Author Topic: Reader Case Study - Sanity Check  (Read 6172 times)

lsalinas

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Reader Case Study - Sanity Check
« on: July 13, 2015, 11:47:10 AM »
I accidentally posted this before I was finished typing - sorry I need a nap!  Below is the full text that I was trying to post the first time around. 

I am trying to grow a mustache.  I live in Southern California so comparatively I feel like I am not spending as much as everybody else and that I am on the right track, but Southern California is so extreme in crazy spending that I can't really tell if I am still on the reckless side or not.  So I was hoping you could give me a sanity check.

Life Situation: I have twins.  They need special expensive formula (they can switch to milk in September), we have copay for occupational therapy for feeding issues, and lots of the baby supplies are doctor recommended/requested purchases.  My kids can only sleep 2 to 4 hour stretches at night (another thing we are working on with the doctors)so we are in severe sleep deprivation  and a lot of the times I pay for convenience so I can sleep an extra twenty minutes!  We could be worse, everybody around me said that we needed to get the biggest SUV possible,  hire a cleaning service, etc. On the other hand I am sure we could be better and one day these kids are going to sleep for 8 hours at once (right?! please?!) so we could do things like cook at home and other money saving stuff.   
The travel budget is for a trip to see my parents, one day we will need to see his family in Ecuador and that is easily $5,000 so I am not sure how and when we will do that.  We have two cars a 2008 Toyota Yaris and a 2011 Hyundai Accent.  Also our renterís insurance includes an earthquake policy.

Gross Salary/Wages:       $8,950.60

Pre-tax deductions:
Dental:                   15.00
Ltd Fringe:           19.84
Medical Ins:           50.00
401K:             535.84
Adjusted Gross Income:    8,279.92

Taxes:
Federal Income Tax:       1031.70
Social Security:      548.46
Medicare:           128.26
CA State Income Tax:   348.44
CA SDI/SUI Tax:      79.52

Current expenses:
Rent:              1,640.00
Daycare (3 full days):   1,400.00
Baby Supplies:         300.00
Formula:                 205.00
Baby Food:         200.00
Doctor:            200.00
Diapers:                 180.00      
Pharmacy:         100.00
Student Loan:         447.05
Groceries:         400.00
Gas:                    100.00
Travel :            100.00
Fast Food/Restaurants:    100.00
Car Insurance:         90.00
Electricity:         65.00
Laundry Room & Dry Cleaning:   50.00
Internet:                 45.00
Cell Phones:         44.40
Gifts:            40.00
Car Maintenance:      35.00
Renter's Insurance:      33.83
Life Insurance:         23.54
Car Registration:      20.00
Netflix:            16.70
Gym:            16.00
Professional Memberships:   12.50
Home Phone:         12.00
Neighborhood Parking permit:   12.00
Haircuts:                 10.00
Other:            100.00
This leaves about $145.52 at the end of the month which I use as an extra payment to my student loan.  I am hoping to have the student loan completely paid off in 3 to 5 years.


lbmustache

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Re: Reader Case Study - Sanity Check
« Reply #1 on: July 13, 2015, 12:29:48 PM »
Ahh, I feel for you with two babies! It will get better!!

A few questions:
How often do you/your spouse go to the gym? If you are not using it currently, I'd drop it, and then maybe pick it back up when you have more time (assuming you're not using it much now).
Home phone in addition to cell phones - is this for phone calls out of the country? (for example, my parents keep the home phone to make calls to India)
Why is the Netflix plan so high? Is this for 2 blu-ray discs or 3 reg discs out at a time?

It looks like most of the budget is allocated for your kids. I am not sure how to skimp and save on that but others will have much more experience :)



Sibley

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Re: Reader Case Study - Sanity Check
« Reply #2 on: July 13, 2015, 12:47:40 PM »
You've got a lot of medical expenses. Can you use a FSA/HSA or similar? Even a little help would be nice. Otherwise, keep track and check if you can deduct for taxes.

I'm assuming you don't have family that can watch the twins. Is there a babysitting co-op? Other moms you know that are stay at home who'd be willing to take yours for some cash?

Get as much from thrift stores/yard sales as you can - toys, clothes, books, etc. Sounds like they're under 1 right now, so you've got years to go of fast growing. Don't buy brand new. Depending on what you're feeding them other than the formula, you might be able to make your own baby food, I have a friend does. That assumes you have time and energy though, so do what you can. No shame in being overwhelmed with twins!

