Pls help us design our family life!!!

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
frugalista
Posts: 5
Joined: Wed Oct 10, 2018 3:45 pm

Pls help us design our family life!!!

Post by frugalista » Wed Oct 10, 2018 4:14 pm

ORIGINAL POST:

Please help us design our family life that brings the most satisfaction for us. Long time reader, first time poster. Sorry for the long post but wanted to give out enough information to portray a clear picture of our situation. Thanks in advance for reading and feedback/advise.

Some Background
- DH (37), me (36), DD (6.5), DS (10 months), it’s 40% likely we may have one more 
- both of us are selectively frugal by nature


Goal/ideal life scenarios
- DH is a workaholic and may never retire voluntarily 
- I would like to go part-time when the youngest starts school. Basically, the ideal scenario is that I leave to work after they leave for school and I come home before they come home from school so approximately 9AM-2PM schedule (5 hours a day) 20-25 hours a week. Not sure if my current employer (local govt) will allow this but I can keep looking if they don’t.
- I don’t think I’m a fully SAHM material so quitting/retiring is probably not in the cards. I just want to be available for my kids as if I were SAHM. Also, I would like to eliminate nanny cost, which is one of the top monthly expense currently.
- One of my goal is to maximize our family time (not necessarily maximize my earning potential). For example, I deliberately got into govt so the work hour is shorter compared to private sector. I’ve friends who make 50% more at private sector with similar background/skillset so I know I can probably fetch that as well. However, as long as we are comfortable, I don’t need much beyond that.
- By comfortable I mean retirement fund is reasonable, some college expense covered, no struggle month to month, enough emergency fund, one vacation per year, eating out 2/3 times a month etc.

Life out look
- We are flexible with our wants but somewhat firm on our needs
- For ex, if there is a downturn, I can stay full time few more years until things get better. We can try to reduce our monthly expense as well (trim vacation budget, eating out etc.).
- However, kids future and education is very important to us so we would hate to skimp on their school and extracurricular activities in early years
- We would like to supplement our kid’s college expense but not fully fund those.

Asset
- His and her 401K: $470K
- His 457: 10K
- He is qualified for pension (well funded), which will be vested in about another 5 years (a total of 10 years vesting period)
- At this point, we are not contributing to 401K, 457 etc. DH is contributing to his pension only.
- 529 plan: 22K
- HCOL house purchase: 1165K (appraised at this amount 7 months ago when we bought; may have bought at the peak but that discussion is for another time)
- Cash from selling apt: 220K (btw, need asset allocation advise with high risk/no bond)
- Fully paid Toyota Camry 2008, which I would like to run to the ground (but DH has a secret wish for a nice car in 50K range someday)

Liability
- - mortgage: 700K (30 yr fixed with a rate of 3.625%)

Emergency Fund
- 20K in savings account
- 50K can be retrieved from parents if needed

Monthly Expenses ( pls don’t try to dissect this. We are selectively frugal and I’m pretty sure there is no fat to trim. This exercise is all about big picture and looking at top down)
- - PITI: 4.3K
- - everything else: 6K
- - total: ~10.3K/month
- - again, please note there is not a lot of room currently to reduce the monthly expense so let’s not derail the discussion towards that

Job and Salary info
- Both of our jobs are as secure as it can get
- Total current yearly income: 240K (Him 127K, Her 113K; with going part-time salary will be reduced to 60K)
- His and Her total current monthly take home: 11K (after tax, contribution towards pension, no 401K etc., FSA etc.)

Questions:
- Can I go part-time in 4-5 years?
- With current rate, where can we expect to be financially?
- Can you help me with figuring out steps to make my wish come true? I’m overwhelmed and not sure where to start.


_____________________________________________________________________________
1ST UPDATE:

Additional Info
This is the OP. Thanks for all the responses so far. They are very helpful with objectivity lenses on.

To answer some questions:
- pension contribution is 6% on his salary so 7.62k
- for this year we allocated $1.5k FSA
- currently contributing 1.2k/year in 529 ( grand parents earmarked 100k inheritance for college funding; besides we are not looking into fully cover all expenses as we both paid through our own and expect the same but we will cover some expenses if needed)
- savings of only $700/month may be a bit underestimated. More like 1k after all said and done.
- yes one of the large expenses is live-in nanny with cash out of pocket 2k/month. We provide her with a generous benefit plan as she is an elderly and therefore the base is a little bit lower for our area (but with ‘live in’ cost, it actually isn’t)
- we do not do private schooling as our public schools are top notch (one of the reasons we moved here)
- yes, we have family ties here only 40 min drive away and moving to a lcol is not an option. We want our kids to grow up knowing their grand parents, uncles, aunts, cousins etc.
- we thought about recasting the mortgage with apt sale $ but eliminated the idea because we believe we actually lower our risk by keeping it liquid even if the taxable may be down at time of needs. It gives us cushion for years if something drastic were to happen. We also want to take reasonable risk to grow this stash as much as possible.
- re: EF, even though its currently low, it’s growing month over month. Also, we can tap into 50k that’s sitting idle in my parents savings account
- the rationale for stopping 401k was because we felt with current balance + pension (70% salary at retirement) + 2 large SS ( even if cut down to 50%) will not be too shabby in 25 years. Also, we hope to start funding again in a few years when we have locked in our expenses better. I personally don’t think we are in too much of a bad shape with retirement funding, specially given our philosophy of living (somewhat) today as well while saving for our 60 year old selves. It’s all about balance. We feel that if we have lived a fulfilled life with our kids at home while we are still young, we don’t have to have a lavish life at retirement when they are gone. Hope this makes sense to you all.
- yes we bought home 5X our salary; however the mortgage is 3X the salary as we put 40% down. It’s not a mansion but a modest 3/2 1700sqft house in a great area.
- our commute is long (2.5hr two way) and expensive costing us 1k/month. We just moved and moving again is not an option. Will kill us in transaction cost.
- with nanny cost and some commute expense gone, we might get 2.5k/month back. I feel as though 2.5k + DH’s salary + my part time salary should still cover us month over month with little to no cushion perhaps. Does that sound right?


