Stay the course with baby on the way?

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runner262
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Joined: Mon May 21, 2018 9:52 am

Stay the course with baby on the way?

Post by runner262 » Tue Mar 05, 2019 10:12 pm

Hi Everyone,

This is basically a follow up to a post I made about 9 months ago where my wife and I were trying to get some thoughts and suggestions regarding our financial goals as we just became debt free. We’ve definitely made strides in the right direction but I'm happy to announce that we are expecting our first child to be born in late August.

We are both very excited but also going a little crazy trying to make sure we have our financial priorities in order and seeing if there is anything we should be doing differently.

Here is our current situation:
Me - 35 y/o; 100K salary (10% bonus)
Wife - 30 y/o; 70K salary (5% bonus)

No debt

Current retirement assets:
401K
$250K total portfolio
40% Dryden S&P 500 Index (.09%)
20% Vanguard Total Bond Market Index Admiral (.05%)
20% Vanguard Total Intl Stock Index Admiral (.11%)
20% Vanguard 500 Index Fund – Admiral (.04%)

HSA- $5K

Savings - $23K (Marcus – 2.25% APY)

We increased our 401K contributions in June to both max out. I also have an HSA which I am maxing out as well. This obviously gave us less after-tax savings but it's been nice seeing the retirement savings grow. We've also gotten to a point where we've adjusted to not having that money in our take home paychecks.

We still rent a townhome (3 bedroom/ 2.5 bath) for $1825 a month.

My main question regarding our situation is this. Should we be scaling back at all in the 401K savings and put that additional money in our after-tax/emergency savings to anticipate any future needs/emergencies regarding the baby? Or do we stay the course with maxing out our retirement accounts? Most likely my wife will have some non-paid time during her maternity leave that. She works from home but we are still expecting some daycare costs eventually. My parents are about 15-20 minutes from us so we may get some help from them but I’m currently not factoring that in.

We still have a goal to eventually buy a house in a few years but we are content with our current living situation. Our one concern is that we are currently saving around $2.5K a month (30% of net take home after 401K/HSA contributions) but I’m sure that will take a hit once the baby arrives so our after-tax savings will grow much slower if we keep our 401K’s maxed. Since our 401K is so much larger than our current savings, I'm not sure if we should factor that into our decision at all given our age and with a goal of owning a home. There are many scenarios but most likely we'd be looking at houses with a max budget of $350K when the time comes.

Our gut is to keep our 401K’s maxed for as long as we can and lower only if absolutely necessary but would love to hear other experiences if anyone has been in a similar situation. Happy to provide any additional info or answer any questions.

Thank you!

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fortfun
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Re: Stay the course with baby on the way?

Post by fortfun » Tue Mar 05, 2019 10:15 pm

You should both get term life insurance ASAP. The EF is a bit small, might add just a bit more (maybe 17k more) to that and then keep maxing out those 401ks.

AkwardDoct@rd
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Re: Stay the course with baby on the way?

Post by AkwardDoct@rd » Tue Mar 05, 2019 10:21 pm

Increase your savings for sure. I second the term life insurance

miamivice
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Re: Stay the course with baby on the way?

Post by miamivice » Tue Mar 05, 2019 10:32 pm

Our experience with kids is costs have risen dramatically. Daycare for example, if you both choose to work.

We purchased our house 6 years ago. I thought we were conservative financially with it, but as property taxes have gone up, daycare, food for a family of 4, etc, etc, I'm really glad that we didn't buy any more house than we did.

bluebolt
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Re: Stay the course with baby on the way?

Post by bluebolt » Tue Mar 05, 2019 10:34 pm

Get an estate plan so you can designate guardians for your child and provide for their support in case something happens to you & your spouse.

If you go high end with car seats, stroller(s), crib, etc., you could spend several thousand just on the "necessities." Relying on hand-me-downs and craigslist can save you a significant amount.

miamivice
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Re: Stay the course with baby on the way?