Can you just use your cell phones and ditch the home phone?

And yes, eventually they will sleep through the night. Hang in there.

lsalinas

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Re: Reader Case Study - Sanity Check
« Reply #3 on: July 13, 2015, 01:10:07 PM »
This line item is for my husband, he hasn't gone to the gym since the babies were born, however he hopes that he can go back to the gym regularly one day soon (he used to go 3 or 4 times a week).  His membership ran out when our babies are a few months old but he usually buys a prepaid 2 year gym membership to 24 hour fitness for $385.00 from Costco, so the $16.00 goes to our savings account and then when we are ready he will buy another membership.  From our research 2 years for $385.00 was the cheapest plan we found, but maybe there are better deals out there? 

We need the home phone to connect to the front door intercom.  The apartment manager said they couldn't connect our intercom to our cell phones because we were on the "wrong" carrier.  We live on the second floor apartment at the back of the building and when I am home alone with the twins I can't easily get to the front door to let visitors in.  And we love our visitors, they come with dinner and promises to clean or watch the babies so I can get a half hour nap :)  On the other hand maybe I am making excuses because I could have visitors call my cell and put a baby carrier on my back and one on my front and ask guests to wait for five minutes for me to get to the front door.

The Netflix plan is for streaming and 1 disc.  We generally only watch movies in 20 minute increments while we are holding the babies upright after a nighttime feeding so we could cut down to either 1 disc or only streaming. 

Yes if the kids still have issues we will do HSA next year.  This year during open enrollment when we made our elections I was still pregnant,  and I didn't forsee medical problems! 

My sister lives a half hour away but she works M-F like I do, so she can't help watch the kids while I am at work.   I don't know any other moms  - all of my friends are single or married with no kids, but I can definitely do some more research into alternative child care options.

Thank you for the input!  It is appreciated!

Sibley

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Re: Reader Case Study - Sanity Check
« Reply #4 on: July 13, 2015, 01:52:02 PM »
You might do the HSA/FSA anyway. I used to use a FSA (not offered now), and would just put in enough to cover my contacts, etc. With little ones, you can pretty much assume you'll have doctor visits. Ear infections, fevers, etc.

And try to make some mom friends who you get along with. It'll be good for you to have someone to talk to who doesn't mind hearing about kids all the time. If nothing else, you'll meet people once they're a little older, with school and stuff.

KCM5

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Re: Reader Case Study - Sanity Check
« Reply #5 on: July 13, 2015, 02:38:24 PM »
Have you adjusted your taxes to include your new family members? With the child tax credit and extra dependents it looks like you're probably over withholding.

Also, if either of your companies offer a flex spending account for child care costs that can save you quite a bit ($5k pre tax rather than post tax). Look into it for next year.

lsalinas

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Re: Reader Case Study - Sanity Check
« Reply #6 on: July 13, 2015, 03:11:54 PM »
Holy crap!  The first thing on my to do list when I returned to work was to fill out a new W-4 and I never did.  I probably wouldn't have realized it until I filed my taxes.  I need to check and see if husband filled out a new W-4 as well.  Thank you! 

Any extra takehome will go towards my student loan repayment - I still have 36k to go. 

I just looked at my benefits website and we do have child care FSA so I will sign up for that at the next open enrollment as well.   

magnuminator

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Re: Reader Case Study - Sanity Check
« Reply #7 on: July 13, 2015, 05:11:10 PM »
Great call, KCM5.

lsalinas, what is/are the interest rate on your student loan/loans? I know it's tempting to just pay them off and have them out of the way, but if those loans carry low rates you would be better off in the long run if you redirected your additional payment amount towards your 401k or an IRA.  Or, in the near term, you might be better off building up some emergency savings. 

That brings me to my next question: do you have any emergency savings set aside?


*If the loans carry high interest rates, forgive me.  I went to school when subsidized loans were pretty widely available.

lsalinas

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Re: Reader Case Study - Sanity Check
« Reply #8 on: July 13, 2015, 07:38:38 PM »
We have 25k in emergency savings and my student loans are at 6.63% interest.  At what interest rate would you think its better to put additional money towards retirement?

