Author Topic: 2022 - new baby, new goals, help me stick to them  (Read 1605 times)

MrsSpendyPants

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2022 - new baby, new goals, help me stick to them
« on: December 26, 2021, 05:35:50 AM »

Life Situation: 2 W2 income earners, about to be 2 young dependents, in the US, State + local taxes = 4.07%

Gross Salary/Wages: 180k (her, this is a new job that just started) + 130k & variable bonus of about 40k (him)

Individual amounts of each Pre-tax deductions:
2 x 401k 20,500
2 x backdoor Roth if this doesn't go away 6000
1 x family HSA 7300
1 x dependent care FSA 5000
150 every two weeks - health insurance

Other Ordinary Income: None

Qualified Dividends & Long Term Capital Gains: None significant

Rental Income, Actual Expenses, and Depreciation: None


Current expenses:
Here is what our January budget looks like:
Pet Care - 250 (3 large dogs, 6 cats, chickens, poultry)
Auto Gas - 450 (drive 25 miles one way to daycare/school with a minivan)
Groceries - 700
Maternity Fund savings - 1000 (this will later become the daycare bill for baby #2)
Water - 145 (this is usually around 90 but we have a leak somewhere outside, hoping the water company gives us back a credit, waiting on plumber to make his way out here but we turn off water to the outside right now)
Electricity - 475 - we added tons of insulation two months ago so our actual usage is about 250 but we're on a balance plan so right now just building up credit
Cell phone - 50 for two lines with Visible
Trash pickup - 150 (this is the trash for six months)
Internet/cable - 140.99 (we get rid of the cable after football season and it goes down to about 100 a month, we are extremely rural and only have one provider)
Tractor payment - 388.90 with 4k left at 0% (should be done this year)
Car payment - 200 with 23k left at 0%
Restaurants - 70 (aiming at eating out once a week tops)
Soda/alcohol - 50 (we live in a super expensive alcohol state where the cheapest bottle of wine is $10)
Child care - 1000 (this will double in the fall after maternity leave)
Subscriptions - 25 (netflix and amazon prime)
Gift sinking fund - 200
Doctor - 500 (my toddler goes to speech therapy 3x a week so we max out our OOP really early in the year)
All insurance and property tax sinking fund - 1215
Edited to add-> current expenses minus mortgage total 7k
Rest going into investments


We also have a mortgage left of 2300 a month for ten years.  We stick my husband's bonus money in a side account and it just pays the mortgage every month. 


Assets:
1MM in retirement funds
75k in taxable accounts
100k in IBonds
80k in 529
500k in home equity

Liabilities:
4k on tractor
23k on one car
247k on home

Specific Question(s):
1. We ended 2021 with a 33% savings rate of gross income and a 42% savings rate of net income with 401k added back to denominator.  I need to bring this up to 50% for 2022.  I'm going to try and pay ourselves first and hope it's possible.  Our higher income is new so hoping to just
2. I would like one of us to FIRE when the mortgage is done in ten years and the other one closely after.  What changes do I need to make to make this happen?
3. Any thoughts on our spending and plan?
« Last Edit: December 26, 2021, 08:32:35 AM by MrsSpendyPants »

waltworks

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Re: 2022 - new baby, new goals, help me stick to them
« Reply #1 on: December 26, 2021, 08:30:38 AM »
So ignoring childcare and tractor, that's like $4500 before the mortgage, $6800 with, I think? It helps if you add stuff up for us.

You'll be FIRE very soon given that the childcare expenses will end once kids are both in school. 10 years when the mortgage is paid off? That's not problem at all. You could probably FIRE now if you changed your lifestyle (refi to 30 year mortgage and/or no more hobby farm expenses/move somewhere less rural/remote) significantly.

Given that I assume you like living outside of town with a tractor and animals, though, that's probably not worth talking about. A refi to a 30 year would still be a good idea, though.

I'm assuming you end up with at least $250k/year after taxes, and your expenses are ~$85k/year without the childcare. You have $1.3 million invested right now and you need about $2 million. Won't take too long to get there if your numbers are accurate, the calculator at networthify is spitting out 3.4 years. 10 is a joke, if you want to work that long you'll be insanely rich - but will have spent an extra 6-7 years working.

-W
« Last Edit: December 26, 2021, 10:10:40 AM by waltworks »

Morning Glory

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Re: 2022 - new baby, new goals, help me stick to them
« Reply #2 on: December 26, 2021, 11:14:23 AM »
Congratulations on the new job and baby, and thank you for sticking around!

I'm with Walt: 3.5 years if you keep the property,  or you could be done right now if you sell it and move somewhere cheaper.  It's really a question of how burned out you are with work +kids+ property maintenance. Another option is for one of you to be a sahp now: you could definitely afford it.

If you're staying it's probably worth looking into the roi on solar, and maybe having a private well dug to get rid of that water payment. You could also see if adding a wood stove or other cheap source of heat would be practical for you. 

It's a big decision that might take a while: maybe you can make this a journal!

MrsSpendyPants

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Re: 2022 - new baby, new goals, help me stick to them
« Reply #3 on: December 26, 2021, 11:29:33 AM »
Thank you, definitely makes my holiday brighter thinking that we may be done sooner.  For some reason I keep assuming our expenses will go up with kids getting older and not lower.  Neither of us hates our jobs right now although we don't love them so it'll be nice to race to 2.1MM and then maybe take our foot off the pedal. 


