Financial checkup - just found out pregnant

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BuckyBadger
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Joined: Tue Nov 01, 2011 11:28 am

Financial checkup - just found out pregnant

Post by BuckyBadger » Wed Jan 03, 2018 2:47 pm

I thought I'd pop in for a checkup. We found out just before the new year that I'm pregnant, and I wanted to get some external opinions. I think we're doing okay, but my husband is a worrier! We went to a lot of grad school, so it took us a long time to get into the savings game, but I feel like we've caught up.

We'd like to retire early and are hoping that it's still going to be possible. Our jobs are very stressful. There's a lot of fat in our "budget" that we can cut if necessary. We're from the school of "save first and spend the rest" so I don't have an actual budget to reference.

I'm starting to look into what taxes look like but haven't gotten very far yet I'm afraid... Not 100% sure if we'll find that we have to move. Our house is great, but the school district isn't great (we live in NC) so might go the private school route. Have been told by others that the back yard isn't child friendly, but have no reference for that at this point...

Any suggestions? Anything at all to suggest/recommend to new parents on the financial front? Thanks!!

Him: 38, annual income ~$135k
Her: 37, annual income ~$155k

House value: ~$500k with ~$230k in equity at 3.5%. Mortgage+escrow ~ $1850 per month but pay $2200 per month.
Cars: late-model Outback nearly paid off; older but well-maintained Honda Element; old fun cheap BMW convertible with 100k+ miles

We have an IPS:

Image

And this is our current portfolio:

Image

And our contributions since 2013:

Image

But we haven't really made any plans for the kid thing. Any comments would be appreciated. Considering that at some point we're going to have to stop contributing the extra bit to taxable accounts. We don't use the HSA (which is my husband's) for expenses - we're planning on keeping it as a stealth IRA. I switched to a very good HMO plan when we started thinking about getting pregnant.

onourway
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Re: Financial checkup - just found out pregnant

Post by onourway » Wed Jan 03, 2018 3:14 pm

It looks like you are doing great!

Not sure what the question is? :D

Yes, kids are expensive. And if you think you are busy now, just wait! In a couple of years you will look back and wonder what the heck you used to do with all your free time!

Because you started investing relatively early and have a reasonable plan, I expect you are still on track to retire early. In fact your situation is similar to ours, except we have 3 kids, and I am targeting around the same age for financial independence and/or early retirement. You'll probably find that by the school age the location of your house becomes a lot more important, but you have years yet to figure that out. Otherwise, just keep doing what you've been doing.

BuckyBadger
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Re: Financial checkup - just found out pregnant

Post by BuckyBadger » Wed Jan 03, 2018 3:18 pm

onourway wrote:
Wed Jan 03, 2018 3:14 pm
It looks like you are doing great!

Not sure what the question is? :D

Yes, kids are expensive. And if you think you are busy now, just wait! In a couple of years you will look back and wonder what the heck you used to do with all your free time!

Because you started investing relatively early and have a reasonable plan, I expect you are still on track to retire early. In fact your situation is similar to ours, except we have 3 kids, and I am targeting around the same age for financial independence and/or early retirement. You'll probably find that by the school age the location of your house becomes a lot more important, but you have years yet to figure that out. Otherwise, just keep doing what you've been doing.
Thanks! I think we're okay, too, but my husband is freaking out... Just want some strangers on the internet to weigh in - like weirdos do!

N10sive
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Re: Financial checkup - just found out pregnant

Post by N10sive » Wed Jan 03, 2018 3:21 pm

I have nothing to add except you both have some great company matches!

BuckyBadger
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Re: Financial checkup - just found out pregnant

Post by BuckyBadger » Wed Jan 03, 2018 3:23 pm

N10sive wrote:
Wed Jan 03, 2018 3:21 pm
I have nothing to add except you both have some great company matches!
Yeah - I get paid well under industry standard for my field but the match makes a big difference. It's not even a match - they contribute a specific portion of my salary even if I don't contribute anything of my own at all.

DawgFan2001
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Re: Financial checkup - just found out pregnant

Post by DawgFan2001 » Wed Jan 03, 2018 3:36 pm

Congratulations! I hope everything goes smoothly for your pregnancy and delivery.

