Edited: Originally, I incorrectly calculated taxes and thought we would have a $400 monthly shortfall for our anticipated post-baby budget. Thanks to KCM5 for pointing out the error! I edited the case study, and now we have an anticipated monthly excess of $160, but that margin seems awfully small. We're still looking for help optimizing, so thanks for any input you might have!
Life Situation:
Hi everyone! My DW and I are expecting our first child! Our long term goal is FIRE, but allowing my DW to be at home with our children until they enter Kindergarten is the biggest short term priority for us. Our goal is to be 100% solvent on my salary, and then anything she earns from part-time work or side gigs will go toward retirement savings and a future house down payment. We currently own a two-bedroom town home, and when our family grows we plan to buy a 3-bedroom SFH and keep the town home as a rental.
After looking at our average monthly spending so far this year, I've come up with my best shot at an accurate prediction for how we can cut expenses. Based on those numbers, we will have a monthly excess of $160 we can put towards savings goals. Thank you in advance for helping us find ways we can optimize further and stay solvent during this exciting chapter in our lives!
I'll list assets and liabilities first to give an overall picture of our situation. But more than anything, I'm looking for help with our monthly expenses below.
Assets:
Town home: $80,000
Retirement accounts: $27,000
Emergency fund: $10,000
Fund for future house down-payment: $10,000
Total: $127,000
Liabilities:
We purchased our town home for $75,000 with a 10% down-payment, so the original loan balance was $67,500. It's a 15-year mortgage at 3.625%. The balance is currently $62,000.
Total: $62,000
Gross Salary/Wages:
Total: $47,032/yr (Includes a 6% employer 401k contribution. 3% safe harbor and 3% match.)
Pre-tax deductions:
401k, employer contribution: $2,662/yr
Health insurance: $5,670/yr
Dental and Vision: $720/yr
Total: $9,052/yr
Adjusted Gross Income:
Total: $37,980/yr
Post-tax deductions:
Roth 401k: $1,775/yr (4% personal contribution. I don't want to go any lower, even during this stage of life.)
Life Insurance: $144/yr
Total: $1,919/yr
Taxes:
Total: $2,947/yr
Take-home pay:
Total: $33,114/yr
($2,760/mo)
Estimated post-baby expenses (monthly):
Our actual 2015 average is included for comparison.
Category Post-Baby Est. 2015 average Notes (re: post-baby)
Mortgage (P&I) $536 $536
Mortgage (T&I) $100 $100
HOA $145 $145
Home Repairs $30 $28 estimating a tiny increase
Car Maintenance $100 $208 estimating a decrease, some big repairs in 2015
Car Insurance $55 $73 just reduced by switching carriers
Car Gas $90 $87 estimating a tiny increase
Car Misc. $35 $44 prop. taxes, DMV fees, etc. (will drop AAA)
Medical $166 $19 $2k for the year to cover the birth
Elect. & Nat. Gas $100 $100
Cell Phones $95 $122 2 smartphones, price will drop after contract
Internet $15 $15
Netflix $9 $9
Pandora $0 $4 we don't need ad-free music
Groceries $300 $297 estimating a tiny increase
Restaurants $40 $76 one dinner with friends per month
Work Lunch $6 $50 one lunch out per month
Fast Food $15 $18 one convenience meal per month
Coffee/Snacks $3 $8 one coffee-date per month
Clothing $70 $95 trying to estimate realistically, want to cut more
Home Furnishings $45 $90 trying to estimate realistically, want to cut more
Church/Charity $240 $477 MMM says to spend according to values, right?:)
Gifts $85 $209 trying to estimate realistically, want to cut more
Travel $200 $540 trying to estimate realistically, want to cut more
Hobbies $25 $35 books, biking gear, art supplies, etc.
Toiletries $20 $23 trying to estimate realistically, want to cut more
Haircuts $5 $11 DW started cutting my hair, she gets 2 cuts/yr
Naturalization $0 $96 one-time expense for DW is over
Misc. $50 $62 pharmacy, movies, turbo tax, stamps etc.
Baby Stuff $20 $0 hopefully $20/mo is realistic
Total: $2,600 $3,577
Excess:
$2,760 (monthly take-home pay) - $2,600 (estimated post-baby expenses) = $160 excess.
Specific Question(s):
I guess my question is pretty simple...
Where can you help us optimize further? :)