Case Study: focusing on the basics (2+ year update)

[BigThief]

See here for our 2+ year update: https://forum.mrmoneymustache.com/case-studies/case-study-dink-seeking-help-on-a-few-basics/msg3294399/#msg3294399

We are newly-wedded DINKs in our early-thirties living in a HCOL area. We have combined finances. DW does the budget, DH does the investments, and we both save. Excuse me for the info dump, questions at the end!

Life Situation
IRS Filing Status: Married
State Income Tax: 6.3%
Federal Tax Bracket: 22%
Dependents: 0
Location: M/HCOL

All numbers are USD$

Gross Salary
DW: 86k/year (>10 years at current job, received a 10% raise June 2022)
DH: 93k/year (began job six months ago, coming from a PhD stipend of 25k/year)
Combined gross: 179k/year
Combined total compensation: ~190k/year (gross + bonus + employer contributions)

Pre-Tax Deductions
DW Governmental 457b Trad: 14k/year (DW maxes but splits contributions into a Roth, see below)
DW Pension: 5.1k/year
DW HSA: 5.8k/year + 1.5k/year employer contribution
DW Insurance: 1.3k/year (high-deductible health, life, disability)

DH Company 401k: 20.5k/year + 2.8k/year employer contribution
DH Insurance: 65/year (vision)

Adjusted Gross Income
DW: 59.8k/year
DH: 72.5k/year
Combined: 132.3k/year

Taxes
Federal Income: 14.7k/year
Social Security: 10.6k/year
Medicare: 2.5k/year
State: 6.4k/year

Total: 34.2k/year

After-Tax Deductions
DW Governmental 457b Roth: 6.5k/year

Adjusted Net Income
Combined: 91.6k/year

Liabilities
No debt.

Expenses
Although we have kept a loose budget for years, DW has recently started a detailed budget and the following is monthly average from January to May 2022. There have been some upfront purchases (vacation) and future anticipated expenses (health), so expenses are still reverting to their means so expect to have a clearer picture as the year goes on.

Overview:
Total housing expenses: 1630/month, 19.6k/year
Total non-housing expenses: 2820/month, 35.4k/year
Total expenses: ~4600/month, ~55k/year

And a more detailed breakdown:
Housing
Apartment rent: 1380/month
Parking: 50/month
Rent Insurance: 8/month

Utilities
Apartment utilities: 190/month (electric, gas, water, municipal taxes)
Internet: 75/month
Phone: 55/month

Transportation 348/month (includes car insurance, maintenance, gas, and bike-related expenses)

Insurance 29/month (sup life, ID theft, disability)

Consumables
Groceries: 563/month (95% groceries come from Aldi and Costco)
Alcohol: 13.5/month (purchases from bars and liquor/grocery stores only, we have worked hard to cut our intake)
Restaurants/Takeout: 353/month (alcohol ordered with food included here)

Health 421/month (DH is paying for therapy out-of-pocket 280-560/month + any other expenses that come up)

Household goods 53/month

Clothing 215/month (this expense has been creeping upward ever since DH finished graduate school to start a professional job)

Subscriptions 104/month (streaming services, news, content creators)

Gifts 124/month (lots of nieces and nephews)

Entertainment 48/month

Traveling 620/month (already pre-booked vacations for the year)

Miscellaneous 44/month

After-Tax Savings
Vanguard Taxable Brokerage Account: 2400/month, 28.8k/year

Leftovers
(Adjusted net income)-(expenses)-(after-tax savings) = 650/month, 7.8k/year. (this is just money accumulating as cash, saving up for a house purchase or whatever expenses or short-term purchase goals we want to make)

Savings Rate
Total projected 2022 savings (HSA + 457b + Pension + 401k + employer contributions + after-tax brokerage) = 85k
Savings rate against total income (post-tax income + pre-tax contributions) = 58.7%

Assets (as of 05/26/2022)
HSA: 3k
DW 457b: 64k
DH Fidelity 401k: 8k
DH Vanguard Roth IRA: 19k
Vanguard Taxable Brokerage Account: 111k
Credit Union checking: 7k
Credit Union money market: 80k

Total financial assets: 292k

Asset allocations (as of 05/26/2022)
Stocks 45.4% (70% domestic / 30% international)
Bonds 22.3%
Cash 32.3%

See attached png file for detailed fund information and asset allocations.

Other assets
Paid-off 2015 Honda CRV (trying to be a single car couple for as long as possible)

DW Pension: expecting 4-5k/month after retirement (making certain assumptions)


Future expenses and goals (in order of expected occurrence)
We are currently trying for our first child. If things go well, we would love to have more.

Single-family house.

DW would like to try working part-time in the next few years.

Aging parents have their finances organized, but if something happened, we would obviously want to take care of them.

Financial independence, and all the psychological well-being that comes from it.

A “forever” home.

Retirement in our mid-fifties.

Questions
Expenses, any face punches here?

In addition to a 401k and 457b, DW has access to a 403b. We are thinking to use the cash that is going into our Vanguard Brokerage Account (2.4k/month) to instead go into the 403b. Any special considerations here? Assuming we do this, there will be cash leftover. Where should we put it? It seems the common wisdom is to invest in personal Roth IRAs. Can someone explain why that is the next best option?

We believe the estimate of 4-5k/month from DW's pension after retirement is reasonably accurate. How should we factor this into our retirement planning? Can it be considered fixed income and how does it reduce our FI number?

Does our health insurance plan make sense given our high healthcare expenses? Obviously there are a lot of details we haven’t shared but the gist is we are on a high-deductible family plan through DW’s employer with access to an HSA we recently began making contributions to. Moving forward we expect two categories of high medical expenses: 1) DH is paying out-of-pocket for therapy. This is a therapist he has a long-term relationship with who was covered under his previous plan but since marriage in late 2021 we have been paying $140 for 45 min sessions 2-4 times a month. 2) We are trying for a baby, so any expenses with having or conceiving (i.e. fertility treatment, we are coming up on a year of trying).

Our assets are a bit of a mess. They are spread amongst different vehicles and current allocations are tilted heavier for international stocks and bonds/cash than we would like long-term. The enormous amount of cash we are sitting on is saved for a down payment, after which, should tilt our portfolio back to ~80% stocks, more on this below. Is there anyway to simplify our assets? One that sticks out is DW’s 457b PMEGX which is a mid-cap with a high expense ratio, thinking we should just go all in on the 2045 target date fund.