Post by miamivice » Tue Mar 05, 2019 10:37 pm

runner262 wrote:
Tue Mar 05, 2019 10:12 pm
Most likely my wife will have some non-paid time during her maternity leave that. She works from home but we are still expecting some daycare costs eventually. My parents are about 15-20 minutes from us so we may get some help from them but I’m currently not factoring that in.
Your wife will not be able to work from home with a little one in tow. Babies require constant attention, and you can't try to do a job while raising a little one. It's not fair to the little one, it's not fair to the employer, and it's not fair to your wife. Plan on having someone watch her when she is working or she can take leave.
Our gut is to keep our 401K’s maxed for as long as we can.
It's fine if you want to max it, but you don't need to max your 401ks to have a nice retirement. You can play with some numbers if you like but most say about 15% of your income (including company matches) into a 401k is plenty to have a nice retirement. So if you put a total of $26,000 into retirement this year, including what your company kicks in, and continue doing 15% each future year, you should be fine.

I see you have a high deductible insurance plan. Have you considered birthing costs? Both of our children cost insurance about $30k, but cost us less than about $300 because we were not on a high deductible plan at the time. Make sure you have money to pay the hospital and ob/gyn bills.

You'll want to think about college savings at some point.

Cycle
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Re: Stay the course with baby on the way?

Post by Cycle » Tue Mar 05, 2019 10:44 pm

We have a 10 week old. I can assure u your wife will not be able to watch a child while working from home.

We get most things free from others, including strangers on next door. We borrowed a few things as well from strangers on next door. We don't have any local family, but have found many generous people. We have super high end stroller and car seat we got used off eBay for 1/10th the price new.

I don't put up a fuss about the mountains of baby stuff we have, but a lot of the stuff is completely unnecessary and a collosal waste of time.... Especially pants and socks.
Never look back unless you are planning to go that way

runner540
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Re: Stay the course with baby on the way?

Post by runner540 » Tue Mar 05, 2019 10:55 pm

miamivice wrote:
Tue Mar 05, 2019 10:37 pm
runner262 wrote:
Tue Mar 05, 2019 10:12 pm
Most likely my wife will have some non-paid time during her maternity leave that. She works from home but we are still expecting some daycare costs eventually. My parents are about 15-20 minutes from us so we may get some help from them but I’m currently not factoring that in.
Your wife will not be able to work from home with a little one in tow. Babies require constant attention, and you can't try to do a job while raising a little one. It's not fair to the little one, it's not fair to the employer, and it's not fair to your wife. Plan on having someone watch her when she is working or she can take leave.
Our gut is to keep our 401K’s maxed for as long as we can.
It's fine if you want to max it, but you don't need to max your 401ks to have a nice retirement. You can play with some numbers if you like but most say about 15% of your income (including company matches) into a 401k is plenty to have a nice retirement. So if you put a total of $26,000 into retirement this year, including what your company kicks in, and continue doing 15% each future year, you should be fine.

I see you have a high deductible insurance plan. Have you considered birthing costs? Both of our children cost insurance about $30k, but cost us less than about $300 because we were not on a high deductible plan at the time. Make sure you have money to pay the hospital and ob/gyn bills.

You'll want to think about college savings at some point.
+1000
If you and your wife are going to work for pay fulltime, You need a plan for fulltime childcare. Period. If you think we're kidding, try babysitting an infant for a full day solo.

JGoneRiding
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Re: Stay the course with baby on the way?

Post by JGoneRiding » Tue Mar 05, 2019 11:03 pm

From my point of view with number 2 on the way you guys are doing great and have done an amazing job if preping!

If you can keep up the 401k i would do that and cut back on the after savings.

I can say in day care if you have other good options I would take them.