___________________________________________________________________________
2ND UPDATE:

This is the OP again. Wanted to quickly chime in and say ‘thanks’. These are all great responses and some food for thoughts for our family.

Megadad, your estimate gives me some hopes as I think an additional $500/month may be doable soon. We both are up for 3% increase in a few months. I know it’s minuscule but still roughly 7k before tax. However, I don’t want to count on that just yet. We can also look really hard and try to trim some areas.

I do appreciate all the great comments from both angle. It’s obvious that to make my wishes come true, some sacrifices need to be made. The good new is I have few years to work on it. At the end, if it doesn’t work out, we won’t be any worse than we are now. Also, like I said before, I’m flexible. If it means instead of 4 years, it will take 6 years to confidently and comfortably go part time, I’ll do just that.

I should mention that I do see myself going back full time again when kids are gone. That makes me think if there was a way to borrow from my future self to pay for my current self, that would be perfect balance in life (I know sounds like a sci-fi movie...lol)

Thanks again everyone for your thoughtful ideas and comments.

________________________________________________________________________________________________

3RD and LAST UPDATE:

Got caught in a bad flu recently and still recovering but wanted to jump in to make few more clarifying points and close the thread with the following thoughts:

- We have a few family obligations that eat away into our monthly expense as well. That + transportation + Nanny + food + everything else come close to a rather high number at around 5.5-6K
- What I gather from everyone else here is that we are doing ok in retirement side of things but can do better. We need to up our college savings if possible. We should try to reduce any other expense if we can and throw at our savings.
- We'll continue to live life like bogelheads and reassess our standing in 4-5 years. Like I said before, we are flexible with the timing so we may have more leeway than we think right now.

Thanks again for all of your viewpoints and suggestions. Our family appreciates it.
Last edited by frugalista on Fri Oct 19, 2018 11:52 am, edited 3 times in total.

barnaclebob
Posts: 2962
Joined: Thu Aug 09, 2012 10:54 am

Re: Pls help us design our family life!!!

Post by barnaclebob » Wed Oct 10, 2018 4:53 pm

What would your savings rate be with you working part time? Looks like you only have $700 a month leftover right now is that correct? Your gross pay will be going down 5250 per month, what will your take home go down by?

By your posted numbers I don't think you can go part time unless your expenses are cut.

Some of the 220k from your apartment sale should be reserved to bolster your emergency fund. Or just keep the whole thing more conservative than you would otherwise need to and use it for any emergencies.
Last edited by barnaclebob on Wed Oct 10, 2018 5:01 pm, edited 3 times in total.

kelvan80
Posts: 84
Joined: Sun Jan 12, 2014 10:06 pm

Re: Pls help us design our family life!!!

Post by kelvan80 » Wed Oct 10, 2018 4:58 pm

Have you run a budget based on his income alone and your part time income? If you have more kids and you are trying to be part time with daycare expenses can you fund the things that you desire?

delamer
Posts: 6138
Joined: Tue Feb 08, 2011 6:13 pm

Re: Pls help us design our family life!!!

Post by delamer » Wed Oct 10, 2018 5:07 pm

Your current expenses are $10.3K per month and your take home pay is $11K.

I am interpreting that to mean that you have a small surplus of $700/month.

Is that correct?

Your job accounts for about half of the family income. So if you reduce hours to half pay, then total take home will go down to about $8250.

So really the question is can you live on $8250/month? Presumably you’ll be rid of the nanny costs but still have some summer childcare expenses and costs for extracurriculars.

If you want to make some dent in college expenses, then clearly you need to begin adding to the 529.

There is no way to tell if you’ll have enough for retirement with no further contributions. You need to know amounts of pensions, Social Security, and anticipated retirement expenses to make even a good guess at that.

What do you want to use the $220K from the apartment sale for? You can’t get good advice on investments without providing your goals for the money.
Last edited by delamer on Wed Oct 10, 2018 6:15 pm, edited 2 times in total.

Thegame14
Posts: 267
Joined: Mon May 07, 2018 11:53 am

Re: Pls help us design our family life!!!

Post by Thegame14 » Wed Oct 10, 2018 5:41 pm

it looks like you are doing well in retirement and income, but like other said, you only have $700 a month positive cash flow, but talking about reducing your income by $5K to go part time. How much cost savings of the $10.3K per month do you save staying home, I am assuming not much. Also you say not to harp on the expense, it sounds like a hot button issue or sore topic, but that seems to be the main problem if your Mortgage payment, taxes, insurance are $K per month, OTHER should not be 150% of that cost. so I am SURE that most of that $6K can and should be cut, but likely is luxury items you don't want to discuss, likely for the kids, so prob expensive lessons or vacations or private schooling. If you don't want to give out information, hard for people to help, but something doesn't add up, with wanting to go part time but having no means to do it. Maybe that $220K from the sale you will eat into each month, but it wont last forever

It is hard to ask people to help design your family life, but then tell them don't touch the most obvious expense to cut.....

WyomingFIRE
Posts: 11
Joined: Wed Sep 12, 2018 10:44 am

Re: Pls help us design our family life!!!

Post by WyomingFIRE » Wed Oct 10, 2018 5:50 pm

First, welcome. It is great that you are contributing. Here are my initial thoughts; take them with a grain of salt. I'm operating on the assumption that you are at the beginning of your journey. If I am wrong, I have misunderstood so forgive me.

1. Background Reading. I'd read a good, basic book on personal finance. Or spend time studying this website and others.

2. Budgeting/Tracking Tool. Then I would download a program like Personal Capital or something similar that allows you to track expenses, as a prior poster also suggested. Before you can manage something (here, your money), you have to measure it. You have to get down into the weeds at some level.