We are indecisive about our housing situation. We like our current duplex apartment; it’s cheap, low maintenance, and in a great location. However, it is old and its size (900 sq ft) makes it challenging to have family over, and that’s not even considering kids. Now that both of us have stable jobs we would like to buy. We are looking to not spend more than 500k, so that has meant looking at houses being listed at 400-475k. In our desired areas (mature neighborhoods where DW can walk to work and DH can bike to work) such a price at best will get us a 100-year-old 1000-1500 sq ft house that will need near-term maintenance/update expenses. We are becoming discouraged by our situation as most houses we want are just outside our price range of 500k-700k. Incoming rant, DH is worried about buying in a competitive market at high prices but simultaneously fears missing out on low interest rates. Also, with a huge pile of cash, probably more than we need, DH is worried that inflation is reducing our purchasing power, although with the performance of every other asset class there are probably worse places for it to be sitting.  Any advice or words of wisdom about our housing situation?

[PharmaStache]

I'm not American so I'll leave your investing questions alone.

I don't think it's a terrible idea to spend more on a house so that you can get what you want, and what will work for you long-term.  You're not looking at retiring that early, so you have lots of time to pay it off.  You probably don't need to be saving 85k a year in order to retire at 55, so you could consider spending a portion of that on a mortgage instead.

What I would do is make a mock budget for you once you have a child- the major factors being a change in income for one of you, and daycare expenses.  Any other child expenses generally pale in comparison to decreased income and daycare expenses!  If you want to do college savings or private schools, consider that as well.  Are you anticipating any increases in income?  This would help decide exactly how much you are comfortable spending on a mortgage rather than there being all these unknowns about the future.

The pension number may not be accurate if you want to retire early, quit or go to part time.  It's clearly not nothing though, so it should be considered in the back of your mind as a potential source of retirement income.

[lucenzo11]

Expenses: I wouldn't call anything in here facepunch worthy especially at a savings rate over 50%, but if you are looking to optimize, a few things stand out to me.
1. Groceries/restaurants/takeout at over $900/month seems high. There's probably some room to reduce costs here, the extreme would be to eliminate all eating out, but if that's your main form of entertainment or if work hours often cut into meal times, then this may be understandable.
2. Clothing seems high. I get it if you are trying to build up a wardrobe for new job but just don't make this into a habit. Stop once you have what you need and take good care of clothes so that they can last a long time. Also, if you find something you really like, try to find similars that are used or even brand new but sold through others. For example, I usually look on ebay to see if anyone has bought up any extras after a product is discontinued.
3. Subscriptions: Re evaluate whether you really need all of these. Try rotating services to reduce monthly cost.
4. Gifts: I know this is a tough one with family expectations, but just consider whether your nieces and nephews really need gifts every birthday. In my family, so much of the gift giving gets excessive and it's mostly stuff they don't even need. Maybe even set an age cutoff, like once they turn 10 no more gifts. I get that this can be a tough conversation with your siblings too and they might not understand your motivation for not wanting to get gifts.

403b: Sorry, but I cannot comment on this one, hoping others can help out.

Pension: First, consider how likely this is to happen and how it aligns with any plans to retire early. Seems like you are aiming for 50s so that doesn't seem out of the question to be eligible after 20 or 30+ years working, but you might not want to rely on this unless you are sure you will be there until you retire. Whatever the number is, you can just subtract the equivalent of what you would need from your investments from your FI number. So for example, if it is $4k/month, then $4,000 x 12 months x 25 (assuming 4% withdrawal rate) = $1.2M. So you can subtract $1.2M from your FI number. If you compare your $4-5k assumption versus your current expenses you can see that if would cover you currently, but your current expenses don't seem like they will stay constant as housing is likely to go up with house purchase and children may change your spending.

Health Insurance: I don't think I have enough info to help you out here. I would need a breakdown of the health insurance plans eligible to you. The general assumption used to be that if you have high health costs then you probably don't want the high deductible plan as it is more likely to be more money. But as more insurance companies and employers have pushed for high deductible plans, the costs more premium plans has gone up, so this is really a case by case basis now.

Assets: Agree on PGEGX, I always choose the lowest ER unless you have a specific reason for wanting this fund. Also, seems like you are in the wealth accumulation phase so probably don't need bond indexes right now. Might be better (simpler) to move those to VTSAX and then adjust your ratios once you are closer to retirement. Also, VWIGX is high ER and international. If you don't want to be as much international then that is an easy transfer to VTSAX.

Housing: This is a really tough one and a lot of people are struggling with it and have been for the past few years. How long do you want to live in this house for? Seems like you don't want one that will require fixing, is this true? One of your strengths right now is your low housing costs in your current rental and if you like it, then there's no need to move immediately until you find a house that fits your needs and budget. As for the housing cost and interest rates, I think the rising interest rates should slow or cutoff the housing price increases because it will price out some buyers and listing prices will need to come down to equal out with the demand of who wants to buy the house. Overall, don't rush into something that you don't need right now. Maybe the housing market will get worse, maybe it will get better, who knows, but don't let FOMO push you into a decision that you aren't fully sure of. Best of luck!

[zolotiyeruki]

My impression is that house prices have stopped rising, and it's my opinion that they'll either start falling, or stagnate for a good long while.  Here's why:  homebuilding is at its highest rate in half a century.  The big surge of people starting to WFH (and therefore moving from HCOL to LCOL, or from city to suburb, or simply upsizing) has passed.  Interest rates are rising, which will put downward pressure on prices.  Lumber prices are down from their stratospheric highs, and large-scale builders have seen demand slacken considerably.  So I'd be in no hurry to buy.

I'd also be in no hurry to buy now, because it's still just the two of you.  And even if/when you have your first kid, they don't take much room for the first couple of years.  There's no rush to buy a home on account of having your first baby. 

Run the numbers.  Right now, you're paying $1400/mo in rent.  A $400k mortgage @4% is about $2200/mo, of which about $1600 would be interest for the first few years.  Then add in insurance ($120/mo, maybe?), and property taxes (who knows, depending on your area), and maintenance ($100/mo at least, plus sinking funds for roof, A/C replacement, etc), and the opportunity cost of the money that has to go toward principal.  All of a sudden, that extra 500 sq ft is costing you an extra $1000/mo compared to your current rent.

[Freedomin5]

Apologies in advance if the facepunches are too facepunch-y. Take the ones that work for you and ignore the ones that are too over-the-top.

We are newly-wedded DINKs in our early-thirties living in a HCOL area. We have combined finances. DW does the budget, DH does the investments, and we both save. --> Congratulations! You're off to a great start!