We had semi nanny the first year and in hind site it was a life saver. We are one month into full time care and between the snow and viruses that he has come home with in 5 weeks he hasn't spent a whole week there! The whole family was sick this weekend and me and my husband both stayed home sick yest. Where we didn't at all the first year

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Watty
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Re: Stay the course with baby on the way?

Post by Watty » Tue Mar 05, 2019 11:29 pm

runner262 wrote:
Tue Mar 05, 2019 10:12 pm
Here is our current situation:
Me - 35 y/o; 100K salary (10% bonus)
Wife - 30 y/o; 70K salary (5% bonus)

......
We still rent a townhome (3 bedroom/ 2.5 bath) for $1825 a month.
With the bonuses you are grossing $187K a year.

To max out your 401ks with $38K a year you would basically be living like you gross $149K(187-38) a year which is hardly a hardship.

The rent is $21,900 a year and maxing out two 401Ks would be $38,000, which combined is $57,900.

That leaves you about $130,000 a year, you would pay a lot of taxes out of that but even after paying taxes you should have a lot of other disposable income.
runner262 wrote:
Tue Mar 05, 2019 10:12 pm
My main question regarding our situation is this. Should we be scaling back at all in the 401K savings and put that additional money in our after-tax/emergency savings to anticipate any future needs/emergencies regarding the baby?
You have at least five months until the baby is due so I would keep doing the 401k contributions, but to also try just living on your income and save all of your wife's income.

That would not only help you build up your savings but it would also help you see what it will be like to live on one income for a while if you need to.

itsgot8
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Re: Stay the course with baby on the way?

Post by itsgot8 » Wed Mar 06, 2019 10:19 am

Cycle wrote:
Tue Mar 05, 2019 10:44 pm
We have a 10 week old. I can assure u your wife will not be able to watch a child while working from home.

We get most things free from others, including strangers on next door. We borrowed a few things as well from strangers on next door. We don't have any local family, but have found many generous people. We have super high end stroller and car seat we got used off eBay for 1/10th the price new.

I don't put up a fuss about the mountains of baby stuff we have, but a lot of the stuff is completely unnecessary and a collosal waste of time.... Especially pants and socks.
I would suggest the OP encourages his wife to look into mom2mom sales to save money, in addition to following the example above.

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MillennialFinance19
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Re: Stay the course with baby on the way?

Post by MillennialFinance19 » Wed Mar 06, 2019 10:30 am

We live in a LCOL area (southeast GA) and our childcare is $750 a month for our 2 year old and $450 a month for our newborn. Once the newborn enters day school, it will be $750 each. We're essentially spending a mortgage on childcare until fall of 2021, at which point we'll be spending a large car payment (YAY). But seriously, this is something you need to be planning for.

stoptothink
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Re: Stay the course with baby on the way?

Post by stoptothink » Wed Mar 06, 2019 10:44 am

miamivice wrote:
Tue Mar 05, 2019 10:37 pm
runner262 wrote:
Tue Mar 05, 2019 10:12 pm
Most likely my wife will have some non-paid time during her maternity leave that. She works from home but we are still expecting some daycare costs eventually. My parents are about 15-20 minutes from us so we may get some help from them but I’m currently not factoring that in.
Your wife will not be able to work from home with a little one in tow. Babies require constant attention, and you can't try to do a job while raising a little one. It's not fair to the little one, it's not fair to the employer, and it's not fair to your wife. Plan on having someone watch her when she is working or she can take leave.
That's a little dramatic. Both my wife and I have alternated working (at least) one day a week from home since my son was born 3.5yrs ago. I currently work every Wednesday (I'm doing it right now) and every other Friday from home. If I didn't have a lot of meetings and the responsibility of representing my company to the public a lot, I'd probably work from home almost exclusively (and my employer would allow it). Many employers are not OK with it, but it is possible to be quite productive and still adequately watch a young child. Small children sleep a lot, and infants don't do a whole lot when they are awake anyways; it's not that big of a hassle to plant yourself (with your laptop) in the same room, keep the door closed, and coordinate feeding and diaper changing. And my children have thrived not having someone hover over them 100% of the time. Of course how possible it is is highly dependent on the job.