It is not too early to begin looking into child care options. Once you realize what those costs look like (unless you enlist family fulltime), add a little and presto, you'll have a good ballpark for private school if you want to stay in your home and are not satisfied with the public school options. We just transitioned from daycare to private school this year, and as I had been warned, the daycare bills are just a warm up for what you may pay for private school.

I would also encourage you to buy as much baby gear used as you can. For me, as a first time mother with no clue, I am now kicking myself for all of the new "must-haves" I bought.

Wishing you good luck and good health!

mega317
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Re: Financial checkup - just found out pregnant

Post by mega317 » Wed Jan 03, 2018 3:48 pm

Congrats! It looks like you're in good shape.

To have 100k per year for an extended retirement you probably need in the ballpark of 3 million. It seems like you'll definitely get there barring major unforeseen obstacles.

You have expenses on the horizon. The major ones are:
- Child care can be in the range of 1500-2000 a month per child. I think I get an 8% discount for my second when she starts.
- College needs to be accounted for one way or another. You could consider contributing to a 529. I am ambivalent. There are good arguments in favor and against them. Other people save in taxable or cash flow or take out loans.

Nothing else about raising a child needs to be expensive. You should not buy used car seats and probably not cribs, but everything else (furniture, strollers, toys, clothes, kitchen stuff) can be found cheap online/craigslist in very good shape. And if you know anyone with slightly older children they will tend to show up with shopping bags full of free stuff.

Make sure you're appropriately insured.

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TxAg
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Re: Financial checkup - just found out pregnant

Post by TxAg » Wed Jan 03, 2018 3:54 pm

You make nearly $300k and have nearly $1MM invested. Tell him to drink a beer and relax :)

aristotelian
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Re: Financial checkup - just found out pregnant

Post by aristotelian » Wed Jan 03, 2018 4:01 pm

You are doing very well. Kids don't immediately change your day to day expenses that much other than diapers. Childcare is expensive but temporary. Things you should start planning for:

-Setting aside money for college, e.g. 529
-Be prepared for private school if public schools don't work out
-Extra plane tickets for travel starting at about Age 2

You mention early retirement. I see you have one of your 401ks almost entirely in bonds. I started a thread to question this approach on the thinking that you may want to treat your 401k more like a Roth IRA in an early retirement scenario because you may be able to withdraw from your 401k at very low tax rates. This would argue for shifting your brokerage account funds to I Bonds, EE Bonds, or munis. I thought it was a good idea but haven't gotten any hits on it. I'd be curious to get your thoughts on that:

viewtopic.php?f=10&t=236650

blueman457
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Re: Financial checkup - just found out pregnant

Post by blueman457 » Wed Jan 03, 2018 5:19 pm

Congratulations! And you're doing fine financially.

You mention there is a lot of excess, which is completely fine when you're DINKS, but that fat does get skimmed when a kid comes into play.

1. Keep saving
2. Really buy as much used baby stuff as you can; you have no idea if your kid will like various baby things and sometimes a high quality used is better than mediocre new. (example: a friend bought an expensive sleeping swings, kid hated it. It cost $1500)
3. Don't consider moving until the kid is old enough to make use of a backyard. Even then, kids in NYC grow up without backyards because they play at the park all the time.
4. Child care can be expensive, but that's life.

Blue man

3funder
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Re: Financial checkup - just found out pregnant

Post by 3funder » Wed Jan 03, 2018 9:53 pm

Looks great!

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celia
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Re: Financial checkup - just found out pregnant

Post by celia » Wed Jan 03, 2018 10:43 pm

OK, I'm looking around for something DH can worry about . . .

Do you both have disability insurance? liability insurance?
Have you figured out your savings goals if one of you wanted/needed to stay home with the kiddo for a year?
Let him figure out how to make the yard kid-friendly. (Is the pool fenced in? Any allergenic/poisonous plants? Anything sharp that would cause an injury? Is there room for a swingset/sandbox? Pets on the loose?)

spth
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Re: Financial checkup - just found out pregnant

Post by spth » Wed Jan 03, 2018 11:46 pm

Congratulation! One of you could stop working and you’d be fine. I’m sure you have already figured that out.