And we do currently have a supplemental wood stove that we use.  We have a three acre pond that has a pump in it that was used before the house had city water.  I'll definitely have to investigate what it would take to make it operational.

brellis1vt

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Re: 2022 - new baby, new goals, help me stick to them
« Reply #4 on: December 26, 2021, 01:22:13 PM »
Congratulations and where you are now.
1.  Figure out how much you truly want to save for the kids in the 529.  I noticed you had $80k and unless you are looking at Ivy league or private schools that is probably enough savings (assuming you are aggressive.)
2   After the second baby my cost went up significantly (health care, eating out.). It's not the typical advice here but you are doing well so I would prioritize sleep over financial goals (assuming you still have a high savings rates.)
3.  I wouldn't look at any big projects (solar panels, wells, etc.) Until the kids are older.  Just adds extra stress to an already stressful situation.

waltworks

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Re: 2022 - new baby, new goals, help me stick to them
« Reply #5 on: December 26, 2021, 01:31:36 PM »
The funny thing is, paying on a 10 year mortgage is actually probably your worst move for quickest FI, given that you're so close.

I'd either refi to a 30 year with the highest mortgage balance you can get (because 3% mortgage is free money, expenses drop by $15k or so a year) or else pay it off now (expenses instantly drop by $28k/year). Getting rid of the childcare/associated car expenses too and paying much less in taxes means one spouse could easily quit now, too, with pretty limited financial consequences.

At the very least, start making a plan for FIRE in the next few years - that probably involves more $ in the taxable, exploring healthcare options, etc.

All this may go out the window when the new baby arrives, of course. 2 kids is a whole different world.

-W
« Last Edit: December 26, 2021, 01:37:06 PM by waltworks »

Freedomin5

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Re: 2022 - new baby, new goals, help me stick to them
« Reply #6 on: December 29, 2021, 05:07:18 PM »
Thank you, definitely makes my holiday brighter thinking that we may be done sooner.  For some reason I keep assuming our expenses will go up with kids getting older and not lower.  Neither of us hates our jobs right now although we don't love them so it'll be nice to race to 2.1MM and then maybe take our foot off the pedal. 

I think this depends on you. Will you insist on having your kids attend all the expensive extracurricular activities? Will you insist on the most expensive private school in the area or will public school be acceptable? Are you thinking both kids will go to fancy summer camps? Are you thinking of buying your kids the latest phone/iPad/smart watch/laptop/car every year or will you make them get a job and buy it for themselves?

There are many ways to optimize child-related expenses.

lhamo

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Re: 2022 - new baby, new goals, help me stick to them
« Reply #7 on: December 29, 2021, 07:03:18 PM »
Totally off the wall suggestion:

Would you be willing to consider moving into town for a year or two while you are juggling the small kiddos and renting out the rural property -- maybe keeping the animals there with weekend visiting privileges?  It would greatly simplify your lives -- and reduce your expenses -- to not have to be driving so much.  Maybe you could reduce the time kids are in care, too-- could one of you potentially go PT for a year or two?  Even if the rental income doesn't totally cover the cost of your property it might be worth it.  If you aren't buying in town you don't have to worry so much about school zoning or even having a bigger house to grow into -- you could get a 2 br 1 bath and have the infant sleep in your room for the first year, then share with the older sibling once sleeping through the night.

zolotiyeruki

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Re: 2022 - new baby, new goals, help me stick to them
« Reply #8 on: December 30, 2021, 09:01:14 AM »
In my experience, kid expenses tend to stay quite low for the first several years. Childcare should drop dramatically as they enter school.  Expenses *do* rise dramatically as they hit 10 and up--orthodontia, bigger appetites, activities, bigger clothes, driver's ed, etc.

MrsSpendyPants

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Re: 2022 - new baby, new goals, help me stick to them
« Reply #9 on: December 31, 2021, 06:05:11 AM »
Totally off the wall suggestion:

Would you be willing to consider moving into town for a year or two while you are juggling the small kiddos and renting out the rural property -- maybe keeping the animals there with weekend visiting privileges?  It would greatly simplify your lives -- and reduce your expenses -- to not have to be driving so much.  Maybe you could reduce the time kids are in care, too-- could one of you potentially go PT for a year or two?  Even if the rental income doesn't totally cover the cost of your property it might be worth it.  If you aren't buying in town you don't have to worry so much about school zoning or even having a bigger house to grow into -- you could get a 2 br 1 bath and have the infant sleep in your room for the first year, then share with the older sibling once sleeping through the night.

We've discussed just moving in general or doing something like this but there is something soul-calming about walking out the door after work and casting a pole into the pond with your son and fishing during a sunset.  It's expensive and time consuming to maintain but we also haven't traveled anywhere in 5+ years because it's like having your own personal campground plus all of our friends come visit and stay and camp here. 

I appreciate all of the insight on child costs.  We're in a low income area (our home is one of the most expensive in the school district by a lot) so I don't think there will be a lot of keeping up with the Jones' mentality but we may have to supplement with activities that aren't provided by the school district. 

I'm rerunning some numbers and getting really motivated to find out we may be able to be done earlier than anticipated.  Thanks everyone.

Cassie

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Re: 2022 - new baby, new goals, help me stick to them
« Reply #10 on: January 01, 2022, 08:04:34 PM »
My kids were cheap when little but yes they get more expensive. I think it’s important for kids to have extra curricular activities, a week of summer camp, braces if necessary and once my boys were 12 they wanted current style clothes/haircuts, prom and other special occasions, etc. When they were little clothes were handed down, home birthday parties, etc.