But, yes, childcare should be at least factored in, in some sense. It's absurdly expensive. We have a great situation, but are still currently paying $600/month for 3.5 days a week for a nearly 4yr old. Once summer comes, it'll be another $600/month (for 3.5 days/week) to include my 7yr old daughter.

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Nate79
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Re: Stay the course with baby on the way?

Post by Nate79 » Wed Mar 06, 2019 11:11 am

I really agree with the posters that stressed the strategy of minimizing the cost of items you buy for the child by focusing on getting second hand items and being really careful with what you buy. I'm always amazed that people that seem to have more money than I can imagine by buying all the latest high end items that can be had for pennies on the dollar. Of course those people are probably not maxing 401ks and are in debt up to their eyeballs.

miamivice
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Re: Stay the course with baby on the way?

Post by miamivice » Wed Mar 06, 2019 11:17 am

stoptothink wrote:
Wed Mar 06, 2019 10:44 am
miamivice wrote:
Tue Mar 05, 2019 10:37 pm
runner262 wrote:
Tue Mar 05, 2019 10:12 pm
Most likely my wife will have some non-paid time during her maternity leave that. She works from home but we are still expecting some daycare costs eventually. My parents are about 15-20 minutes from us so we may get some help from them but I’m currently not factoring that in.
Your wife will not be able to work from home with a little one in tow. Babies require constant attention, and you can't try to do a job while raising a little one. It's not fair to the little one, it's not fair to the employer, and it's not fair to your wife. Plan on having someone watch her when she is working or she can take leave.
That's a little dramatic...... Many employers are not OK with it, but it is possible to be quite productive and still adequately watch a young child. Small children sleep a lot, and infants don't do a whole lot when they are awake anyways; it's not that big of a hassle to plant yourself (with your laptop) in the same room, keep the door closed, and coordinate feeding and diaper changing.
This does not match the reality of the world that I have lived in.

nyclon
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Re: Stay the course with baby on the way?

Post by nyclon » Wed Mar 06, 2019 11:22 am

miamivice wrote:
Wed Mar 06, 2019 11:17 am
stoptothink wrote:
Wed Mar 06, 2019 10:44 am
miamivice wrote:
Tue Mar 05, 2019 10:37 pm
runner262 wrote:
Tue Mar 05, 2019 10:12 pm
Most likely my wife will have some non-paid time during her maternity leave that. She works from home but we are still expecting some daycare costs eventually. My parents are about 15-20 minutes from us so we may get some help from them but I’m currently not factoring that in.
Your wife will not be able to work from home with a little one in tow. Babies require constant attention, and you can't try to do a job while raising a little one. It's not fair to the little one, it's not fair to the employer, and it's not fair to your wife. Plan on having someone watch her when she is working or she can take leave.
That's a little dramatic...... Many employers are not OK with it, but it is possible to be quite productive and still adequately watch a young child. Small children sleep a lot, and infants don't do a whole lot when they are awake anyways; it's not that big of a hassle to plant yourself (with your laptop) in the same room, keep the door closed, and coordinate feeding and diaper changing.
This does not match the reality of the world that I have lived in.
Agreed. Our child would only take three to four 20 minute naps between the hours of 6am-7pm for at least 6 months.

Consider the exhaustion experienced after feeding the infant every 1.5-2 hours for the first three months carrying over into the day, combined with the constant attention the baby needs during the day.

Edit: +1 on obtaining term life insurance.
Last edited by nyclon on Wed Mar 06, 2019 11:28 am, edited 1 time in total.

Jack FFR1846
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Re: Stay the course with baby on the way?

Post by Jack FFR1846 » Wed Mar 06, 2019 11:23 am

2 things stand out.