KCM5

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Re: Reader Case Study - Sanity Check
« Reply #9 on: July 14, 2015, 07:35:40 AM »
6.63% is high enough to pay them off ASAP! Depending on your comfort level, you could even use a bit of your emergency fund for those, too. I know some people really, really like their emergency fund, though, so if you or your spouse don't feel comfortable with that then no big deal.

magnuminator

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Re: Reader Case Study - Sanity Check
« Reply #10 on: July 14, 2015, 09:42:59 AM »
I agree.  Given that you've got some emergency funds set aside, at 6%+ you're getting a assured return from paying off the loans that is going to exceed anything you can get (guaranteed) from the market. 

Even though the long term expected return on equities may be higher, it's not enough above 6.63% (in my opinion) to make paying off the loan seem like a bad idea.  If you'd had 2.5% loans it would have been a very different story.   Exactly where the your personal (practical, not mathematical) breakeven point for investing vs debt retirement is depends on your risk tolerance.  But I'd pay off the loans at that rate.  You might consider that your "bonds" exposure and weight your investment allocations in your 401k a little more aggressively.

I'm hardly portfolio pro, others here may have better advice to give on this point.

lsalinas

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Re: Reader Case Study - Sanity Check
« Reply #11 on: July 14, 2015, 10:02:43 AM »
Great, I will stick the plan and keep on paying down the student loan.  I know people that have student loans at 12% so I just wanted to double check what was considered high for student loans. 

I do like my emergency fund!  I am a middle manager in a role that is strategic so day to day operations could hum along rather nicely without me.   Except for upper management nobody even noticed when I went out on maternity leave.  In a crisis or restructure I am sure that my position would be the first to go and I want to be prepared in case of a layoff. 

catccc

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Re: Reader Case Study - Sanity Check
« Reply #12 on: July 14, 2015, 10:33:06 AM »
What kind of baby supplies are costing your $300 a month?  Seems steep.

Also, babies don't really need baby food, its a modern invention.  I fed my kids absolutely zero baby food, except that time once on an airplane that they gave us some pureed fruit and I didn't want to decline it or waste it.  So maybe it's different with formula fed babies; I breastfed.  But if formula is supposed to replace breastmilk, IDK why it would be.  In fact, there's a lot of thinking that spoon feeding pureed baby foods lead to picky eaters that are poor at regulating quantities consumed.  Self feeding of baby-safe real people food is preferable, and it's really only for fun and learning how to eat, and not nutrition, until they are one.

I'm actually surprised that your daycare costs are only $1,400.  That seems really reasonable. I'm in so-not-SoCal PA, and we pay nearly $1700 for 2 kids 4 days a week.  And they are older.


lsalinas

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Re: Reader Case Study - Sanity Check
« Reply #13 on: July 14, 2015, 11:33:04 AM »
My kids can't eat people food yet, they are in occupational therapy for feeding issues and right now we have to use techniques with baby purees.  We are looking forward to when the babies have the physical capability of eating normally and will go to people food then.  We should make homemade purees, but honestly we don't cook anymore, we have been living off of Trader Joe frozen meals and I don't know if I want to trade off cooking for sleeping.

The baby supplies are a 6 month average, but there are two new convertible car seats purchases (they are growing out of their infant carriers) that probably raised the average a little. The supplies are random like when they were having trouble bottle feeding we tried 20 different kinds of bottles and for five of those bottles tried different levels of nipple flow.  Also we bought feeding cups and syringes to see if an alternative to bottle feeding would work.  Now that they are in occupational therapy for solid food there were things like different high chairs and specialized textured spoons.  Lots of baby proofing supplies like baby gates are in the spend.  Christening outfits and candles were in there.  Every month I think we can't have more baby expenses but something new comes up.  However I acknowledge that I could have spent more time in trying to find used baby gates or high chairs.  My husband and I are trying to get better at finding baby deals.


asiljoy

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Re: Reader Case Study - Sanity Check
« Reply #14 on: July 14, 2015, 12:27:42 PM »
This may not be super Mustachian, but when we were in your shoes (my kid didn't sleep 8 hours in a row until he was 14 months and every single, damn growth spurt he'd regress to legit just not sleeping) I just made sure the bills were paid and put everything else on autopilot.

Give yourself a pat on the back for at least eating frozen meals. I didn't always have enough energy to hit the grocery store and on more than 1 occasion I ordered from a restaurant for no other reason than I had saved a profile with them so I didn't have to go find my wallet; to be clear, it wasn't my finest hour and I'm not bragging about that...

Anyways, if you're really worried about the student loans, it took me about a cumulative hour of effort to refinance mine with Sofi down to 3.2% from 6.8%.