Life Situation
IRS Filing Status: Married
State Income Tax: 6.3%
Federal Tax Bracket: 22%
Dependents: 0
Location: HCOL
Jobs: DW is in HR at a public institution, DH is a scientist at a private biotech

All numbers are USD$

Gross Salary
DW: 86k/year (>10 years at current job, received a 10% raise June 2022)
DH: 93k/year (began job six months ago, coming from a PhD stipend of 25k/year)
Combined gross: 179k/year
Combined total compensation: ~190k/year (gross + bonus + employer contributions)

Pre-Tax Deductions
DW Governmental 457b Trad: 14k/year (DW maxes but splits contributions into a Roth, see below)
DW Pension: 5.1k/year
DW HSA: 5.8k/year + 1.5k/year employer contribution
DW Insurance: 1.3k/year (high-deductible health, life, disability)

DH Company 401k: 20.5k/year + 2.8k/year employer contribution
DH Insurance: 65/year (vision)

Adjusted Gross Income
DW: 59.8k/year
DH: 72.5k/year
Combined: 132.3k/year

Taxes
Federal Income: 14.7k/year
Social Security: 10.6k/year
Medicare: 2.5k/year
State: 6.4k/year

Total: 34.2k/year

After-Tax Deductions
DW Governmental 457b Roth: 6.5k/year

Adjusted Net Income
Combined: 91.6k/year

Liabilities
No debt.

Expenses
Although we have kept a loose budget for years, DW has recently started a detailed budget and the following is monthly average from January to May 2022. There have been some upfront purchases (vacation) and future anticipated expenses (health), so expenses are still reverting to their means so expect to have a clearer picture as the year goes on.

Overview:
Total housing expenses: 1630/month, 19.6k/year
Total non-housing expenses: 2820/month, 35.4k/year
Total expenses: ~4600/month, ~55k/year

And a more detailed breakdown:
Housing
Apartment rent: 1380/month
Parking: 50/month
Rent Insurance: 8/month

Utilities
Apartment utilities: 190/month (electric, gas, water, municipal taxes)
Internet: 75/month
Phone: 55/month --> This can be lower. See this thread and also this thread. If you're in the US, it seems to me you can get this quite a bit lower.

Transportation 348/month (includes car insurance, maintenance, gas, and bike-related expenses)

Insurance 29/month (sup life, ID theft, disability)

Consumables
Groceries: 563/month (95% groceries come from Aldi and Costco) --> This seems high for two people, especially because it doesn't include dining out. You're spending almost $1000 a month, for two people, to eat food! Check out this thread for ways to lower your grocery bill.
Alcohol: 13.5/month (purchases from bars and liquor/grocery stores only, we have worked hard to cut our intake)
Restaurants/Takeout: 353/month (alcohol ordered with food included here)

Health 421/month (DH is paying for therapy out-of-pocket 280-560/month + any other expenses that come up)

Household goods 53/month

Clothing 215/month (this expense has been creeping upward ever since DH finished graduate school to start a professional job) --> This is high, but I expect it will drop once DH has gotten all the clothes he needs for work. I don't assume he's going to need $200 worth of clothes every single month for the rest of his career, unless he ruins them on a weekly basis. Check out thrift stores or consignment stores. In a HCOL area, you should have some really nice neighborhoods where you can get good quality, almost brand new, used clothing.

Subscriptions 104/month (streaming services, news, content creators) --> Do you use all of these services often enough to justify spending $100 a month on them? Some people rotate through the services, which allows them to watch all the shows without paying all the costs for the entire year.

Gifts 124/month (lots of nieces and nephews)

Entertainment 48/month

Traveling 620/month (already pre-booked vacations for the year)

Miscellaneous 44/month

After-Tax Savings
Vanguard Taxable Brokerage Account: 2400/month, 28.8k/year

Leftovers
(Adjusted net income)-(expenses)-(after-tax savings) = 650/month, 7.8k/year. (this is just money accumulating as cash, saving up for a house purchase or whatever expenses or short-term purchase goals we want to make)

Savings Rate
Total projected 2022 savings (HSA + 457b + Pension + 401k + employer contributions + after-tax brokerage) = 85k
Savings rate against total income (post-tax income + pre-tax contributions) = 58.7%

Your savings rate is not bad compared to the typical American, but the typical American doesn't reside on these forums. I think you can do better than your current rate, especially with your relatively high incomes.

Assets (as of 05/26/2022)
HSA: 3k
DW 457b: 64k
DH Fidelity 401k: 8k
DH Vanguard Roth IRA: 19k
Vanguard Taxable Brokerage Account: 111k
Credit Union checking: 7k
Credit Union money market: 80k

Total financial assets: 292k

Asset allocations (as of 05/26/2022)
Stocks 45.4% (70% domestic / 30% international)
Bonds 22.3%
Cash 32.3%

See attached png file for detailed fund information and asset allocations.

Your bonds and cash allocations are very high for someone so young. Are you very risk averse? That's okay if you are, just be aware that you're likely trading that impression of safety for much lower returns. I think you could get much better returns if you bumped up the equity allocations.

Other assets
Paid-off 2015 Honda CRV (trying to be a single car couple for as long as possible) --> Good for you!

DW Pension: expecting 4-5k/month after retirement (making certain assumptions) --> A lot can change in 20 years. To be conservative, I probably would run two scenarios -- one with the pension and one without, just to hedge bets and make sure that you save enough for retirement.


Future expenses and goals (in order of expected occurrence) --> I'm reading a bit of lifestyle inflation here. On your salaries, with your current investments, you're on a good path. However, I see pockets of time when your income will drop, like when on maternity/paternity leave, or when DW drops to part-time, or if one of you needs to cut back or quit work to take care of aging parents. It would be good to run those scenarios to see how that impacts the speed of your path towards FIRE. Use one of the online calculators such as FIRECalc or cFIREsim, and run different scenarios. That will tell you whether you are on track to meet your goals based on your current savings rate or whether you have to turbocharge your savings for a more years before you take your foot off the throttle to have a kid or drop to part-time.

We are currently trying for our first child. If things go well, we would love to have more.

Single-family house.

DW would like to try working part-time in the next few years.

Aging parents have their finances organized, but if something happened, we would obviously want to take care of them.

Financial independence, and all the psychological well-being that comes from it.

A “forever” home.

Retirement in our mid-fifties.

Questions
Expenses, any face punches here? --> See responses in blue above.

In addition to a 401k and 457b, DW has access to a 403b. We are thinking to use the cash that is going into our Vanguard Brokerage Account (2.4k/month) to instead go into the 403b. Any special considerations here? Assuming we do this, there will be cash leftover. Where should we put it? It seems the common wisdom is to invest in personal Roth IRAs. Can someone explain why that is the next best option?

--> Chech out the Investment Order thread for the answer to your question.

We believe the estimate of 4-5k/month from DW's pension after retirement is reasonably accurate. How should we factor this into our retirement planning? Can it be considered fixed income and how does it reduce our FI number? --> See response above.

Does our health insurance plan make sense given our high healthcare expenses? Obviously there are a lot of details we haven’t shared but the gist is we are on a high-deductible family plan through DW’s employer with access to an HSA we recently began making contributions to. Moving forward we expect two categories of high medical expenses: 1) DH is paying out-of-pocket for therapy. This is a therapist he has a long-term relationship with who was covered under his previous plan but since marriage in late 2021 we have been paying $140 for 45 min sessions 2-4 times a month. 2) We are trying for a baby, so any expenses with having or conceiving (i.e. fertility treatment, we are coming up on a year of trying). --> Will let the more knowledgeable Americans answer who can speak more directly to your situation in your healthcare environment.