Above, you say that you don't want comments on your budget, in part because you believe that nothing else can be trimmed. Once you journey further down this path and start to track your expenditures, you may conclude that you could make your household more financially efficient without too much effort -- and thereby free up dollars, for example, to facilitate a reduction in household income.

Plus, many of these programs provide a broader suite of personal finance tools (cash flow, NW calculations, retirement planning, etc.) that can be exceedingly helpful.

Once you have several months of data or more, you can make more informed decisions related to lifestyle changes, income reductions and the like. Without those data, viewed within the broader context of personal finance, you might end up spinning your wheels unnecessarily.
Last edited by WyomingFIRE on Wed Oct 10, 2018 6:02 pm, edited 1 time in total.

Dottie57
Posts: 4485
Joined: Thu May 19, 2016 5:43 pm

Re: Pls help us design our family life!!!

Post by Dottie57 » Wed Oct 10, 2018 5:50 pm

If you can’t cut expenses, then how can you go to part time work? The numbers don’t balance.

livesoft
Posts: 62709
Joined: Thu Mar 01, 2007 8:00 pm

Re: Pls help us design our family life!!!

Post by livesoft » Wed Oct 10, 2018 5:56 pm

1. I don't know about your money situation, but it is not that important.

2. Time is important, so cut out wasted time such as commuting for both parents and children. That means live close to jobs and schools and any shopping and errands that you need to do. That way, you can go to school functions while working or after-school things while working.
Wiki This signature message sponsored by sscritic: Learn to fish.

Regattamom
Posts: 28
Joined: Sat Jan 06, 2018 3:40 pm

Re: Pls help us design our family life!!!

Post by Regattamom » Wed Oct 10, 2018 6:30 pm

Hi Frugalista,

I am a SAHM now and I have also worked part-time and full-time in the past.

It seems you don't have much left over at the end of the month, but how much will you save by not working? Is any of the 6k that goes to "everything else" daycare or a nanny's salary? Will you save on transportation costs and eating out by not working? Dry cleaning and career clothes? It's hard to say whether or not you will be able to reduce your hours without that information.

Also, my first thought was that your mortgage is really high. Is it possible to find less expensive housing?

Good luck to you!

User avatar
Watty
Posts: 14118
Joined: Wed Oct 10, 2007 3:55 pm

Re: Pls help us design our family life!!!

Post by Watty » Wed Oct 10, 2018 6:30 pm

A couple of sort of random things;
frugalista wrote:
Wed Oct 10, 2018 4:14 pm
- Cash from selling apt: 220K .....

- - mortgage: 700K (30 yr fixed with a rate of 3.625%)
I don't know if it would be a good option for you or not but one option to consider would be to call your lender and ask if they will "recast your mortage"(Google this) if you make a large prepayment. They are not required to do this but they often will for a couple of hundred dollar processing fee. The way this works if you pay the loan down by 25%(or whatever percentage makes sense) then your required monthly mortage payment will be reduced by the same percentage. The length of the loan and the interest rate will stay the same. That would help improve your cash flow each month.
frugalista wrote:
Wed Oct 10, 2018 4:14 pm
Can you help me with figuring out steps to make my wish come true? I’m overwhelmed and not sure where to start.
One option if you do not have strong family ties to that area would be to move to a less expensive area. You have over $400K in home equity and in probably 80% of the country you could buy a McMansion for that.

Here is an example of what you could buy for cash in the suburbs of Atlanta. Housing closer to downtown would cost more.

https://www.realtor.com/realestateandho ... 10&view=qv

Atlanta is not nervana but one thing that I might do in your situation is to look at college towns to see if there is one that you would want to move to. Some college towns have a lot going for them and could be a great place to live.

With a paid off house you should be able to comfortably live on one income for a while if you wanted to.
frugalista wrote:
Wed Oct 10, 2018 4:14 pm
He is qualified for pension (well funded), which will be vested in about another 5 years (a total of 10 years vesting period)
Don't overestimate the value of that. If it is currently worth a $500 dollars a month starting when he is 65 then it is worth very little today.
frugalista wrote:
Wed Oct 10, 2018 4:14 pm
Basically, the ideal scenario is that I leave to work after they leave for school and I come home before they come home from school so approximately 9AM-2PM schedule (5 hours a day) 20-25 hours a week. Not sure if my current employer (local govt) will allow this but I can keep looking if they don’t.
Summers, school breaks, snow days, etc will make working those hours a lot harder even if you work at a school. If you do something where you can run your own business that might work better.

Your husband makes a very similar income as you do. It might make sense for him to be a stay at home parent or to work part time and for you to go to work in the private sector where you could make 50% more. That might also help with his workaholic problem.
frugalista wrote:
Wed Oct 10, 2018 4:14 pm
Monthly Expenses ( pls don’t try to dissect this. We are selectively frugal....
OK.......

..... except that you said "selectively frugal" twice in your post. That doesn't sound any more right than something like "selectively sober" and you live in a million dollar house so you may be kidding yourself.

There are several variations of a saying, "You can afford anything you want, but not everything you want."

carguyny
Posts: 315
Joined: Mon Aug 08, 2016 4:56 pm

Re: Pls help us design our family life!!!

Post by carguyny » Wed Oct 10, 2018 6:47 pm

Take the $220k cash and add $20k to emergency fund, pay the rest off the mortgage. Don't refinance nor recast the mortgage as this will get you on a path to have it paid off sooner.

IMO, you need a forced savings plan above the $700/month if you don't want to cut expenses - it will be tied up in your house which isn't great, but it's better than you spending the excess. When you have expense discipline, consider a recast or refinance.

grokzilla
Posts: 78
Joined: Tue Aug 16, 2011 8:25 am

Re: Pls help us design our family life!!!

