Please help - Planning for Baby #2

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Topic Author
SanAntionetta
Posts: 24
Joined: Fri Apr 06, 2018 1:42 pm

Please help - Planning for Baby #2

Post by SanAntionetta » Fri Jun 14, 2019 2:31 pm

Hi Guys & Gals,

It's been about a year since I posted and got some very good advice to accelerate our student loan payments, which we did although we still have some (down $22K!). Now life has changed again for our little family and I'm seeking advice on what to do as I'm a bit overwhelmed. Please indulge me. :)

Monthly net income: $10,500
(This is after full 401K match, health insurance, full HSA contributions, taxes, etc.)

Spending: $7,500 (This includes auto payment $440 (3.5%), mortgage $2250 (3.5%), daycare $1360, etc.)
Savings (not including retirement): $1350 - $900 savings, $250 529, $200 future baby education
Student Loans: $1290 mo (Minimum payment + $500/mo extra payment).
Total Out: $10,140

Savings total (not including 529) $30K
Student Loan balance: $17K (down from $39K+ last spring so we have made progress but we were told to increase ER) - at current payment plan done in August 2020.
We will get about $25K (post-tax) in bonuses in March 2020 that I originally have allocated $5K ER, $10 Mid-Term, and $5K Long-Term savings (I only allocated $20K in case either business has a bad year). Luckily I have enough in HSA to cover any medical costs associated with having a baby, and company provides 4 months paid maternity leave so do not have to worry about income.

Savings Goals
Emergency Fund: $30K
Mid-Term Savings (3-5 years, includes replacing husband's car, house mechanical updates, vacation): $50K
Long Term Savings: $45K (5-10 years - new roof, car for me in 10 years etc.)

As you can see we run a tight budget and two in daycare starting next Spring will stretch it (for about 15 months until other kiddo starts Kindergarten it will be about $2700/mo). With this in mind I have a couple of questions:

- Should I decrease my retirement savings to the match to take care of my debt faster? My employer match is 200% of 5% so the retirement calculators have me retiring with 200% of my income which seems too much. If I moved my contribution from 12% to 5% and my husband's from 22% to 15% we would have an extra $1000/mo net income. I could increase it back when SLs are paid off.

- Should I stop contributing to the cash savings and focus on the student loans to improve cash flow? If I put the $950 savings into the student loans we would be paid off by the end of the year. Our jobs are relatively secure. Without the student loans we can cover the double daycare bill in the budget.

- Before anyone mentions it we have tried to reign in spending in fact we are having a "no spend" June. However we have a certain lifestyle that we enjoy and having a young child at home plus stressful jobs requires spending money from time to time.

Thanks in advance!
Last edited by SanAntionetta on Fri Jun 14, 2019 5:56 pm, edited 1 time in total.

User avatar
Watty
Posts: 16127
Joined: Wed Oct 10, 2007 3:55 pm

Re: Please help - Planning for Baby #2

Post by Watty » Fri Jun 14, 2019 2:45 pm

What are your federal and state tax brackets?

What are the interest rates on your student loans?
SanAntionetta wrote:
Fri Jun 14, 2019 2:31 pm
Spending: $7,500 (This includes auto payment $440
....
Student Loan balance: $17K
....
Mid-Term Savings (3-5 years, includes replacing husband's car, house mechanical updates, vacation): $50K
Why not use part of that $50K to pay off the car loan and student loan then save those monthly payments each month.

Topic Author
SanAntionetta
Posts: 24
Joined: Fri Apr 06, 2018 1:42 pm

Re: Please help - Planning for Baby #2

Post by SanAntionetta » Fri Jun 14, 2019 3:02 pm

Watty wrote:
Fri Jun 14, 2019 2:45 pm
What are your federal and state tax brackets? 24% federal / 6% state (CT)

What are the interest rates on your student loans? 3.5% - 3.75% depending on the loan
SanAntionetta wrote:
Fri Jun 14, 2019 2:31 pm
Spending: $7,500 (This includes auto payment $440
....
Student Loan balance: $17K
....
Mid-Term Savings (3-5 years, includes replacing husband's car, house mechanical updates, vacation): $50K
Why not use part of that $50K to pay off the car loan and student loan then save those monthly payments each month.
We don't have the $50K yet that is the savings goal for 3-5 years. Both the student loan and the car loan would be paid off well before 3 years. The point of the Mid-Term savings fund is so we do not need to take out another loan when my husband's car dies (165K miles).

eta: I also like having cash as it provides flexibility and safety (something our parents never had)

veindoc
Posts: 542
Joined: Sun Aug 14, 2016 9:04 pm

Re: Please help - Planning for Baby #2

Post by veindoc » Fri Jun 14, 2019 4:52 pm

When is the baby due?

Take the $200 that you are saving for future baby’s education and deploy that towards debt. How old is the other child that you are saving for? - the $250 that you are putting into the 529.

If you take both those amounts how long before the student loan is paid off?

cherijoh
Posts: 5742
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Please help - Planning for Baby #2

Post by cherijoh » Fri Jun 14, 2019 5:00 pm

Do you have multiple student loans or one consolidated one? If multiple please list the principal due and interest rate on each individual loan. If one loan, what is the interest rate?

Topic Author
SanAntionetta
Posts: 24
Joined: Fri Apr 06, 2018 1:42 pm

Re: Please help - Planning for Baby #2

Post by SanAntionetta » Fri Jun 14, 2019 5:51 pm

cherijoh wrote:
Fri Jun 14, 2019 5:00 pm
Do you have multiple student loans or one consolidated one? If multiple please list the principal due and interest rate on each individual loan. If one loan, what is the interest rate?
His aren’t consolidated because it didn’t seem worth it, mine were 3.5 years ago for a 5 year term because they were grad school loans so the rate was ridiculous.

his #1
Original Loan Amount: $7,000 Current Balance: $4,544 as of 5/24/2019
Interest Rate: 3.610%

His #2
Original Loan Amount: $9,000 Current Balance: $1,050 as of 5/24/2019
Interest Rate: 4.410%

His #3
Original Loan Amount: $9,500 Current Balance: $0 as of 5/24/2019
Interest Rate: 6.550%

His #4
Original Loan Amount: $5,500
Current Balance: $3,571 as of 5/24/2019
Interest Rate: 3.610%

Mine
Institution: Earnest
Current Balance: $9,772 as of 3/12/2019
Interest Rate: 3.500%

Topic Author
SanAntionetta
Posts: 24
Joined: Fri Apr 06, 2018 1:42 pm

Re: Please help - Planning for Baby #2

Post by SanAntionetta » Fri Jun 14, 2019 5:54 pm

veindoc wrote:
Fri Jun 14, 2019 4:52 pm
When is the baby due?

Take the $200 that you are saving for future baby’s education and deploy that towards debt. How old is the other child that you are saving for? - the $250 that you are putting into the 529.

If you take both those amounts how long before the student loan is paid off?
The baby is due in February but I have four months of maternity leave so don’t have to worry about daycare until next June.

I could take the $450 and apply them to the student loans but I would feel guilty doing so. They say you have to save up $350K/kid and I was hoping to increase the contributions after daycare - I’m already so behind.

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