Our assets are a bit of a mess. They are spread amongst different vehicles and current allocations are tilted heavier for international stocks and bonds/cash than we would like long-term. The enormous amount of cash we are sitting on is saved for a down payment, after which, should tilt our portfolio back to ~80% stocks, more on this below. Is there anyway to simplify our assets? One that sticks out is DW’s 457b PMEGX which is a mid-cap with a high expense ratio, thinking we should just go all in on the 2045 target date fund.

--> Check out JLCollins Investment Series .

We are indecisive about our housing situation. We like our current duplex apartment; it’s cheap, low maintenance, and in a great location. However, it is old and its size (900 sq ft) makes it challenging to have family over, and that’s not even considering kids. Now that both of us have stable jobs we would like to buy. We are looking to not spend more than 500k, so that has meant looking at houses being listed at 400-475k. In our desired areas (mature neighborhoods where DW can walk to work and DH can bike to work) such a price at best will get us a 100-year-old 1000-1500 sq ft house that will need near-term maintenance/update expenses. We are becoming discouraged by our situation as most houses we want are just outside our price range of 500k-700k. Incoming rant, DH is worried about buying in a competitive market at high prices but simultaneously fears missing out on low interest rates. Also, with a huge pile of cash, probably more than we need, DH is worried that inflation is reducing our purchasing power, although with the performance of every other asset class there are probably worse places for it to be sitting.  Any advice or words of wisdom about our housing situation?

900 sq ft is a very large apartment. Does it perhaps feel smaller because of clutter or because of inefficient layout? With regard to the rent vs. own question in HCOL areas, this calculator may help shed some light. Personally, I don't have a preference one way or another -- there are financial and psychological pros and cons to both options. I do think that for two people, and even for two people + baby, 900 sq ft should be enough space if used wisely. $1300+ for a 900 sq ft apartment in an HCOL area is very reasonable, and I would be loathe to give it up unless I absolutely have to.

[BigThief]

I’m in the process of writing an update on our current situation, but first wanted to give my sincere thanks to the posters who took the time to read and give feedback. We took action on many of your suggestions, and credit our progress in the last two and half years to the advice of this forum.

@PharmaStache

The suggestion to create a mock budget with child expenses took us in the right direction. Learning what child care actually costs these days (wow) motivated us to keep our savings rate high and make hay while the sun shined.

Our thinking and analysis of pensions have refined over time. We have explored several different scenarios which change the assumptions and projected value of the pension. It’s turning out to be a bit of a golden handcuff asset that has changed DW’s thinking on working part-time.

@lucenzo11

While we didn’t make any radical changes to our spending, your comments did help us re-examine how we spend in those categories. We canceled a couple subscriptions and cut our dining out expenses in half.

Pulled the trigger on axing PMEGX and transferring those funds to a Vanguard target date.

And thank you for sharing thoughts on the pension and housing situation.

@zolotiyeruki

This analysis on housing costs cooled our FOMO and ultimately kept us within budget. We ended up buying a house last summer in 2023, and while our housing expenses have gone up, it could have been much MUCH more expensive given how the market and interest rates continued to climb. More on this in the update.

@Freedomin5

As I replied above, we were able to reduce spending on some of the categories you pointed out. Still have room for improvement, particularly in the clothes category. Overall your feedback motivated us to keep expenses low and savings rate high. Thank you!

[BigThief]

So here is an update. I should probably start a journal as I have a lot to say lol.

Life
Our work situation is still good. Work can be challenging and there are occassional politics, but it is rewarding and mostly interesting. We keep our heads down and focus on doing good work. I (DH) am on site full time but have flexibility as needed. DW is hybrid and likes the arrangement. Employers have been good to us and continue to give competitive raises.

We bought a house! It was still very much a seller’s market when we closed in summer of 2023. There were ten other offers, and we took it for 15% over asking while waiving both the inspection and appraisal. While this all sounds crazy (and is crazy), we stayed well within our original budget despite getting raises over the years. This in combination with our 20% down payment resulted in a mortgage only 1.5x our HHI. As for the inspection concerns, the house was well maintained and updated from the previous owners, who had lived there 30+ years. It’s since been inspected and having lived in it for a year there are no concerns. The house itself is 3bd/2ba ranch at a modest 1500 sq ft. There are people in our life who don’t quite “get it” (co-workers especially), but we are happy. It’s in a mature neighborhood with walkable access to school, parks, libraries, and decent food options. Grocer is a little far but it is at least on the way home from work. DW can no longer walk to work but she is happy with the public transit. And I can still bike when the weather cooperates (20-mile round trip almost entirely on trail, half of which is through conserved natural areas). We made some compromises, but overall feeling very proud and pleased with our decision!

Growing our family has not been easy. Our happy ending is in sight, but there is a lot to unpack and I will try to keep it short.  Right after the OP we learned we had conceived which was obviously very exciting and a huge relief to know we were not up against complete infertility. However, we ended up losing the pregnancy at 7 weeks. We then went on to conceive and lose two more in the first trimester. Words cannot express the grief and sense of loss we have for these three little ones... IVF was looking inevitable when our fourth conception took. As of today, we are full term with the only complication being a breech presentation. C-section is scheduled in two weeks. DW is going to take 18-weeks paid maternity and I’m going to take a 6-weeks paid paternity leave. Just trying to wrap things up at work so we can have our time away. We are anxious and excited!

Still share a single car. It can be difficult juggling the car, but we make it work. I bike a couple days a week for half the year but use the car to commute during winter. I want DW to have access to a vehicle during her long winter maternity leave, so we are pretty set on buying a second car, just a matter of time.

In the meantime, we have allowed ourselves lots of vacations and getaways. In summer 22’ we did a Greek islands cruise with my parents. In fall of 22’ we flew to Boston and drove along the coast to Acadia National Park in Maine where we enjoyed hiking, seafood, and coastal views. In spring 23’ we did a road trip from Miami down the Florida Keys. This was an incredible trip! Enjoyed the night-life and art deco on South Beach. Did a food tour along Calle Ocho and got a $5 street portrait in Little Havana. Biked the Everglades and had some near misses with gators. Swash buckled in Key West and toured the Hemingway House and Little White House. And the highlight of the trip was taking a seaplane out to the Dry Tortugas to do some snorkeling. Oh and my brothers-in-law and friends appreciated the cigars I brought back. In fall 23’ we rented a small cabin in Estes Park Colorado and spent a week hiking in Rocky Mountain National Park. Did about 50 miles and enjoyed seeing the aspens turn color and hearing the elks in rut. Didn’t do any 14-ers but stoked our appetite for more longer hikes in the future! Late fall 23’ we went out to Virginia for a wedding and managed to see some civil war and early American history museums. In summer 24’ we had a family reunion in Branson, MO. Not our cup of tea but fun to experience. Sprinkled throughout this were lots of holidays with both our families, camping trips to state parks, and group weekends with friends.