Post by grokzilla » Wed Oct 10, 2018 6:48 pm

Hmmm, you're not really in a pickle, but you're sorta in a pickle! :) You've got plenty of income and you're doing well on savings but clearly could be doing more. That monthly spend is pretty darned high, but we've all been there.

The nanny is probably costing you about as much as your mortgage per year. But, in 4-5 years you won't have nearly as much need for that nanny with one nearly in middle school and the other about to go to pre-school. Unfortunately, dropping the nanny expense is also about what you'd be reducing your salary to by going part time. So, you'd be right back where you are now...with a decent, but not exciting surplus per month. And, now that much closer to college expense.

One thing we did when we were in a similar hcol, young kids, working parents boat was to eschew the nanny and instead pick a really nice daycare instead. While we lost some of the nanny convenience, the kids enjoyed an early school type environment, good socialization and there was a notable drop in expense -- still very expensive but it allowed us to both keep working. Something to consider if you haven't already, but kidcare is never easy.

There's also a solid case to be made that now would be a good time to drop the nanny and go part time rather than waiting 4-5 years since this is the most expensive time and would save you the most. Then once they've settled in, use after school care, YMCA, etc. and go back to full time. Of course, among my family, friends and neighbors few ever seem to go back to work after caring for the kids... I imagine it's really hard to get back on that pony once you've dismounted.

Ultimately, my advice would be to do whatever you can to boost your savings activity NOW rather than later.

User avatar
TxAg
Posts: 1289
Joined: Sat Oct 17, 2009 11:09 am

Re: Pls help us design our family life!!!

Post by TxAg » Wed Oct 10, 2018 6:55 pm

Your definition of frugal is different than mine ;)

WyomingFIRE
Posts: 11
Joined: Wed Sep 12, 2018 10:44 am

Re: Pls help us design our family life!!!

Post by WyomingFIRE » Wed Oct 10, 2018 8:04 pm

frugalista wrote:
Wed Oct 10, 2018 4:14 pm
- At this point, we are not contributing to 401K, 457 etc. DH is contributing to his pension only.
Quick additional comment on the above: The general rule of thumb is to pay yourself first -- i.e., max out retirement-focused accounts in a thoughtful, tax-efficient manner. Then all other expenses follow, if that can be done. If you elect to do some household budgeting, I would prioritize savings first, then everything else follows after that, if possible.

Dottie57
Posts: 4485
Joined: Thu May 19, 2016 5:43 pm

Re: Pls help us design our family life!!!

Post by Dottie57 » Wed Oct 10, 2018 8:11 pm

WyomingFIRE wrote:
Wed Oct 10, 2018 8:04 pm
frugalista wrote:
Wed Oct 10, 2018 4:14 pm
- At this point, we are not contributing to 401K, 457 etc. DH is contributing to his pension only.
Quick additional comment on the above: The general rule of thumb is to pay yourself first -- i.e., max out retirement-focused accounts in a thoughtful, tax-efficient manner. Then all other expenses follow, if that can be done. If you elect to do some household budgeting, I would prioritize savings first, then everything else follows after that, if possible.
I would frget the “if possible” part. Savings go first. Then mortgage/insurance. Food.

I don’t think you can go part time without adding to your debt.

Dottie57
Posts: 4485
Joined: Thu May 19, 2016 5:43 pm

Re: Pls help us design our family life!!!

Post by Dottie57 » Wed Oct 10, 2018 8:14 pm

Dottie57 wrote:
Wed Oct 10, 2018 8:11 pm
WyomingFIRE wrote:
Wed Oct 10, 2018 8:04 pm
frugalista wrote:
Wed Oct 10, 2018 4:14 pm
- At this point, we are not contributing to 401K, 457 etc. DH is contributing to his pension only.
Quick additional comment on the above: The general rule of thumb is to pay yourself first -- i.e., max out retirement-focused accounts in a thoughtful, tax-efficient manner. Then all other expenses follow, if that can be done. If you elect to do some household budgeting, I would prioritize savings first, then everything else follows after that, if possible.
I would frget the “if possible” part. Savings go first. Then mortgage/insurance. Food.

I don’t think you can go part time without adding to your debt.

It is really problematic that you are no longer funding 401k accounts.

RudyS
Posts: 1299
Joined: Tue Oct 27, 2015 10:11 am

Re: Pls help us design our family life!!!

Post by RudyS » Wed Oct 10, 2018 8:59 pm

Good comments so far.
But to repeat, pay yourself first! remember you can get loans for college, but not for retirement.
Also, you may be missing some helpful advice by telling us to lay off the 6K "discretionary" spending. Sort of asking us to help with one hand behind our back.

veindoc
Posts: 378
Joined: Sun Aug 14, 2016 9:04 pm

Re: Pls help us design our family life!!!

Post by veindoc » Wed Oct 10, 2018 9:01 pm

Can you start by modifying your hours now? My cousin who’s works in govt used to to a 6-3 schedule. Hubby got kids off to daycare/school and she picked them up. This might give you some of the work life balance you want and possibly reduce child care costs giving you some breathing room.

runner540
Posts: 738
Joined: Sun Feb 26, 2017 5:43 pm

Re: Pls help us design our family life!!!

Post by runner540 » Wed Oct 10, 2018 10:41 pm

frugalista wrote:
Wed Oct 10, 2018 4:14 pm

- Can you help me with figuring out steps to make my wish come true? I’m overwhelmed and not sure where to start.
Welcome, frugalista.

You are in the right place to start learning. My guess is that you are feeling overwhelmed because you have a new baby and just bought a house that is 5x income if both are working full time, and you don't have much margin relative to your expenses and goals ($700/month, or $8400/year). You can get increase the margin by increasing income, or decreasing expenses (which you have taken off the table). You also need to make sure not to add any more expenses, or this will get harder. I know HCOL is tough, but you should read the new book, The Next Millionaire Next Door. $240k, or $180k, is just not enough to have "everything" in a HCOL area ($1.2MM house, nanny, eating out, vacations, and no "skimping" on child activities).