You need another $100k in the emergency fund.
Why are there no Roth IRAs?

That's it.
Bogle: Smart Beta is stupid

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obafgkm
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Re: Stay the course with baby on the way?

Post by obafgkm » Wed Mar 06, 2019 11:38 am

runner262 wrote:
Tue Mar 05, 2019 10:12 pm
Most likely my wife will have some non-paid time during her maternity leave that.
You'll have some family leave time coming to you, as well. Paid or unpaid, take at least some of it. When my daughter came home my employer gave me 6 weeks paid paternity leave. One of the best things I did was to take it. I acknowledge that taking paid leave is easier than taking unpaid leave, but take some leave to start bonding with your new child.

stoptothink
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Re: Stay the course with baby on the way?

Post by stoptothink » Wed Mar 06, 2019 11:44 am

miamivice wrote:
Wed Mar 06, 2019 11:17 am
stoptothink wrote:
Wed Mar 06, 2019 10:44 am
miamivice wrote:
Tue Mar 05, 2019 10:37 pm
runner262 wrote:
Tue Mar 05, 2019 10:12 pm
Most likely my wife will have some non-paid time during her maternity leave that. She works from home but we are still expecting some daycare costs eventually. My parents are about 15-20 minutes from us so we may get some help from them but I’m currently not factoring that in.
Your wife will not be able to work from home with a little one in tow. Babies require constant attention, and you can't try to do a job while raising a little one. It's not fair to the little one, it's not fair to the employer, and it's not fair to your wife. Plan on having someone watch her when she is working or she can take leave.
That's a little dramatic...... Many employers are not OK with it, but it is possible to be quite productive and still adequately watch a young child. Small children sleep a lot, and infants don't do a whole lot when they are awake anyways; it's not that big of a hassle to plant yourself (with your laptop) in the same room, keep the door closed, and coordinate feeding and diaper changing.
This does not match the reality of the world that I have lived in.
Maybe my kids are unicorns. I'm a megacorp director and wife is in tech sales, we've been very productive while working from home and simultaneously watching our two children. Your results may vary. You'll be tired, but that doesn't ever change.

peseta
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Re: Stay the course with baby on the way?

Post by peseta » Wed Mar 06, 2019 12:23 pm

stoptothink wrote:
Wed Mar 06, 2019 11:44 am
Maybe my kids are unicorns. I'm a megacorp director and wife is in tech sales, we've been very productive while working from home and simultaneously watching our two children. Your results may vary. You'll be tired, but that doesn't ever change.
Your experience doesn't comport with mine, but it seems like you got lucky on the toddler-energy/mania front. Regardless, though, I don't think OP can *plan* on being able to pull something like that off. If it turns out later that OP can, it's all gravy. But OP should plan for a high-maintenance child.

Concerning the OP's general query, I was concerned that we couldn't fully fund retirement once a child was born, but we've been able to manage so far. An emergency fund is very prudent ($23k probably seems okay to me, assuming you have quality health insurance), but I would wait and see on the contribution issue -- you can always reduce contributions temporarily if the cash flow isn't working out. Definitely cut the after-tax savings first.

Also, as a previous poster observed, term insurance is a must if you don't have it yet.

peseta

frankandbeans
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Re: Stay the course with baby on the way?

Post by frankandbeans » Wed Mar 06, 2019 12:54 pm

Our experience is squarely in the camp of those who can't count on being able to balance work with childcare. We both have jobs that require a lot of conference calls and a fair bit of concentration, and we find that if we are both at home we can manage our single toddler and take turns working, but that it's not possible to get much of anything done with only one parent at home. And you at all times run the risk of this happening.
peseta wrote:
Wed Mar 06, 2019 12:23 pm
stoptothink wrote:
Wed Mar 06, 2019 11:44 am
Maybe my kids are unicorns. I'm a megacorp director and wife is in tech sales, we've been very productive while working from home and simultaneously watching our two children. Your results may vary. You'll be tired, but that doesn't ever change.
Your experience doesn't comport with mine, but it seems like you got lucky on the toddler-energy/mania front. Regardless, though, I don't think OP can *plan* on being able to pull something like that off. If it turns out later that OP can, it's all gravy. But OP should plan for a high-maintenance child.