Income
Our gross HHI has grown to $245k/year. That includes base salaries, employer HSA contribution, employer 401k match, employer pension match, and bonuses. This gross income is split evenly between us.

Something new is that one set of parents has started gifting us money at the beginning of each year. They are calling it an early inheritance and want to see us enjoy it. I think there is also some tax efficiency considerations as well, as the value of the gift approximated the size of the annual gift tax exclusion. This year we received $15k from them and put it right into house principal.

Cash Flow rough breakdown of where our income is going (projected for 2024)
Retirement Savings: $70k
Extra Principal Payments: $10k
Taxes: $47k
Expenses: $90k
“Left Over” HYSA savings: $28.5K

Contributions (projected for 2024)
Account: annual employee contribution + employer contribution if applicable

401k: $23k + $4.4k
457b: $17.3k
403b: $1.3k
HSA: $6.7k + $1.5k
Roth IRA: $3k
Pension: $7.9k + $7.9k
 
Total employee savings: $55.7k
Total employer savings: $13.8k
Total retirement savings: $69.5k
 
Other non-retirement savings include $9.6k/year to house principal (not counting the principal component in the mortgage) and about $28k/year going into our HYSA. This is to save for a car, housing expenses, and general emergency fund. Eventually this income will also go to paying for childcare.

So our savings rate is about 32% (defined as retirement savings + house principal savings / gross income). Not bad but seems like we should be able to do better with our income. I would love to max all our available retirement accounts, but unsure this will ever happen.
 
Expenses
DW continues to track our expenses. We have a detailed breakdown of every month’s expenses starting in 2022 to present. Perhaps in a future post I can share the details, but for now I’d like to at least share our totals:
 
2022
Total: $56,174 – darn close to our projected spending in the OP
​Housing: $17,660
​Non-Housing: $38,514

2023  – bought a house this summer
Total: $76,380
​Housing: $ 27,683
​Non-Housing: $48,697

2024
Total: $90,000 – projected estimate based on our monthly spending
​Housing: $46,584
​Non-Housing: $43,416

Just taking total expenses, it looks like our lifestyle exploded! But you can see most of this difference is actually housing costs.

In 2023 our non-housing expenses were up $10,000. What did we spend more on? Vacations (+$6500, Miami ain’t cheap!) and health care (+$3500, we met our deductible getting care for miscarriage and fertility). That’s it, no other lifestyle creep.

In 2024 our non-housing expenses have settled a bit, but still up $5,000 compared to 2022. What are we spending on now? Well we’ve done very little vacationing this year so that category is way down. Most of this difference is categorized as household items/supplies. We are nesting and preparing for the arrival of the little one! Spending here includes tools and raw materials for house maintenance and improvement. Some examples are expenses from DIY projects (painted the entire main floor, ripped up carpet in the nursery and refinished the hardwood floors), household consumables (salt for the water softener, furnace filters, light bulbs), yard care (inherited an old lawn mower, sharpened the blades and it works fine), random maintenance and repair (including $15 for a shovel that handled 30+ inches of snow this winter, no need for a snowblower when you have your health). This category also includes furnishings (a king bed to replace our squeaky frame and lumpy mattress and a new TV to replace our 15-year-old 42” TV). Didn’t pay a dime to move from our apartment to the house. Had help from parents and used their trailer. We did buy them pizza after everything was moved in.

The rest of the spending has been on baby-related expenses. About $600 of this was on a new car seat (nothing but the best here). Another $400 spent on maternity clothes, clothes for the baby, and some random here and there things. The remaining $400 was spent buying a used stroller, crib, and bouncer. How have we spent so little? The generosity of our family and friends. Pretty much everything else we’ve gotten gifted, and believe me, we are lacking for nothing. We must have a dozen types of bottle tops and at least three different mechanisms to snuck snot from a baby’s nostril.

Considering our increasing income and the nation’s inflation, I feel good about our spending. Key will be keeping it low in these early childhood years.

Invested Assets
Pre-tax retirement (401k, 403b, 457b): $252k
Post-tax retirement (Roth IRAs): $57k
HSA: $26k
After-tax brokerage: $138k

Other Assets
HYSA: $52k
Vehicle: $13k
Estimated House Value: $520k
 
Liabilities
30-yr fixed mortgage @ 6.5%: (-$358k)
Current credit card debt (paid off monthly): (-$3k)
 
FI number (all invested assets): $473k
Net worth (all assets minus liabilities): $697k

Thoughts and Questions
I think our expenses, particularly non-housing expenses, have been very reasonable. Agree or disagree?

We are pretty set on buying a car. Talk me out of it! We are leaning toward a mini-van. Unsure whether to buy new or used. Market seems to be cooling but from the numbers it is still tempting to buy new. Either way, we would pay cash. Buying used would be nice so we can max our Roth IRA’s at the end of the year. Thoughts on new vs used in 2024?

We are super motivated to pay the mortgage off. Seeing how much of the monthly goes to interest is painful. And our total annual expenses would drop to ~50k and there would be a lot more to put into savings. We are trying to strike a balance between retirement savings (current +55k/year) and mortgage principal (current +8k/year). With a 6.5% interest rate, would you tilt more into the mortgage? But the Feds are about to begin rate cuts, and we are already looking into refinancing options. Are there any rules of thumbs on when to refinance?

Whether we have more than one kid is now up in the air. We just need to see how this first one goes. If we have one, I don’t see why we couldn’t stay in this house forever. But if we have more kids a different house may be in our future.

Childcare is going to be expensive. DW will be on maternity leave until February, but then we will need childcare. Family and friends are not an option. We’ve looked at three different daycare centers, each range from 23k to 27k/year. Our preference is the most expensive (funny how that works). We are also exploring in-home options which are much cheaper. However, many are either not certified or have (minor) violations. Our biggest challenge with in-home is finding options and determining which are good and which to avoid. Should we be open minded to in-home?

We’ve been considering hiring out our house cleaning. Life is so busy we barely seem to get around to cleaning the house. It doesn’t get nearly as dirty as our old apartment, but we still struggle to find the time to clean. The cleaning that does get done mostly falls on DW. We are considering budgeting $200-300/month for this. We’ve decided to revisit this in early Spring as we hope to have more time cleaning while we are on parental leave.