To go part time in 4-5 years, something needs to change positively, and no negative shocks: the family needs to free up thousands, not hundreds, of dollars per month to put toward big goals that will reduce your need for income in 4-5 years.
-Turbocharge retirement and college savings
-pay down mortgage aggressively and then recast or refinance

Miscellaneous comments:
$20k emergency fund seems small for a house that expensive. Good comment to take $20k from $220 and bolster this. Use the rest to pay down mortgage and recast, or put into college savings and be done with those. Do NOT use the $200k to cover a monthly deficit of living expenses.
$11k monthly take home on $240k annual seems pretty low without 401k, HSA, etc. Are the tax withholdings right? How big is the pension withholding?

Yellowhouse
Posts: 2
Joined: Tue Sep 25, 2018 8:45 pm

Re: Pls help us design our family life!!!

Post by Yellowhouse » Wed Oct 10, 2018 10:51 pm

As someone above stated, your definition of frugal is odd. If I understand it correctly, you're living in a million plus dollar home...again, that's not frugal where I come from. Where I live, a 1.1 million dollar home is simply put, a frigging mansion.

Can you sell your house and cut it in half?? I mean living in a 600k home isn't chopped liver....outside of that, it's a tight fittin boot.

User avatar
leeks
Posts: 163
Joined: Thu Apr 07, 2011 4:33 pm
Location: new york

Re: Pls help us design our family life!!!

Post by leeks » Thu Oct 11, 2018 8:38 am

A family of 4-5 should be able to easily live a comfortable life on $187K in any cost-of-living area using your criteria of "retirement fund is reasonable, some college expense covered, no struggle month to month, enough emergency fund, one vacation per year, eating out 2/3 times a month." Plenty of families do so on a lot less. You could certainly live well on your husband's income alone, although you would probably need to reduce your housing costs.

If you want to spend more time with your children, go to part-time now, there is no need to wait beyond working out your new budget and downsizing your housing cost if necessary. Make sure you are looking at your after-tax income (and take-home pay after retirement contributions) when you compare options. If the housing costs become the deal-breaker in your budget, than realize you are choosing to keep that home instead of spending more time with your children (no judgement about the validity of that choice, but realize it is a choice).

User avatar
8foot7
Posts: 751
Joined: Mon Jan 05, 2015 7:29 pm

Re: Pls help us design our family life!!!

Post by 8foot7 » Thu Oct 11, 2018 8:43 am

If you’re not saving anything for retirement outside of what must be a minimal pension given what you’ve described, then you can’t afford your lifestyle *now.*

User avatar
MnyGrl
Posts: 232
Joined: Tue Apr 11, 2017 3:44 pm
Location: DC

Re: Pls help us design our family life!!!

Post by MnyGrl » Thu Oct 11, 2018 9:00 am

Hi,

I think most working moms would love a 9-2 job. I don't know what you do, but have you investigated whether this is realistic for your profession? Are you planning on working part time indefinitely or for a certain amount of time?

I live on a lot less than you do, but I save quite a bit more, and live in a HCOL area as well. Are you sure you've cut all the fat in your budget? I'm not sure that people can give good advice without knowing your monthly expenses. With such an expensive house it will be tough to live just on husband's income.

frugalista
Posts: 5
Joined: Wed Oct 10, 2018 3:45 pm

Re: Pls help us design our family life!!!

Post by frugalista » Thu Oct 11, 2018 9:01 am

This is the OP. Thanks for all the responses so far. They are very helpful with objectivity lenses on.

To answer some questions:
- pension contribution is 6% on his salary so 7.62k
- for this year we allocated $1.5k FSA
- currently contributing 1.2k/year in 529 ( grand parents earmarked 100k inheritance for college funding; besides we are not looking into fully cover all expenses as we both paid through our own and expect the same but we will cover some expenses if needed)
- savings of only $700/month may be a bit underestimated. More like 1k after all said and done.
- yes one of the large expenses is live-in nanny with cash out of pocket 2k/month. We provide her with a generous benefit plan as she is an elderly and therefore the base is a little bit lower for our area (but with ‘live in’ cost, it actually isn’t)
- we do not do private schooling as our public schools are top notch (one of the reasons we moved here)
- yes, we have family ties here only 40 min drive away and moving to a lcol is not an option. We want our kids to grow up knowing their grand parents, uncles, aunts, cousins etc.
- we thought about recasting the mortgage with apt sale $ but eliminated the idea because we believe we actually lower our risk by keeping it liquid even if the taxable may be down at time of needs. It gives us cushion for years if something drastic were to happen. We also want to take reasonable risk to grow this stash as much as possible.
- re: EF, even though its currently low, it’s growing month over month. Also, we can tap into 50k that’s sitting idle in my parents savings account
- the rationale for stopping 401k was because we felt with current balance + pension (70% salary at retirement) + 2 large SS ( even if cut down to 50%) will not be too shabby in 25 years. Also, we hope to start funding again in a few years when we have locked in our expenses better. I personally don’t think we are in too much of a bad shape with retirement funding, specially given our philosophy of living (somewhat) today as well while saving for our 60 year old selves. It’s all about balance. We feel that if we have lived a fulfilled life with our kids at home while we are still young, we don’t have to have a lavish life at retirement when they are gone. Hope this makes sense to you all.
- yes we bought home 5X our salary; however the mortgage is 3X the salary as we put 40% down. It’s not a mansion but a modest 3/2 1700sqft house in a great area.
- our commute is long (2.5hr two way) and expensive costing us 1k/month. We just moved and moving again is not an option. Will kill us in transaction cost.
- with nanny cost and some commute expense gone, we might get 2.5k/month back. I feel as though 2.5k + DH’s salary + my part time salary should still cover us month over month with little to no cushion perhaps. Does that sound right?