As the babies get older and you get more sleep, it gets easier to differentiate needs from wants as far as the kids are concerned/you'll just have the time to price shop and costs will go down. I've seen pretty much all my friends with kids go through that same cycle.

lsalinas

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Re: Reader Case Study - Sanity Check
« Reply #15 on: July 14, 2015, 01:42:47 PM »
asiljoy, thank you for sharing.  It gives me hope that the kids will eventually sleep because right now it feels like the kids will be leaving for college before they sleep a full night.  All I hear from the other twin mommies is that their twins have slept through the night since they were 3 months and they do it in unison so that no baby is waking the other baby up!   

I don't know much about SoFI, but I will look into it and see if I can get my interest reduced too.  3.2% sounds great :)

Dee18

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Re: Reader Case Study - Sanity Check
« Reply #16 on: July 14, 2015, 02:13:56 PM »
Everything you buy for the babes can be used.  I always told myself, hey the baby books say you should wash all their clothes before they wear them anyhow.  Baby gates, toddler toys....all of those are quickly outgrown so lots of people pass them on instill great condition.  I routinely found brand new baby clothes, including Gap and Gymboree, with the tags still on at thrift stores.  It's better for the environment too.  Look for a Mothers of Twins group in your town...they can give or sell you hand me downs and give advice on how to manage twins. 

At my baby shower a colleague told me, just pick one spot in your house to keep clean and keep taking baby pictures there.  I thought that was so funny, but soon came to realize it was a fine standard!

asiljoy

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Re: Reader Case Study - Sanity Check
« Reply #17 on: July 14, 2015, 02:24:17 PM »
At my baby shower a colleague told me, just pick one spot in your house to keep clean and keep taking baby pictures there.  I thought that was so funny, but soon came to realize it was a fine standard!

That person is a genius.

All I hear from the other twin mommies is that their twins have slept through the night since they were 3 months and they do it in unison so that no baby is waking the other baby up!   

This is what happened to me to! Minus the twins part, all of the people who had babies around me had them sleeping immediately with no other work than, "uh, I dunno, they just started sleeping". GAH.

Mr Money Mustache has a good write up on sofi here: http://www.mrmoneymustache.com/2015/05/06/sofi-review/. And I just used his referral code to get $300. Maybe it'll still work for you?

Apples

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Re: Reader Case Study - Sanity Check
« Reply #18 on: July 14, 2015, 02:43:43 PM »
As a childless 20 something, I'm amazed at everything you're doing.  Seriously-sleepless twins who couldn't feed so you tried everything and got them into occupational therapy.  And they don't sleep through the night, so you're running on zero sleep.  And you're totally covering the bills, and are now looking for ways to reduce spending.  You guys are amazing!

I second the suggestions to look into SoFi.  Any interest savings will help!  And redo your tax forms.  A little more money coming home each month will help a lot.  For secondhand items, google around for some shops in your local town.  If you attend (or attended, pre-kids) a church/synagogue/mosque/etc., check there.  If that doesn't turn up a lot, check for facebook groups.  I live in a rural area, so my county has an "online yard sale" group.  There's not a whole lot of kids' clothes because local organizations really work to collect those items to resell, but there's a lot of baby gates, kid bikes, toys, furniture, that kind of stuff.  And it's pretty low key to check facebook while feeding to claim that you want an item instead of loading up the car to go peruse a store somewhere.

lsalinas

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Re: Reader Case Study - Sanity Check
« Reply #19 on: July 14, 2015, 10:16:35 PM »
Thank you Apples and Dee18 for suggestions on where to find used kids stuff.  I am part of a parents of multiples association but what I am finding in my neighborhood is that all the mommies bought a super deluxe luxury double stroller for $800 so the resale price on it is still ridiculous.  The facebook group idea is great, because the less driving I have to do the better :)  Although I could make time to check out thrift and second hand stores on my drive home if I needed to. 

asiljoy

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Re: Reader Case Study - Sanity Check
« Reply #20 on: July 15, 2015, 04:51:18 AM »
Thank you Apples and Dee18 for suggestions on where to find used kids stuff.  I am part of a parents of multiples association but what I am finding in my neighborhood is that all the mommies bought a super deluxe luxury double stroller for $800 so the resale price on it is still ridiculous. 

If they're in good shape and you take good care of them, when you're finished using them you may be able to sell the item for a decent amount depending what it is.