I’ve been learning a lot about taxes in the past year. One thing to address is the location of our bonds. Currently we have bonds in the after-tax brokerage and are paying taxes on the interest at our marginal tax rate. I really need to consider closing this out in the brokerage and buying a corresponding amount in one of our retirement accounts. But I’m also having market timing temptations: wait for bonds to go up in value (o rly?) and the market to go down (o rly?) and go 100% stocks (o rly?). Feel free to talk sense into me.

Summary
That’s all folks. Life is about to change in a big way with the little one coming. Hoping that our personal finances are in a good trajectory to carry us through these next years. See you on the other side!

[PharmaStache]

Sorry to read about your pregnancy losses.  Hope everything goes smoothly for you with this pregnancy!  Sounds like the vacation spending ended up being a good plan pre-baby.

Would you ever consider selling the bonds and putting them towards your mortgage if you're wanting it paid off?  I'm not American but I also don't have bonds in non-registered investments due to the tax implications. 

23k a year in daycare....wow.  I'm not a fan of in home care though- my kids needed more stimulation than that, and the days off the provider took did not work with our work schedule (sick days or mine also took random vacation days throughout the year).  We only had that for one year though and are now free of daycare forever!

[Sandi_k]

@BigThief - very impressive to read your progress and analysis! You guys are doing great, and have made big changes while keeping your eyes on the prize. And congrats for keeping the house purchase in line with your long-term plans - that is HARD to do!

You sound as though your challenges and grief have not broken you as a couple, and that is rare, IMO. Many couples who have been through multiple miscarriages lose each other, too. My condolences, and my congratulations on the nearly-here arrival!

A couple of quick thoughts:

- I would refi if you can do it for low/no cost, while lowering both the interest rate and the length of the loan.

- I would absolutely hire out the house cleaning while the baby is new - there are plenty of better ways to be spending your time with a new baby - like sleeping!

- I would look for a used van; the typicall recommendations are a Honda Odyssey or a Toyota Siena.

For optimizers like us, it's sometimes hard to remember that we can spend a bit of money NOW to make life better NOW.

It seems to me that you have a very clear path, and very defined items where a little spending could have big benefits. I wouldn't stress tooooo much, as it is clear that you both are thoughtful about short term AND long term goals. Use your money and time judiciously - you're doing great.

[NotJen]

We are pretty set on buying a car. Talk me out of it! We are leaning toward a mini-van. Unsure whether to buy new or used. Market seems to be cooling but from the numbers it is still tempting to buy new. Either way, we would pay cash. Buying used would be nice so we can max our Roth IRA’s at the end of the year. Thoughts on new vs used in 2024?

If you do decide to buy a car - do it now while your wife is super pregnant - send her alone to negotiate the price!  My mom and sister swear it's the easiest time to buy a car, because they just want to get you out before you go into labor (I can't vouch for this method myself).

[Freedomin5]

[/size]So our savings rate is about 32% (defined as retirement savings + house principal savings / gross income). Not bad but seems like we should be able to do better with our income.

A good way to get to your preferred savings rate is to pay yourself first and live off the remainder. First contribute to your investment vehicles, then decide how many vacations, how many renovations, how nice of a second car, and how many baby supplies you can afford.



Another way to think about it is to ask yourself, are you still living like a PhD student on your 25k stipend? If no, then you’ve experienced lifestyle inflation. The longer you try to keep your grad student lifestyle, the better it will be for your savings rate.


You have had a not insignificant amount of lifestyle inflation over the past few years and will likely experience a significant increase in expenses once baby arrives, including the hiring of a cleaning lady. That’s okay. No judgement here (heck, I have a cleaning lady who comes once a week). We spend on things that we value. However, I would challenge you to optimize that spending.


For example, baby things. Do you need to buy new or can you get things for free from the local Buy Nothing group? Or for cheap from the thrift store?


For daycare, is there a way to exchange work for a tuition reduction? (As an example, DD currently attends a $50k a year school for free because we found out that employees’ kids can attend for free.)


For your car, do you need a brand new car, or can you make do with an economical used car? Or would it be even more optimized if you took an Uber for the couple days a week that you drive to work and just kept one car?


Are there ways to optimize your holidays so that you’re not paying full price for travel, accommodations and attractions?


Lifestyle inflation often creeps up on you without you realizing it, and it’s often for things that you feel you “need”. There are always ways to justify more spending.


Congratulations on the imminent new addition to your family, and focus on optimizing spending on the things and experiences you truly value!

[BigThief]

@PharmaStache
Happy to report everything went well with the birth! I'll share more in an update. The vacations turned out to be exactly what we needed.. and it was especially important for us to have a trip always in the hopper to plan and get excited for.

I have considered selling the bonds and/or other assets to pay down the mortgage, but am a bit wary taking our current retirement assets and locking it into house equity. Re bonds idea, our holdings (VBTLX) are currently down 15% and I'd like to continue to have some bond exposure. But I really ought to draft an Investment Policy Statement and come up with an asset allocation we are comfortable with and then work from there. The few times I've thought about moving funds around it feels like shooting from the hip.

I share those concerns (low stimulation, last minute scheduling difficulties) with the in-home. We are likely going to go with the middle of the road daycare center. We have the expenses earmarked, but it is a huge expense no doubt. We will be able to slightly reduce our taxable income with a dependent care FSA (may be just an American thing?) but it's a drop in the bucket.

@Sandi_k
Thank you for your condolences. My wife teared up reading your comment. We've had our highs and lows, but overall it has strengthened our marriage.

Looks like we may have missed the recent dip in interest rates, but will keep an eye on it weekly for any further lowering. Our credit union doesn't offer lender credits so I would have to shop around to do it no cost. I'm wary of this - my preference is to stay with our current lender. I've been following the re-finance mega thread over on the bogleheads forums.. maybe I'll warm up to it.

Appreciate the reminder that it's OK to spend on things or services that bring value. I am sure there is enough fat in the budget to re-allocate to higher value expenses. E.g. cut $200 in clothing + eating out expenses and put it into house cleaning expenses. We are doing another deep dive into our expenses and will explore this idea.

@NotJen
Lol! We weren't able to take advantage of this, but maybe a newborn would have a similar effect?

@Freedomin5
Good stuff, made us think. Lifestyle inflation HAS happened, no doubt! Back in the early grad school days the only vacation spending was a twice year $40 round trip bus ticket to visit parents. And the only category with higher spending was alcohol and coffee, which I do not miss! Back then I was living on just $18k/year. Now in the same metro area with daycare expenses we will be over $100k/year. I really cannot believe it. I've been a long time reader of the MMM blog and always considered myself a frugal person, but lifestyle creep is real. These forums are a breath of fresh air.

[Novik]

We are pretty set on buying a car. Talk me out of it! We are leaning toward a mini-van. Unsure whether to buy new or used. Market seems to be cooling but from the numbers it is still tempting to buy new. Either way, we would pay cash. Buying used would be nice so we can max our Roth IRA’s at the end of the year. Thoughts on new vs used in 2024?