I’ve also updated the original to reflect the above. Thanks again for all of your thoughtful comments.

dstac
Posts: 60
Joined: Sun Jun 02, 2013 5:12 pm

Re: Pls help us design our family life!!!

Post by dstac » Thu Oct 11, 2018 9:37 am

Good comments above. Just a thought on how to get to PT... Often it can be easier to work a reduced number of days rather than reduced hours every day. Knowing someone is not in on Friday’s is easier than trying to catch them by 2 every day. Job sharing on a 3-2 split can be easier to manage as well.

I think this may also benefit you as well by getting rid of commute days. There are also plenty of opportunities to help out during the school day.

My DW has been at 30hrs/wk over M/T/W & 1/2Th since returning to work. This allows her time to volunteer in the classroom regularly, getting to know other kids too. We share a number of the do/pu but also work much closer. We partner w other parents & school and find “enrichment opportunities” M-W after school. (We’ve also used college sitters for this as well.)

This Friday is a random no school day. DW will have a few kids from class on an adventure who’s parents work on F. We will swap back with another family on an upcoming no school Monday as another parent has M off instead (as part of a job share w in a local govt ofc no less).

Just another option to consider.

barnaclebob
Posts: 2962
Joined: Thu Aug 09, 2012 10:54 am

Re: Pls help us design our family life!!!

Post by barnaclebob » Thu Oct 11, 2018 9:58 am

frugalista wrote:
Thu Oct 11, 2018 9:01 am
- with nanny cost and some commute expense gone, we might get 2.5k/month back. I feel as though 2.5k + DH’s salary + my part time salary should still cover us month over month with little to no cushion perhaps. Does that sound right?
What will your total take home pay be after going part time? How will commute expenses be reduced if you still go to work each day?

Regattamom
Posts: 28
Joined: Sat Jan 06, 2018 3:40 pm

Re: Pls help us design our family life!!!

Post by Regattamom » Thu Oct 11, 2018 10:31 am

Frugalista,

It's the house. The payment is too high now and it's especially too high if you want to reduce your hours. I was thinking that if you took the $220K and used it to pay down the mortage and then recast, that might get you where you need to be on monthly expenses. But even then, it would be really tough. Remember, even if you get rid of the nanny cost, you will still need daycare during the summer and every school break.

If I was in your situation and wanted to reduce my hours in four to five years, I would plan on selling the house at that time and finding a more affordable place to live.

Regattamom

bloom2708
Posts: 4797
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Pls help us design our family life!!!

Post by bloom2708 » Thu Oct 11, 2018 10:37 am

Regattamom wrote:
Thu Oct 11, 2018 10:31 am
Frugalista,

It's the house. The payment is too high now and it's especially too high if you want to reduce your hours. I was thinking that if you took the $220K and used it to pay down the mortage and then recast, that might get you where you need to be on monthly expenses. But even then, it would be really tough. Remember, even if you get rid of the nanny cost, you will still need daycare during the summer and every school break.

If I was in your situation and wanted to reduce my hours in four to five years, I would plan on selling the house at that time and finding a more affordable place to live.

Regattamom
+1

When you have a $700k mortgage (at most any income), you are locked into a certain path. It is 40+% of your spending.

Sometimes you can't have your cake and eat it too. House purchase size often dictates THE path for many, many years.
Where to spend your time: | 1. You completely control <--spend your time here! | 2. You partially control <--spend your time here! | 3. You have no control <--spend no time here!

Maverick3320
Posts: 502
Joined: Tue May 12, 2015 2:59 pm

Re: Pls help us design our family life!!!

Post by Maverick3320 » Thu Oct 11, 2018 10:37 am

Awful hard to help you out when expenses are 10,500 a month and you ask us not to dissect them.

If we can't touch your expenses, my advice is to make more money. Not sure how that will square with you going part time.

Admiral
Posts: 1367
Joined: Mon Oct 27, 2014 12:35 pm

Re: Pls help us design our family life!!!

Post by Admiral » Thu Oct 11, 2018 10:46 am

Your house is much too expensive for your CURRENT incomes (forget about reduced incomes). It strikes me as that simple. 40% +/- of your take home. That's not real sustainable if you want to reduce your income.

You need less house. Sorry, but that's what jumps out at me.

gotester2000
Posts: 582
Joined: Sun Nov 12, 2017 1:59 am

Re: Pls help us design our family life!!!

Post by gotester2000 » Thu Oct 11, 2018 10:48 am

I think giving up a local govt job to be a SAHM is a bad idea. You have plenty of time and low stress.
Continue the job and I see no problem at all.

CFOKevin
Posts: 109
Joined: Sat Jan 04, 2014 4:07 pm

Re: Pls help us design our family life!!!

Post by CFOKevin » Thu Oct 11, 2018 11:21 am

Too many unknowns to make much of a plan for 4-5 years out, IMO.

But, based on your current situation, it seems you'll need $240K less $30K (nanny) or $210K in income to be as well off going PT as you are now. I'd use that as you measuring stick and focus on ways to boost income/cut expenses to get there. I'm assuming you can cut expenses each year to offset inflation and your reduced commuting cost wold be offset by purchasing a second car.

In our family's experience, the HCOL +3 kids years with nanny and/or part-time work for my wife were the ones that had our savings close to zero.

Good Luck,

Kevin

WyomingFIRE
Posts: 11
Joined: Wed Sep 12, 2018 10:44 am

Re: Pls help us design our family life!!!

Post by WyomingFIRE » Thu Oct 11, 2018 11:33 am

frugalista wrote:
Thu Oct 11, 2018 9:01 am
This is the OP. Thanks for all the responses so far. They are very helpful with objectivity lenses on.

