Specific Questions:
1. How far off does each child push FI?
2. What would be the budget for the new home if we still want to retire by 45-50 with possibly 2 kids?
1. Varies widely, depending on what happens to your income and expenses.
2. See collected notes below. Might need to resolve those before working on this.
Other notes:
- The 9.9 years next to "Guess at time to FI" is an input, not a calculated estimate. See where the nearby chart crosses the x-axis for the estimated time to FI (given all the assumptions).
- Calculated P&I for the mortgage is $733/mo. Does insurance cost an extra $3300/yr? Why not enter the insurance in row 81 instead of overriding the calculated value? (Might be a very good reason, in which case perhaps the spreadsheet could/should be modified to eliminate the need for the override.)
- Something to consider: switch to Roth instead of traditional during the year (assuming your workplaces have that option) after you have contributed enough traditional that you will have dropped from the 22% to the 12% federal bracket.
- Any state income tax?
- There are more sophisticated tools such as those described in Best and/or Recommended Retirement Calculator - Bogleheads.org for estimating "time to FI." With the large uncertainties in your future, the added complexity may not be particularly useful.
I will update my spreadsheet and uncombine the mortgage and insurance. I just figured it would be easier to keep them on the same line since I pay them together.
How do I know when I've dropped from the 22% bracket to the 12% bracket? I was planning to max out my traditional 401k. What is the advantage of switching to Roth before the traditional is maxed? You can't add more money to a Roth once the traditional is maxed, right?
Yes, I have state income tax (Oregon). I will look it up and add it to the spreadsheet. (I'll re-attach an updated spreadsheet later today or tomorrow).
I guess it depends on how much you plan to pamper your child. Will you buy all the children's stuff new or are you gonna use second hand give-away stuff? Will you use private schools, lot of clubs to build a good children's CV, private university? Or do you plan to use the public school schools and not bother about the CV's. You intend to dress it in reasonably prices clothes, or let it follow fashion. Do you want to sponsor university/collage and living expenses?
Doesn't your country or state have a reference budget that you could use? In Norway, the reference budget says that a child costs approx 120K euro per child until age 18. But that is without private schools. The reference budget usually is a frugal alternative for a budget.
I don't plan to pamper the child. Public school, reasonably priced clothes, etc. As for college, I'll probably start a college savings fund, but they may not want to go to college. What then? Do I get to transfer that money to my other investment accounts? I think the US estimates the cost of raising a child from birth to age 18 is somewhere around $280,000. I'm not sure what they base that on, but I can look more into it.
My first question is more around income than expenses. (although that is important, too!)
What is your current work situation, and what will you do when the child arrives? If you are a two income household, will one of you transition to a stay-at-home parent? Will you stay out of the workforce for a time? You do not provide your assets, but with 15-20 years anticipated to work, lowering your contributions now (and foregoing the compounding) will be a big impact.
(If you are already sitting on $1M in liquid investments, then never mind.)
We are a two income household. Neither of us plans to leave the workforce and will send the child to daycare. Not sitting on $1M in liquid investments (darn). Assets right now are about $150,000 in retirement accounts. I'll add that to my spreadsheet when I get a few minutes.
It looks to me like there are a lot of categories missing from the expense list in the spreadsheet. I have to admit I am not a spreadsheet person and find that very hard to read, but it looks to me like you are saying you have only $1,150 in monthly expenses outside your mortgage, which means you need less than $450K saved to support your retirement. I strongly suspect that accounting is missing a lot of things -- home/car maintenance, dinners out, vacations, out-of-pocket medical/dental, etc. etc. etc. So the first and most important step is to track all of your expenses, so you can see how much your lifestyle currently costs.
Unfortunately, no one here can tell you whether and how much a child or two will set back your FIRE plans, because none of us know what lifestyle you intend for you and your kids. Will one of you cut back or quit work, or will you pay for daycare? Do you plan to cover college, and if so, how much? Do you want your kids to play sports/instruments, and if so are you willing to pay for travel team, private lessons, etc.? What's the likelihood that your kids will need glasses or braces? Do you plan to get their clothes at consignment stores, Kohl's/Target, or Nordstrom's? Etc. etc. etc.
I would suggest for now focusing on thinking of the kind of lifestyle you want to live with your kids. Live it for a while and track how much that lifestyle is costing you. Then once the kid comes, readjust (nothing messes with a plan like reality!). Once you have a year or two of tracking expenses and living with a kid under your belt, you'll have a much better idea of how much your specific desired lifestyle is costing you, which will put you in a much better position to re-run the spreadsheet and get real numbers.
I would add the additonal one-off expenses, but how do you track/account for those when they are only occasional expenses? I can't put them in the monthly column because they are not monthly.
The lifestyle will not be excessive. We will take occasional family vacations, but basically we are still going to try to save as much money as possible.
Is that budget based on writing down expense categories and then filling it what you believe you should/can/will spend? Or is it based on tracking your actual expenses for a sustained period of time? Do the numbers add up? In other words, does your bottom line spend, subtracted from your income, reflect what is actually leftover and saved each month?
I think there's just too much flux in your life right now (and probably uncertainty in that budget) to have any clear picture.
Lastly, when you build the house, while you should have a maximum budget you absolutely refuse to go over, even if that means bare walls and unfinished bathrooms (but please, please plan better than that and have a huge contingency, especially if this is a custom build, not a tract home). But the best answer to "home much can we spend" is "as little as possible". Don't look at it as you *can* spend $300,000 (or whatever). Look at each decision as though it were critical to your retirement. The basic window shade that costs $100, or the fancy layered, mechanized, light sensitive blinds that cost $300 each? Is it worth working another month of your life for those window shades? Are they critical to your happiness?
That's the kind of thinking that allows you to retire, not "we have $300,000 to spend and we are almost done and only at $270, so we can afford these fancy blinds!".
It's based on actual spending (the bills, at least). I'm still not sure how to account for the unexpected, occasional expeneses.
As for the house, we have a goal of not going over $350,000 for everything (land+house). Of course, we are going to aim as low as possible, but we don't want to cut any corners. Our first contractor put everything in as cheap as possible and it's led to more costs for us to fix/maintain the house. With our current house being worth quite a bit more than we bought it for, I think that profit will help going toward the new house. This is all just a dream at the moment, we haven't found the land we want yet so we're in the research phase.
Thank you all for your thoughts on all of this. I know I can't predict everything, I'm just hoping to get a general idea since this will be my first child and I don't really know what to expect, except the unexpected I suppose. :)