...

Whether we have more than one kid is now up in the air. We just need to see how this first one goes. If we have one, I don’t see why we couldn’t stay in this house forever. But if we have more kids a different house may be in our future.

As a one kid one car family in 2bd/1ba 800 square feet of living space, here are some thoughts / small facepunches...

Congrats and good luck. Nothing motivated me more to FIRE than missing my kid all day at work. You may find your priorities change too.

I totally see why you're interested in a second car. With one kid, I would recommend a Honda Fit. You'd have to go older as they stopped making them which will save money (but that's fine cause you might want to sell if you have a second kid anyways). They have visibility and storage like a minivan as you can keep half the backseat down but great fuel economy, parking etc. Only downside is if you're both very tall as you do lose some legroom with carseats so be mindful. Just don't pre buy a minivan you won't need for YEARS if at all.

3bd 2ba 1500 Sq ft is PLENTY of space for 2 kids. Probably more although that's up to you. And even with more you might find you have a long time until you feel the need for space. We're going to have a second kid in this house and assume we'll want to move eventually for more space/bedrooms but not until kiddos are at least school age. Again, wait and see.

Save you money and buy yourself flexibility.  I promise it's worth it.

[zolotiyeruki]

We had four kids before our 1500 sqft (including 2-car garage!) 3/2/2 house started feeling a bit crowded.  Two kids in such a house? Piece of cake, especially when they're really young.

[BigThief]

@Novik
I miss my kid every day. But I also really enjoy my work, and don’t think I’m cut out to be a SAHP. But I can see thinking differently in a few years, and certainly want to keep options open, which is what FI is all about imo.

Honda Fit was a great suggestion. We seriously considered it, but ended up going with an Odyssey, which turned out to be a good fit. We probably could have waited a year or two to buy it but felt the hassle of buying a bridge car wasn’t worth it. We will be driving the wheels off this minivan. 300k mile club or bust!

800 sq ft with a kiddo is impressive. You’ve got to run lean to make that work! I like the wait and see approach. Best not to anticipate these sort of changes and rather adapt then make the change if needed. You get the benefit of delayed gratification.

@zolotiyeruki
That’s the spirit, got to love it. You folks are my people. I think the small space brings the best out in family. Makes you think and optimize your consumption. Wait until we have teens I suppose lol.

A couple things we are doing to commit to our house is pay it off early and put in sweat equity to make it sentimental. If we can pay off our house and make it a perfect oasis, I don’t think we’d ever move.

Thanks for the feedback to you both!
 

[TheFrenchCat]

I'll pile on to say I think 1500 sq ft is plenty for two kids.  I grew up in a 1200 sq ft ranch, with half of the basement partially finished (we eventually had a desk and a TV room down there) in a family of 2 kids, and there was plenty of space.  Our house is almost 1400 with about 800 sq ft of basement and the previous occupants raised three kids here.  With just one child, it feels quite large to me. 

I've both stayed home and now am working two jobs for almost full time hours, and I think flexibility is more important to me than completely staying home.  I worked 16 hours a week remote, since my daughter was 1, and once she got well into elementary school, I was really bored during the day.  So I got another part time job, this one in person.  But both it and my old remote job are quite flexible, so we don't stress about sick days and are able to do lots of after school activities.  My husband's job also is decently flexible with remote work days, so that helps too. 

Sounds like you've got a pretty good plan, I hope that perspective helps!

[BigThief]

@TheFrenchCat

That sounds very similar to our layout! A good 600 of our 1500 square feet is basement, but calling it finished is generous lol. As it is, it’s a blank canvas for us to make the way we want. Should be a fun DIY project in the next few years.

I share your thoughts on work flexibility. I’d be hard pressed to put a number to the value it brings, and with kiddos now in the equation, it’s arguably priceless. My job does offer flexible remote work days, so fortunate for that. Sounds like you have a great set up, and have done well over the years to adapt to your family needs.

[BigThief]

Early 2025 Update
 
The little one has arrived safely. Taking nine weeks of PTO—some after birth, then around the holidays, and before starting daycare—gave me invaluable time to bond with my daughter and navigate parenthood with my spouse. I'm grateful for that experience. Returning to work feels mostly good lol. I get to work on interesting problems with interesting people. And I do enjoy the personal time I can get throughout the day, quiet cups of green tea or the occasional afternoon workouts. But, work is still work.. meetings, politics, and responsibilities. Every hour at work is an hour less with my family. It’s a good reminder why we save. Being on the path to FI gives me confidence to make choices that balance my career with family priorities. If our financial situation was less favorable, I don’t know if I would have taken as much paternity leave. I might have been too worried about missing opportunities to take on work responsibility and advance my career.
 
So the newborn fog has lifted and our noses are back to the grindstone. Here are some random updates.
 
Car purchase
We bought a new minivan. Had the cash to buy new but decided to finance part of it with a low interest rate loan. We instead put that cash into house principal, death to the 6.5% 30-year loan, deeeath! The minivan was the right choice for us. We want the cargo space for camping and road trips, and I’ll be using it to haul materials for DIY projects. It’s our parenthood chariot.
 
Cleaning service
We tried out a highly recommended cleaning person. Pretty underwhelming. Maybe our expectations were set too high? We get a lot of satisfaction cleaning ourselves, and as we get to know our house it only becomes easier. At this point, we've made peace with setting aside a Saturday every couple months to roll up our sleeves, crank the music, and get the job done ourselves.
 
Life insurance
Now that we have a dependent we will be taking out term life insurance policies. Thinking about $500K 10-year term ($80/month for both of us). In addition, we each have workplace coverage of 3-4x annual salary. I feel like this is sufficient for now. If I were to pass my wife would get approximately $950K. She could pay off the house, set aside funds for college, take some time off work and still be way ahead on retirement savings. And in 10 years’ time we hope to be self-insured to handle any income loss. Thoughts?
 
Bond position
I took the advice from PharmaStache and sold a portion of our bond position in our taxable brokerage and put it into house principle. Then bought corresponding amount of bonds in pre-tax retirement accounts. Did just enough to capture $3000 in losses for the 2024 calendar and will TLH for the first time this tax season. Not to self, I believe I avoided doing a wash sale. Could have done more and rolled the losses into the next years, but was hesitant to lump sum so will be DCAing it every calendar year. Will do this for 2025 again soon.

Taxes
Speaking of taxes, there are new tax considerations. For 2024, I believe we get the child tax credit and the dependent care tax credit? We’ve started contributing to a DCFSA, but that won’t come in to play until 2025 tax season? I’d like to be more involved with doing our taxes in the future, to strengthen my knowledge on all the intersections between personal finance and tax efficiency.

