all means go for it, but go in with eyes wide open.

davisgang90

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #5 on: June 13, 2013, 01:17:40 PM »
Folks are absolutely correct on the possibility for a reserve call up.  You need to be ready for that, but also realize we really dogged out the services and reserves during OIF/OEF and there is very little appetite for more of that down the road.

There are no guarantees in life, but I think the chance of a one year reserve call up/deployment is significantly less than it was 5 years ago.

Johnny Aloha

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #6 on: June 13, 2013, 01:27:18 PM »
Reserve deployments are decreasing, and notice before deployment is increasing, but the possibility is still there.

Since you are coming off active duty you'll have a 2 year "deferment" period in which you are not eligible to be mobilized.  This is a good opportunity to feel out the reserves ... if you like it, continue.  If not, move on!

ep114

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #7 on: June 13, 2013, 11:12:40 PM »
I hate to sound negative, but signing up for the reserves when you have a young child and are planning on having another sounds risky. A friend of mine was in the reserves and deployed for a year when she had an infant, and 2 young ones. It was TOUGH.

jamccain

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #8 on: June 13, 2013, 11:54:34 PM »
What service are you in?  The potential for and length of deployment can vary depending on service.  Also, the world is NOT stable and becomes less so every day.  So, what is true today, is one bomb away from becoming untrue tomorrow.  How open are you to deployment if you're in the reserves?

When you say your husband has a ten year contract do you mean he has ten years of service commitment?  You have two years of service commitment left?  How much time do each of you have left until 20 years of service?  Does he plan to make the military a career?

You are debt free and have $5K and $9K.  Anything else?  TSP?  Your husband is currently deployed?  Is he in a combat zone, if so, your TSP rules are different?  Can you afford to max out his TSP while he is gone? 

What are your goals?  FIRE ASAP?  Something else?    Are you only interested in the daycare so you can stay at home and make some money or do you consider that a calling?

There are many questions which would shed light on this scenario. 

Nords

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #9 on: June 15, 2013, 06:33:05 PM »
C'mon guys, you could lighten up a little with all the dire warnings about the Reserves.  My spouse and I were a dual-military couple for our entire careers, and having one of the couple in the Reserves/Guard is a whole heck of a lot better than having to toss the kids to Grandma on the way to the deployment.

Besides there's not enough money in today's defense budget to mobilize the Reserves as much as the last decade.  There's barely enough to pay for fuel and drill weekends, let alone active duty. 

Posted a few months ago about my budget, thanks to everyone who replied. The hubby and I are now debt free, down to one horse and in the process of getting out of them.  (60k paid off in two years!) I have two questions below that I知 looking for feedback on.
Sounds like a good plan.  I have never met a horse owner (dressage, Western) who has been able to retire early.  However they seem very happy with being horse owners, so perhaps it's a lifestyle that you have to save up for.

I recently sold my horse trailer and am trying to figure out what to do with the money ($9K)for the next 4-5 years.  The short-term plan is to deposit all of it into the Savings Deposit Program while he is deployed (10% guaranteed return). Afterwards, I want to move the money into an S&P index fund with Vanguard. Hubby wants to keep it sitting in the bank (in a savings acct no less!) as the beginning of our emergency fund. Given that he is  contracted for 10+ years  and I知 contracted for the next 2 years I知 not worried about having an immediate EM fund. (We also have 5k sitting in our savings acct.)
What do you recommend I do with the money?
Absolutely.  The SDP is like having governmental permission to print your own money.  Best deal in town, except for the part about being in a combat zone. 

I'm sorry to hear that he's ended up in a 10+ year obligation, and I'd love to hear that story, but in the meantime his continued employment seems pretty good.  From a financial aspect you should certainly save as much as you can in equity index funds while you're earning a steady/reliable income.  Max out the Roth TSPs and your Roth IRAs.  If the volatility interferes with sleeping at night then choose a TSP "L" fund.

From an emotional investor-psychology issue, there are a couple of other ways to assuage his concerns.  One would be to compromise by putting half in his savings plan and half in your plan.  Another option would be to figure out your bare-bones emergency-car-repairs-and-plane-tickets-to-visit-the-parents fund and save only that amount.  A third option would be to figure out how much you'd spend each month if you were both unemployed, and then just put 2-3 months of that in an emergency fund.

But the reality is that you could also put the emergency expense on a credit card and pay it off from the next few paychecks, or talk to the command about a month of advance pay, or talk to your service's relief organization. 

Now, I知 getting tired of my job and am interested in getting out to raise our daughter (with plans to have a second kid in the next year). But, I like the idea of going into the reserves ( I would get abt $800 on drill weekends) to earn a bit of extra money. While I raise our kids at  home, I知 interested in opening an in-home day care to make up for the loss of my income. (We currently bring in 8k/month (after taxes), we池e working on trying to save 5k/month, but rent(1375/month)+child care (1100/month) are our biggest expenses.
Keep in mind that you may have commuting/lodging expenses for those drill weekends, as well as meals.  You'd earn $800 but if you had to buy a plane ticket then you quickly find yourself rationalizing "Well, at least I'm earning points for retirement."  Another advantage of a Reserve drill weekend is that you could put 92% of that pay into the TSP to accelerate your savings in the world's cheapest index funds.  My spouse used to get Reserve pay of "$10.02" after TSP deductions.

Check with the Reserve unit in your area where you'll be getting out (or where your spouse will be stationed) to see what they offer for contracts.  You may be able to move straight from active-duty to the Reserves with a contract guarantee that you will not deploy for the first year or two.  If you get to the 12-18 month point and you're absolutely not willing to risk a deployment then you could transfer to the IRR and continue doing online correspondence courses or other duties (funeral honors guard) for enough points to have a "good year".  Drilling for a bunch of cash is a nice benefit, but the long-term goal is to keep earning your good years so that you qualify for a Reserve/Guard pension.

Besides trying to save as much as possible in 2 years, what would you do/advise knowing that your income is going to drop by half so that you can stay home to raise 2 kids?
Develop a budget for the worst case:  him on active duty (but no extra combat pay) and you unemployed with two kids and a bureaucratic hangup on your home childcare plans.  Figure out how much money you'd like to have in savings to survive that period for 6-8 months.  Then figure out when you'd need to cut back on your TSP & Roth IRA contributions in order to build up enough cash in taxable accounts to cover that new version of your emergency fund.

Another option would be to look at your Roth IRA contributions as your emergency fund.  You can withdraw them anytime for any reason, but of course that also means you lose their retirement compounding power. 

Finally I recommend that you read The-Military-Guide.com and look for the book at your base library or local community library.  I'm always happy to have guest posts, too, and you could share your stories & advice as you go through the next couple years.

Gundy

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #10 on: June 22, 2013, 05:27:41 PM »
Quote
I'm sorry to hear that he's ended up in a 10+ year obligation

That is not always a bad thing. I would assume that if he signed up for a 10 year obligation he at least marginally liked his job.

Villanelle

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Re: Married Mil to Mil, No debt w/kid, $9 K windfall....
« Reply #11 on: June 23, 2013, 03:00:55 AM »
Keep in mind that job loss (and illness, with you also don't need to worry much about since you have Tricare) are not the only reasons to have emergency savings.  Cars need major repairs or die, family has emergencies that you want to travel for or help with financially, etc. 

I think your relative job stability means you can get by with less emergency savings than many, but it still makes sense to have a nice chunk of change in some fairly liquid situation.