Concerning the OP's general query, I was concerned that we couldn't fully fund retirement once a child was born, but we've been able to manage so far. An emergency fund is very prudent ($23k probably seems okay to me, assuming you have quality health insurance), but I would wait and see on the contribution issue -- you can always reduce contributions temporarily if the cash flow isn't working out. Definitely cut the after-tax savings first.

Also, as a previous poster observed, term insurance is a must if you don't have it yet.

peseta

miamivice
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Re: Stay the course with baby on the way?

Post by miamivice » Wed Mar 06, 2019 1:00 pm

frankandbeans wrote:
Wed Mar 06, 2019 12:54 pm
Our experience is squarely in the camp of those who can't count on being able to balance work with childcare. We both have jobs that require a lot of conference calls and a fair bit of concentration, and we find that if we are both at home we can manage our single toddler and take turns working
Just out of curiosity, if you take turns working and watching the toddler, do both of you charge your employers for a full days work?

My spouse and I both work for companies that expect we put in 8 hours of work if they are going to pay us 8 hours time, so there is no taking turns. Working does not include baby diaper changing time or feeding time or burping time in our 8 hour workday. We're expected to sit and work except for (2) 15 minute breaks plus a 30 minute lunch (which we both eat while working because it is just easier.)

frankandbeans
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Re: Stay the course with baby on the way?

Post by frankandbeans » Wed Mar 06, 2019 1:12 pm

We're both lawyers who typically work more than 40 hours per week. Our employers are generally flexible as to when and where we do the work, as long as the work gets done. So on these days we may just work more after the kid's in bed, but if we don't end up putting in a full day on a given day, it just gets made up some other time. That said, since meetings and calls happen during business hours, the turn-taking approach is not feasible as a matter of routine and so we only do it when totally necessary (kid home sick, daycare closed and backup care not available, etc). Also, the toll of managing competing demands on these days is pretty draining. We miss the time when snow days were fun!

miamivice wrote:
Wed Mar 06, 2019 1:00 pm
frankandbeans wrote:
Wed Mar 06, 2019 12:54 pm
Our experience is squarely in the camp of those who can't count on being able to balance work with childcare. We both have jobs that require a lot of conference calls and a fair bit of concentration, and we find that if we are both at home we can manage our single toddler and take turns working
Just out of curiosity, if you take turns working and watching the toddler, do both of you charge your employers for a full days work?

My spouse and I both work for companies that expect we put in 8 hours of work if they are going to pay us 8 hours time, so there is no taking turns. Working does not include baby diaper changing time or feeding time or burping time in our 8 hour workday. We're expected to sit and work except for (2) 15 minute breaks plus a 30 minute lunch (which we both eat while working because it is just easier.)

stoptothink
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Re: Stay the course with baby on the way?

Post by stoptothink » Wed Mar 06, 2019 1:36 pm

miamivice wrote:
Wed Mar 06, 2019 1:00 pm
frankandbeans wrote:
Wed Mar 06, 2019 12:54 pm
Our experience is squarely in the camp of those who can't count on being able to balance work with childcare. We both have jobs that require a lot of conference calls and a fair bit of concentration, and we find that if we are both at home we can manage our single toddler and take turns working
Just out of curiosity, if you take turns working and watching the toddler, do both of you charge your employers for a full days work?