Old saving bonds
My father found a few old series EE saving bonds that were given to me as a young kid. Most had matured and yielded around 4-5% CAGR. Had instead their purchase value been invested into a stock index (assuming 10% CAGR), they would have yielded four times as much. I’m not trying to make a point here but found it fun to think about. Also funny to think that together they won’t even purchase two weeks of childcare. Not sure that’s what my great aunt had in mind when she gifted them, but I could think of a lot more irresponsible ways to spend the money.
 
Donating
We are fortunate to make more than we need. Of course, that differential is being saved to build towards FI, but I think the time has come to start giving to others. We have a couple charities and causes in mind. My work has a matching program that I could take advantage of too. We are ready to start giving back to our community.
 
Year-end spending analysis of 2024 coming shortly in a seperate post.

[BigThief]

No point in beating around the bush, our expenses have exploded in the past few years. Estimated 2025 expenses will be more than double what we spent in 2022. I’m going to offer what I think is a reasonable explanation. Hopefully, it doesn’t come across as a whiny defense of a consumer-sucka spendy-pants-McGee lifestyle, but you let me know lol.

Here are the big picture numbers (can’t figure out how to format, looks okay on desktop but all fumbled on mobile)

                              2022             2023              2024           2025 (estimate)
Housing              $17,659.96     $27,682.51     $43,182.96          $45,000
Transportation     $4,314.28       $2,474.38      $23,469.22           $9,000
Non-Housing       $34,200.16     $46,223.50     $39,966.96          $70,000
            
Total                  $56,174.40     $76,380.39     $106,619.14        $124,000

Housing category contains fixed expenses only (PITI and extra monthly principal contributions, but not year-end principal lump sum).
Transportation category captures vehicles and related expenses.
Non-housing category is literally everything else.

While our budget is fairly comprehensive, it does not include paycheck deductions for insurances, federal and state taxes, or cash transactions.

The main takeaway is that our expense explosion is due to just three (albeit major) lifestyle choices:
1) Buying a house
2) Buying a new car
3) Having a child and sending them to daycare

I’ve talked about this in past updates, so I’d like to avoid any face punches here if possible lol. But it is notable how modest our choices in these categories have been.  We live in a 1500 sq ft ranch, drive a mini-van, and send our child to a chain daycare center. I suppose this is just the price of growing a family in 2025 post-ZIRP.

What’s not reflected in our total expense number is all the effort to keep day-to-day expenses in check and keeping that non-housing category fairly flat. We’ve made hundreds of frugal choices in the past few years, but they are merely drops in the bucket when you look at the expenses incurred by the big lifestyle changes.

I'm not sharing the full budget, but here are some comments:

•   Our food expenses continue their march lower! Compared to 2022, we spend about $80/month less on eating out and alcohol. Despite inflation our grocery spending is about the same thanks to meal planning and less food waste.
•   Entertainment category spending was way down this year. Vacations have always been the biggest line item in this category. We did not vacation as a family in 2024, but would like to start again, as it’s something we really value.
•   Home furnishing and improvement categories have risen, naturally. A lot of our furnishings are hand-me-downs or new from places like Walmart and Target. For improvements, I’m DIYing pretty much everything. Planning to put up a cedar privacy fence this spring. It’s been a fun way to flex my mustachian muscles.
•   Hoping we don’t meet our healthcare out of pocket deductible for 2025.
•   Trending down: Subscriptions, phone (paid off), gas (bike commuting)
•   Trending up: Toiletries (diapers, wipes, baby-related things), utilities (apartment > house), gear (what the heck is this suspiciously generic category anyway? I’m always teasing my wife about it. It’s legitimate: used baby stroller, car seat, etc.)
•   Flat: Clothing. Way back in 2022 I suggested that this was transiently high due to starting a new job. Turns out we just buy a fair amount of new clothes lol. But my wife deserves a huge shout for getting by with a minimal maternity wardrobe.

Expenses for 2025 are estimated to grow. From highest to lowest cost: day care is the lion’s share, followed by monthly car payments, estimated material costs for a DIY fence, growing property taxes, and a new term life insurance policy. We are entering an expensive phase of life.

That’s all folks. We will continue to track expenses but probably keep future budget updates at a high level. Thanks for your time and attention.

[Novik]

That is quite the increase but I do see your point it's mostly down to a couple choices. Curious on the house front.... you mention a couple different extra payments. How does the house expense look over those years if you ignore those optional payments and/or ignore all principal payments?

Sounds like your daycare is painfully expensive. At least you can toss that out when looking at your FIRE budget!

[BigThief]

That is quite the increase but I do see your point it's mostly down to a couple choices. Curious on the house front.... you mention a couple different extra payments. How does the house expense look over those years if you ignore those optional payments and/or ignore all principal payments?

Sounds like your daycare is painfully expensive. At least you can toss that out when looking at your FIRE budget!

This is our current monthly spending on housing (rounded):

Mortgage $2460
Insurance $120
Property Taxes $680
Extra Principal $800
Total $4060

So we are on the line for $3260/month or $39,120/year.

The extra principal payments could be argued as savings, but I prefer to view it as an expense, because that money is being locked into an asset (house equity) that we don't plan on tapping in retirement. But I think it's totally fair to say we spent $97,000 in 2024 (106,600-(800*12)). Once our house is paid off our housing expense will go from $48,720 to a glorious $9600/year (just taxes and insurance).

By the way if those numbers don't totally add up to the housing category in the above table, it's because we get extensions on our property tax, and total it to the year paid, not the year it was for. Confusing I know.

With a paid off house and no daycare, our FiRE number is actually pretty low. But I do expect some lifestyle creep so don't want to get ahead of myself. I feel like we need another good decade under our belts before I can start seriously considering FIRE.

[Novik]

That is quite the increase but I do see your point it's mostly down to a couple choices. Curious on the house front.... you mention a couple different extra payments. How does the house expense look over those years if you ignore those optional payments and/or ignore all principal payments?

Sounds like your daycare is painfully expensive. At least you can toss that out when looking at your FIRE budget!

...

So we are on the line for $3260/month or $39,120/year.

The extra principal payments could be argued as savings, but I prefer to view it as an expense, because that money is being locked into an asset (house equity) that we don't plan on tapping in retirement.

Absolutely. I just think it's a more fair "lifestyle creep" comparison to show ~18k in 2022 and say ~33k in 2024 for housing, or whatever it would be. Still a lot, but you're not locked into being on the hook for as much as the extra principal payments make it look.

[SomethingFishy]

First, congrats on the birth of your little one. Pregnancy after loss can be fraught, I hope you’re now in a place you can focus on the joy instead of the fear.

Second, your spending increase looks similar to my pre and post kid changes. We didn’t have housing changes, but when we got to living kids finally, we had two at once, so child care was double. I hope you have a different fate, but with kid illnesses, we’ve met our deductible annually. At the same time, we’re at a high earning point in our careers, and our solid base of savings leaves us in a great place, and it looks the same for you.