BuckyBadger
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Re: Financial checkup - just found out pregnant

Post by BuckyBadger » Thu Jan 04, 2018 11:36 am

TxAg wrote:
Wed Jan 03, 2018 3:54 pm
You make nearly $300k and have nearly $1MM invested. Tell him to drink a beer and relax :)
mmm... Beer. I miss it already!
aristotelian wrote:
Wed Jan 03, 2018 4:01 pm
You mention early retirement. I see you have one of your 401ks almost entirely in bonds. I started a thread to question this approach on the thinking that you may want to treat your 401k more like a Roth IRA in an early retirement scenario because you may be able to withdraw from your 401k at very low tax rates. This would argue for shifting your brokerage account funds to I Bonds, EE Bonds, or munis. I thought it was a good idea but haven't gotten any hits on it. I'd be curious to get your thoughts on that:

viewtopic.php?f=10&t=236650
I consider (I could say "we," but honestly I'm the one who does investments and he has no idea what I do!) all our retirement accounts as one big bucket, so I put the money in however gets our AA correct for the fewest basis points. For whatever reason, his 401k doesn't have as good a Total US stock as I do, and mines easier to change, so I keep his the same and mostly in bonds and then rebalance via my 403b account when necessary. I haven't thought about what to do when a potential early retirement actually happens - but you're right, I probably should keep it in mind.
blueman457 wrote:
Wed Jan 03, 2018 5:19 pm
Congratulations! And you're doing fine financially.

You mention there is a lot of excess, which is completely fine when you're DINKS, but that fat does get skimmed when a kid comes into play.

1. Keep saving
2. Really buy as much used baby stuff as you can; you have no idea if your kid will like various baby things and sometimes a high quality used is better than mediocre new. (example: a friend bought an expensive sleeping swings, kid hated it. It cost $1500)
3. Don't consider moving until the kid is old enough to make use of a backyard. Even then, kids in NYC grow up without backyards because they play at the park all the time.
4. Child care can be expensive, but that's life.

Blue man
We are planning on buying SO MUCH stuff from garage sales! Whenever we've been garage sale hunting in the past we're amazed at the amount of baby stuff available. Bags stuffed with baby clothes for like $10! Other than stuff that needs to be new for safety, I agree that we should definitely investigate the used market!
celia wrote:
Wed Jan 03, 2018 10:43 pm
OK, I'm looking around for something DH can worry about . . .

Do you both have disability insurance? liability insurance?
Have you figured out your savings goals if one of you wanted/needed to stay home with the kiddo for a year?
Let him figure out how to make the yard kid-friendly. (Is the pool fenced in? Any allergenic/poisonous plants? Anything sharp that would cause an injury? Is there room for a swingset/sandbox? Pets on the loose?)
Good reminder. We do NOT have life insurance but I'll look into it. We have some disability through work but I'm not sure how much. We have a nice big umbrella policy - is that what you mean by liability?

Yard itself isn't too terribly bad, but it's down a flight of stairs from the level of the back door. Plenty of room for swingset and sandbox once you get out there, though, so we might be okay. I'll make him build an elevator! Or an awesome slide!
spth wrote:
Wed Jan 03, 2018 11:46 pm
Congratulation! One of you could stop working and you’d be fine. I’m sure you have already figured that out.
Agreed. That would take a little more work than just "cutting the fat" in the budget, but if that's something we decide to do we certainly could. Not the plans right now, but I do understand that we could make it work if it became important for us.

And I'll look into 529 plans and see if it makes any sense for us. Maybe take the $10k-$13k we were putting into taxable and put it into a 529... But we may be fine to cash flow. Although if we ca retire early we'll be not working by the time college rolls around, so maybe that makes it more valuable... I'll have to think about it and investigate other 529 threads!

Now just waiting a few more weeks to tell my parents and ask my mother to clear her schedule in September!

book lover
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Re: Financial checkup - just found out pregnant

Post by book lover » Thu Jan 04, 2018 11:59 am

Congratulations on your upcoming baby! Given your income levels, have you looked into umbrella insurance? This increases your auto and homeowner's liability and can be set at one to five million dollars.

wrl
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Re: Financial checkup - just found out pregnant

Post by wrl » Thu Jan 04, 2018 12:10 pm

You guys are doing great. I love the way you have older cars, sensible house, etc relative to your income. My only advice would be for you to not stop working after you have a kid. My wife did that and 15 years later she is trying again but having to go back to school. She is getting back into the workforce because she is bored, needs a challenge. It is very hard to get back in once you get off the career train, especially after several years.