- with nanny cost and some commute expense gone, we might get 2.5k/month back. I feel as though 2.5k + DH’s salary + my part time salary should still cover us month over month with little to no cushion perhaps. Does that sound right?
Three quick observations on the above:

(1) Again, try one of those free personal finance software packages. Then you won't have to "guess" or "feel" where you stand; you instead will have actual data for your current situation, then will have a foundation from which you can do better planning. I would never feel comfortable making a major life decision, such as potentially reducing income, based upon whether my forecast "sounds right."

(2) Your current absence of a "cushion" means that you are not currently saving for retirement outside of DH's pension, a condition which it looks like you intend to continue. You also said above that you felt that you "had saved enough" in your retirement accounts based upon their anticipated value when you both retire. You are potentially a long way away from retirement, but have you done any "financial independence" or retirement planning? Do you know what your accounts' anticipated future value will be decades down the road based upon their AA? Do you have a decent estimate of "your number" -- i.e., the aggregate amount invested in the markets (based upon a slew of thoughtful assumptions and actual data, including AA and your risk profile) to sustain the lifestyle you wish to live when you both retire or otherwise leave the workforce? As to all of the above, you might want to start fiddling with retirement planning tools such as cFIREsim or FIREcalc (and there are many of them); some budgeting/personal finance software packages include retirement calculators, too. Before you reduced your hours or stopped working, for example, you might want to separately assess what, if anything, that might mean for your personal SS payouts at 62, FRA or 70; these planning tools can help you with those decisions. Retirement and/or financial independence may be a ways off, but it is never too early to develop a baseline plan, which you then can update annually or otherwise as needed. You also can run scenarios to see the potential future impact of financial decisions you might make today.

(3) Further to the "cushion," you need an adequate emergency fund -- a point previously made by others. What would happen if you reduced your hours and DH fell ill or was disabled?

From the 10,000-foot level, the bulk of your labor hours is going to pay for a house and a nanny. To your credit, since you are sitting back now and thoughtfully assessing your life (and all credit to you for that), I'd read the "Next Millionaire Next Door" (or the original one) and "Your Money or Your Life." Those books may literally change your life. And this isn't a false choice between "more money" and "less family time." What you may find is that, by making different choices with money, your family relationships are enhanced.

Again as to all of the above, I just suggest you throw some data and math at your questions, using popular, widely available and free tools. Books are helpful, too. The fact that you are asking these questions puts you way ahead of your HCOL lifestyle peers, in my view.

User avatar
leeks
Posts: 163
Joined: Thu Apr 07, 2011 4:33 pm
Location: new york

Re: Pls help us design our family life!!!

Post by leeks » Thu Oct 11, 2018 2:20 pm

our commute is long (2.5hr two way) and expensive costing us 1k/month.
This commute sounds like a lot of time away from your children and overly expensive. I would think the trade off many make is long commute/cheaper housing vs short commute/expensive housing. It seems you have chosen long commute AND expensive housing. It's hard to see how part-time days could ever make sense if you spend this much time just getting to/from work (if you can work at home or work fewer days per week, that would be more realistic).

I hope your whole family is absolutely in love with your neighborhood such that it is worth the many sacrifices you are making in terms of the time and money (commute) and money (house price!) you are sacrificing to be there. This choice is what is restricting other options.

JGoneRiding
Posts: 1155
Joined: Tue Jul 15, 2014 3:26 pm

Re: Pls help us design our family life!!!

Post by JGoneRiding » Thu Oct 11, 2018 2:34 pm

If you want to go part time you need to find a job closer to where you live. Even if it means a pay cut now this will give you the most increase in family time. My commute is 12 min. I go home at lunch on most days to spend them with my infant son. This time is really precious as he is usually happy at lunch and often cranky at end of day.

aristotelian
Posts: 4686
Joined: Wed Jan 11, 2017 8:05 pm

Re: Pls help us design our family life!!!

Post by aristotelian » Thu Oct 11, 2018 2:57 pm

You need to cut your expenses, or keep working.

User avatar
8foot7
Posts: 751
Joined: Mon Jan 05, 2015 7:29 pm

Re: Pls help us design our family life!!!

Post by 8foot7 » Thu Oct 11, 2018 3:24 pm

Since you have a $700,000 mortgage, you need approximately $233,000/year gross to service that debt and still be able to live life. Supposedly you should still be able to save a reasonable amount at that level. You're at, what, 240 now? So barely over the ideal, and now you want to reduce that by $53k to $187 total.

I don't really see how that math is going to work out for you.

Regarding cutting the nanny expense: childcare in a HCOL area is going to be $1200/mo minimum per kid under 5, plus afterschool costs of probably $400-500 for your older kid, so even if you cut back hours, you're still on the hook for $1600-1700/mo and perhaps more if you have another kid. So your childcare expense is going to be about the same--you won't save anything meaningful there going PT unless you can get creative with neighbors and friends.

Your PITI is 4300, 39% of your take-home. It's hard to build much wealth or create many options when 2/5ths of your income goes right out the door to put a roof over your head. Assuming a third of your gross goes to various fed, state, and local taxes, you're wanting to kill off another $2,900 a month of take-home pay, and that sends your house payment to a whopping 53% of your take-home. That's insane.

It's clear that your house will prevent you from responsibly cutting to part-time and your house decision is driving your future at this point.

delamer
Posts: 6138
Joined: Tue Feb 08, 2011 6:13 pm

Re: Pls help us design our family life!!!

Post by delamer » Thu Oct 11, 2018 5:24 pm

Don’t assume you’ll be savings $2500 per month once your kids are both in school and you go part-time.

While the nanny will be gone, you still will need child care in the summer even if you completely eliminate it on school days and holidays. And there will be some costs for extracurricular activities.

Regarding the commuting costs, they will not go down at all if you end up at the same job but fewer hours per day. If you work fewer days at regular hours, then yes. But then you won’t save as much on child care.

The only way you save significantly on commuting costs and school-day child care is if you end up with a part-time job that is much closer to home.

It may be that you want to go part-time so much that you are not being as objective about the numbers as you should be.