My spouse and I both work for companies that expect we put in 8 hours of work if they are going to pay us 8 hours time, so there is no taking turns. Working does not include baby diaper changing time or feeding time or burping time in our 8 hour workday. We're expected to sit and work except for (2) 15 minute breaks plus a 30 minute lunch (which we both eat while working because it is just easier.)
Not who you were asking the question to, but my employer pays me based on productivity and the success of my team. Both the wife and I have proven that were are among the most productive employees, regardless of where we are working from or whether or not we have other simultaneous responsibilities. We're not standing on an assembly line organizing widgets, there is absolutely no punch-clocking, we earned the trust of our employers (this privilege is not necessarily common at either of our employers). If we were both home watching our kids (which never happens, it's always one of us), we would both be charging our employers. It's unfortunate that you and your wife are not in a similar situation.

Therapist Investor
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Re: Stay the course with baby on the way?

Post by Therapist Investor » Wed Mar 06, 2019 1:44 pm

runner262 wrote:
Tue Mar 05, 2019 10:12 pm
Hi Everyone,

This is basically a follow up to a post I made about 9 months ago where my wife and I were trying to get some thoughts and suggestions regarding our financial goals as we just became debt free. We’ve definitely made strides in the right direction but I'm happy to announce that we are expecting our first child to be born in late August.

We are both very excited but also going a little crazy trying to make sure we have our financial priorities in order and seeing if there is anything we should be doing differently.

Here is our current situation:
Me - 35 y/o; 100K salary (10% bonus)
Wife - 30 y/o; 70K salary (5% bonus)

No debt

Current retirement assets:
401K
$250K total portfolio
40% Dryden S&P 500 Index (.09%)
20% Vanguard Total Bond Market Index Admiral (.05%)
20% Vanguard Total Intl Stock Index Admiral (.11%)
20% Vanguard 500 Index Fund – Admiral (.04%)

HSA- $5K

Savings - $23K (Marcus – 2.25% APY)

We increased our 401K contributions in June to both max out. I also have an HSA which I am maxing out as well. This obviously gave us less after-tax savings but it's been nice seeing the retirement savings grow. We've also gotten to a point where we've adjusted to not having that money in our take home paychecks.

We still rent a townhome (3 bedroom/ 2.5 bath) for $1825 a month.

My main question regarding our situation is this. Should we be scaling back at all in the 401K savings and put that additional money in our after-tax/emergency savings to anticipate any future needs/emergencies regarding the baby? Or do we stay the course with maxing out our retirement accounts? Most likely my wife will have some non-paid time during her maternity leave that. She works from home but we are still expecting some daycare costs eventually. My parents are about 15-20 minutes from us so we may get some help from them but I’m currently not factoring that in.

We still have a goal to eventually buy a house in a few years but we are content with our current living situation. Our one concern is that we are currently saving around $2.5K a month (30% of net take home after 401K/HSA contributions) but I’m sure that will take a hit once the baby arrives so our after-tax savings will grow much slower if we keep our 401K’s maxed. Since our 401K is so much larger than our current savings, I'm not sure if we should factor that into our decision at all given our age and with a goal of owning a home. There are many scenarios but most likely we'd be looking at houses with a max budget of $350K when the time comes.

Our gut is to keep our 401K’s maxed for as long as we can and lower only if absolutely necessary but would love to hear other experiences if anyone has been in a similar situation. Happy to provide any additional info or answer any questions.

Thank you!
Congratulations to you both on the upcoming addition to your family! :sharebeer

There is some great advice above. Regarding your health insurance, if you have a high deductible health plan you should try to save enough to max out your out-of-pocket expense for this year. Deliveries (especially if there is a C-section) can be expensive. Try to leave the money in the HSA to grow until your retirement if possible. HSAs are a great savings vehicle. Assuming you will be putting your child in daycare at least part-time, check with your HR to see if you or your DW have access to a Flexible Spending Account. Flex spending accounts offer a way to pay for childcare with pre-tax dollars. The money you contribute must be spent or you lose it. Do your research on how much daycare costs and shop around to see if there are any that offer part-time enrollment. Plan on being on a daycare waitlist for 6 months.