CT-Scott
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Re: Financial checkup - just found out pregnant

Post by CT-Scott » Thu Jan 04, 2018 12:17 pm

I just did a quick search and it looks like in NC 529 contributions can be deducted from your state income taxes (married up to $5,000/year). You should double-check that, of course.

Congrats on the pregnancy!

Frank Grimes
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Re: Financial checkup - just found out pregnant

Post by Frank Grimes » Thu Jan 04, 2018 12:39 pm

CT-Scott wrote:
Thu Jan 04, 2018 12:17 pm
I just did a quick search and it looks like in NC 529 contributions can be deducted from your state income taxes (married up to $5,000/year). You should double-check that, of course.

Congrats on the pregnancy!
Contributions are no longer deductible in NC

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bligh
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Re: Financial checkup - just found out pregnant

Post by bligh » Thu Jan 04, 2018 12:50 pm

wrl wrote:
Thu Jan 04, 2018 12:10 pm
You guys are doing great. I love the way you have older cars, sensible house, etc relative to your income. My only advice would be for you to not stop working after you have a kid. My wife did that and 15 years later she is trying again but having to go back to school. She is getting back into the workforce because she is bored, needs a challenge. It is very hard to get back in once you get off the career train, especially after several years.
Sorry to hear that man. What field was she in?

Just to balance out the above advice to the OP, I'll provide my own anecdote. My wife took 9 months off for our first kid, went back to work for a year, and then took 2 more years off for our second. When she was ready, she had no trouble finding a job, and she is really glad she took the time off to bond with her kids. We made that choice both having and making a lot less money than this family.

If the OP is in a reasonably good industry and she (or her husband) chooses to take a break from work to spend time with their kids I think they can certainly afford it.

Also, Congratulations on the pregnancy BuckyBadger.

- Make sure you have a proper Will and estate setup. If something happens to the two of you, make sure there is a good Plan B for your child.
- Personally, with your NW I would consider life insurance optional, or perhaps get it for just one of you. Provided you had a proper arrangements in place, if your child were to lose both of you, your assets are large enough to see them through to adulthood.
- Take the time to enjoy them while they are little. They grow up WAY too fast.
- If you wish to pay for, or subsidize your kids college education, 529 plans are a great idea regardless of whether you get a state tax deduction or not. You guys are not going to qualify for any aid, might as well get the tax free growth over the next 18+ years. Depending on your situation, you may also be able to direct gifts from family members to the 529 plan.
- Research the near by day care centers (if you will be using them) and your schools now. Sometimes there are waiting lists to get into the good Day Care centers. In densely populated areas it can be a problem. One near our old place had a 15 month wait list, and they didn't actually call us back with an availability until 20 months later.

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unclescrooge
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Re: Financial checkup - just found out pregnant

Post by unclescrooge » Thu Jan 04, 2018 1:40 pm

What's the life insurance coverage?

BuckyBadger
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Re: Financial checkup - just found out pregnant

Post by BuckyBadger » Thu Jan 04, 2018 1:49 pm

unclescrooge wrote:
Thu Jan 04, 2018 1:40 pm
What's the life insurance coverage?
Nothing outside of what is offered through work - which I don't actually know, and I assume is quite small. I'll look into term policies for both of us this weekend!

Already have umbrella coverage - at least 2m, possibly 3?

Frank Grimes
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Re: Financial checkup - just found out pregnant

Post by Frank Grimes » Thu Jan 04, 2018 1:53 pm

Second the advice to check around with daycare center availability. Other than our immediate family, the first folks to know we were pregnant were the daycare centers where we got on wait lists.

TheHouse7
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Re: Financial checkup - just found out pregnant

Post by TheHouse7 » Thu Jan 04, 2018 3:19 pm

TxAg wrote:
Wed Jan 03, 2018 3:54 pm
You make nearly $300k and have nearly $1MM invested. Tell him to drink a beer and relax :)
+1 :sharebeer

Nanny will make more than my wife and I combined. lol
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

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