I am sympathetic as I worked part-time until my youngest was in high school. But don’t kid yourself about the effect on your financial bottom line. We all have to make tradeoffs — you can have anything you want, but you can’t have everything you want.

I am less pessimistic than others regarding your retirement, given the pension, SS, and that you already have $500K saved.

Kids and commutes are expensive and your expenses will go down a lot once you are empty nesters. My husband and I will live quite comfortably on about 40% of our highest gross income (with no mortgage).

But I would not count in an inheritance to help with college — too many unknowns (like grandparents living so long that there is no inheritance until college is done). If the grandparents are willing, them giving each kid less money now will be more help than a future promise.

Good luck.

megabad
Posts: 585
Joined: Fri Jun 01, 2018 4:00 pm

Re: Pls help us design our family life!!!

Post by megabad » Thu Oct 11, 2018 6:09 pm

frugalista wrote:
Wed Oct 10, 2018 4:14 pm
- with nanny cost and some commute expense gone, we might get 2.5k/month back. I feel as though 2.5k + DH’s salary + my part time salary should still cover us month over month with little to no cushion perhaps. Does that sound right?
By my rough calc at 45% tax rate you would be about $500/month short. Can you find $500/month savings or increase either of your incomes by say 10k per year (maybe you could work just a few more hours per week)? Sounds like you have a few years to figure that out. I can see you being pretty comfortable in retirement if you and your husband continue working SS eligible jobs until age 70 and the pension remains funded and is inflation adjusted. I am not a huge fan of relying heavily on a state pension, but that is a personal decision. I am much less gloom and doom on your situation than some because it appears you are comfortable living with a narrow budget and you stated your jobs are very stable. Worst case, If you have a catastrophic job loss, you can likely sell the home and still be ok for a while (I know this would not be good, I am just saying you could if you had to).

frugalista
Posts: 5
Joined: Wed Oct 10, 2018 3:45 pm

Re: Pls help us design our family life!!!

Post by frugalista » Thu Oct 11, 2018 9:14 pm

This is the OP again. Wanted to quickly chime in and say ‘thanks’. These are all great responses and some food for thoughts for our family.

Megadad, your estimate gives me some hopes as I think an additional $500/month may be doable soon. We both are up for 3% increase in a few months. I know it’s minuscule but still roughly 7k before tax. However, I don’t want to count on that just yet. We can also look really hard and try to trim some areas.

I do appreciate all the great comments from both angle. It’s obvious that to make my wishes come true, some sacrifices need to be made. The good new is I have few years to work on it. At the end, if it doesn’t work out, we won’t be any worse than we are now. Also, like I said before, I’m flexible. If it means instead of 4 years, it will take 6 years to confidently and comfortably go part time, I’ll do just that.

I should mention that I do see myself going back full time again when kids are gone. That makes me think if there was a way to borrow from my future self to pay for my current self, that would be perfect balance in life (I know sounds like a sci-fi movie...lol)

Thanks again everyone for your thoughtful ideas and comments.

Leemiller
Posts: 1049
Joined: Sat Jun 01, 2013 12:42 pm

Re: Pls help us design our family life!!!

Post by Leemiller » Fri Oct 12, 2018 8:02 am

Housing is a killer for so many families - it creates the two income trap. Your part time dream likely means a drop in housing - that can mean a condo or townhome in a HCOL. It’s not easy - we purchased a home below our two income means and sometimes I want the fancier home.

I do strongly support having a nanny, while expensive, yours is frankly under market cost & I have no doubt worth it.

I would take a careful look at pensions and the security of future payment flows. The only pension I would (and do) count on is my vested federal pension. I agree with others that you are undersaving for retirement and college for the kids. I too had a relative “promise” to help. They ended up funding $0.

Going forward I would take every raise and split it between the 529 and retirement. The 220 can go to savings, 529, and two back door Roths. I probably wouldn’t recast because I really like liquidity if I was you. These aren’t easy choices. I’d like to go part-time or even SAH for a few years, but I’m recently the higher earner and I have two daughters. Tough choices all around.

grokzilla
Posts: 78
Joined: Tue Aug 16, 2011 8:25 am

Re: Pls help us design our family life!!!

Post by grokzilla » Wed Oct 17, 2018 11:00 am

frugalista wrote:
Thu Oct 11, 2018 9:14 pm

I should mention that I do see myself going back full time again when kids are gone. That makes me think if there was a way to borrow from my future self to pay for my current self, that would be perfect balance in life (I know sounds like a sci-fi movie...lol)
Borrowing from future self would be AMAZING! Soooo much compounding.... :D Even better if young self could hijack old self's knowledge too! but, that's probably too much cheating... I'll settle for the former, plskthx!

The good news with the kids is, that the expense of the early years totally mellows out once they reach school age and again once they are more self sufficient, e.g., middle school/junior high. Assuming no private school. There are all manner of new expenses along the way, but these are prime savings years. It gets muddy again come college time, but that sorta depends on how much you help.

Good luck.

frugalista
Posts: 5
Joined: Wed Oct 10, 2018 3:45 pm

Re: Pls help us design our family life!!!

Post by frugalista » Fri Oct 19, 2018 11:38 am

This is the OP again. Got caught in a bad flu recently and still recovering but wanted to jump in to make few more clarifying points and close the thread with the following thoughts:

- We have a few family obligations that eat away into our monthly expense as well. That + transportation + Nanny + food + everything else come close to a rather high number at around 5.5-6K
- What I gather from everyone else here is that we are doing ok in retirement side of things but can do better. We need to up our college savings if possible. We should try to reduce any other expense if we can and throw at our savings.
- We'll continue to live life like bogelheads and reassess our standing in 4-5 years. Like I said before, we are flexible with the timing so we may have more leeway than we think right now.

Thanks again for all of your viewpoints and suggestions. Our family appreciates it.

Post Reply