It sounds like you have a nice living situation. Assuming you will buy a house eventually, you'll want to save up for a 20% downpayment (about $70,000 based on your stated total house budget above, but with your emergency fund that will be more like $90,000 total). I can relate to the difficulty of your question regarding funding your retirement versus savings. You may be tempted to cut out 401k contributions to save up more for a downpayment. My best advice is to try to save for both at the same time. Future you needs to retire just as much as future you needs a house. Set a percentage of your take home pay aside for retirement (whatever works for you) and save the rest in your online savings account.

Also, this has not been mentioned above yet to my knowledge, but in addition to term life insurance and setting up a will, you should also both look into long-term disability insurance to replace your income if you or your spouse becomes unable to work. All the best to you!
"Get what you can, and what you get hold, 'Tis the stone that will turn all your lead into gold." | -Benjamin Franklin

Chadnudj
Posts: 829
Joined: Tue Oct 29, 2013 11:22 am

Re: Stay the course with baby on the way?

Post by Chadnudj » Wed Mar 06, 2019 1:59 pm

I'll echo the life insurance/increase your emergency fund as much as possible suggestions above.

I'd also suggest you spend some time understanding your employers' respective benefits regarding dependent care. My employer (for instance) has a dependent care savings account -- essentially a flex spending account for "dependent care" -- that allows me to put up to $5k per year in pre-tax money away to pay for childcare (At the end of the year, I have to submit receipts from our daycare and then get paid the money.) At your tax level, that's a nice bit of savings on some of your childcare expenses (namely your marginal tax rate times $5000).

One other thing to think about -- taxes! There are a tax benefits that you'll see as a result of having a child -- child tax credit of $2k, child and dependent care credit, I believe, 529 plan contributions reducing state income tax if applicable -- and you should start considering those in your planning.

FlyEaglesFly2000
Posts: 15
Joined: Mon Feb 11, 2019 10:39 am

Re: Stay the course with baby on the way?

Post by FlyEaglesFly2000 » Wed Mar 06, 2019 2:05 pm

To follow up on the health insurance comments, my experience has been that out-of-pocket costs on a high deductible plan will be in the $5k-$7k range for the birth of the baby. Also, your insurance premiums will go up once you change to a family plan.

As others have said, I would plan on spending $ on part-time daycare or an hourly babysitter at a minimum, if you both continue to work full-time.

I'd plan for $1k-$2k in baby equipment (crib, car seats, swing, bottles, etc). I fully agree that you look into buying second-hand for a lot of this stuff.

The good news is that you will likely save $$ from your entertainment budget. A lot more weekends will be spent at home instead of eating out or nights out on the town.

Best wishes on the new baby!

miamivice
Posts: 2197
Joined: Tue Jun 11, 2013 11:46 am

Re: Stay the course with baby on the way?

Post by miamivice » Wed Mar 06, 2019 2:43 pm

Chadnudj wrote:
Wed Mar 06, 2019 1:59 pm
I'd also suggest you spend some time understanding your employers' respective benefits regarding dependent care. My employer (for instance) has a dependent care savings account -- essentially a flex spending account for "dependent care" -- that allows me to put up to $5k per year in pre-tax money away to pay for childcare (At the end of the year, I have to submit receipts from our daycare and then get paid the money.) At your tax level, that's a nice bit of savings on some of your childcare expenses (namely your marginal tax rate times $5000).
Dependent care accounts are great. Keep in mind the money can only be used to enable the parent(s) to work or look for work. Date night babysitters don't count!

dknightd
Posts: 1930
Joined: Wed Mar 07, 2018 11:57 am

Re: Stay the course with baby on the way?

Post by dknightd » Wed Mar 06, 2019 2:51 pm

I'd scale back the 401k contributions for awhile. Perhaps just to get employer match if any.
I'd increase the "emergency" fund since you know you will need at least some of it ;)

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