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We had a similar situation and similar numbers as yours except we paid off all our debts including mortgage. Daycare/preschool years are expensive. The elementary years are the cheapest. Then costs start rising again in middle school and especially high school. Things start getting really pricey with 3 kids. There are sports, activities, music, dance, cheer -- whatever it is your kids are into. Then there is SAT tutoring, college applications and visits. They all add up. Food costs go up. Clothing costs go up. Just shoes alone are crazy expensive and we don't even buy high end stuff. Once they drive, your insurance will skyrocket. You may need an extra car. We thought we wouldn't but ended up buying one so our oldest could drive to his school and PT job. At the same time, kids need a lot of parental assistance in MS/HS with rides and just being there because there are no more after school programs. So for me, working while my kids were in elementary was the best thing and now they are older, I've gone to PT so I can be there in the afternoons. Once they are all out of the house I may (or may not) go back FT but I will have the options to do either.
Oh and btw I thought once we paid off the house and cars and had no more daycare to pay we would have SO MUCH EXTRA. Not so at all, especially as we are now trying to save up for college that is quickly coming up.
Thanks everyone for the great advice and replies, apologies for totally ghosting this thread, will post responses. Its been almost a year and going well so far, mostly due to the markets.
I did recently get a raise so whereas previously we we not able to have any savings, were able to put a little away on our brokerage account now.
My wife still plans on going back to work next year when our youngest starts kindergarten, we'll see what happens.
Great point on expenses during elementary vs middle/high school.
Well, if your wife is staying at home, seems like a vast percentage of the above amounts could be eliminated.
I think we had this idea in our head that we would try to maintain our current lifestyle in terms of maintaining the type of external social interactions and activities for the kids especially for our now 4 year old vs just interacting with us. But I guess the point is moot now given the pandemic since we've decided to keep him out of preschool for now. I guess in some ways it was a blessing in disguise my wife was laid off as were fortunate to have the option for full virtual learning. My wife has definitely taken the brunt of virtual learning since march and keeping the kids occupied during the summer, god bless all the stay at home parents.
One downside is she has pretty much stopped all her studying/certifications to keep up with her field due to the kids being at home.
Your assets seem fine, but I still don't know what your regular expenses and income streams look like. That seems like it would be important information to have before I would give advice. Also when you plan to retire and with what lifestyle.
For point of reference. We have 2/3 of your net worth (if even that). Nearly all our net worth is tied up in two properties (HCOL). A little in retirement. $60k in 529s that I imagine will be insufficient. Two kids, ages 16 and 13. College is coming upon us soon.
Our strategy has always been to minimize our living expenses. So after a mortgage payoff next year, per month our living expenses will drop to $3.5-4k and our savings [discretionary spending] will increase to $7.5-8k. We intend to cash flow any remaining college expenses.
I would say, given the information you presented that you should be fine, but again, I don't know your income and intentions.
Good point, devil are in the details but am reluctant to give a detailed breakdown of our expenses on the internet if that is what youre asking for. My take home is about 8k a month with ~10k yearly bonus, that is the extent of our income. Recently got a promotion so am able to save ~900 a month whereas prior we were not saving anything other than 401k, so expenditures are ~7100 monthly. Just the house (mortgage/insurance/hoa/utilities) is ~4k, we have about 7 years left on our mortgage when our oldest will start college.
Just to clarify, when i originally posted as no savings, this didnt include 401k, I'm still maxing it out.
Last edited by LostInNJx4; 08-26-2020 at 07:58 AM..
You are fine, I wouldn't worry about 529s. If you so desire... you can help your kids pay off their loans with the money you have kept working for you. (529 is not so important in my state that has no income tax, and offers FREE FT college instead of wasting time in High School (if you can pass a college entrance exam in in 9th or 10th grade (simple to do))
Many states allow / encourage HS kids to enroll (and pay for) college classes.
Stay invested (Financially)
Keep invested in your kids (relationally and exposing them to alternative opportunities for cultures, education, finances)
I started mine in Roths at age 12 and matched their wages 100% into Roths until they were age 18. (They had enough $$ in investments to pay for their own college if they wanted to use it for that).
529...? Maybe your kids or yourself will never go to college?
Hopefully (likely) something better than a USA edu comes along by then.
BTW: we did the 'family thing' on a single earner income from day one, (hourly night shift wages, i.e. not great), Still reached FIRE by age 49. You can FIRE in 8 yrs! And Enjoy a few yrs at home with the family! before they are GONE! Consider stepping up the mortgage payoff instead of 529 . FIRE in 5!
Consider starting a small business that kids can learn / participate in, and DW can do from home.
Wow, some great advice, thanks so much! Will definitely start looking into some of them.
Good point, devil are in the details but am reluctant to give a detailed breakdown of our expenses on the internet if that is what youre asking for. My take home is about 8k a month with ~10k yearly bonus, that is the extent of our income. Recently got a promotion so am able to save ~900 a month whereas prior we were not saving anything other than 401k, so expenditures are ~7100 monthly. Just the house (mortgage/insurance/hoa/utilities) is ~4k, we have about 7 years left on our mortgage when our oldest will start college.
Just to clarify, when i originally posted as no savings, this didnt include 401k, I'm still maxing it out.
Thanks for the update.
I have my own:
We did put off driver's ed to this summer.
My son is looking at colleges. He mentioned an expensive private one in our state as a "good option".
1/4 million dollars for an undergrad??? It sounds soooo stupid, but if that's what he realllllllyyyyy wants then okaaayyyyy.....
And then the 2nd kid wants to pursue a sports management degree out of state just three years later???
I will say we are underprepared on the college expense projections
I guess it's a good thing my mom died so young and her money is coming soon ...
If you're thinking of paying for your kids colleges make sure you account for them to go to expensive schools. We always assumed in-state and transfers from community colleges (which could very well happen still.. or not...)
When people decide for one parent to stay home, there are usually some expenses that will be cut. Have you considered that? You say your everyday expenses can be covered with just your salary, so cutting some expenses will free up money for savings. They stay at home spouse generally pays less for commuting, clothing, dry cleaning and eating out. See if you can calculate how much those expenses will drop.
When I stayed at home my son did not go to preschool for full days, and it's really unnecessary since most of a full day is day care and not learning. That should trim that tuition bill. My son still did camps when I was home, but not full day, daycare type camps. That should trim the other expense.
I think our challenge last year was our mind set. We initially thought hey she'll just keep current in her field through study/certifications and go back into the workforce in a couple of years, but the pandemic has changed all that with her essentially having no time to do so with the kids at home 24/7. Since then we've cut some of our expenses by selling a car. We've decided keep our youngest at home vs preschool which saves a bunch as well. With our two oldest pretty much at home during the school year for the forseeable future, at least he'll have some social interaction.
If you're planning to pay for their college without loans, you're already behind.
Focus on your retirement and on staying debt free during their school years. College can be paid for in other ways, but tuition is increasing exponentially to the point that the state school that cost me $5K per year as a student now costs us $28K per year for our sons. Saving/investing to pay outright for that requires a major lifestyle change.
It's not good for the mom OR the kids for her to be their sole source of entertainment and education. Camps are great for kids, and they give a needed break to stay-home parents.
Preschool also teaches kids valuable skills and gives them a head start on doing well in elementary school.
Just to clarify, when I originally posted no savings, I was referring to liquid savings, apologies for being vague. I'm still maxing out my 401k and prioritizing that first. We would like to help with their tuition where we can after that and I think we'll be able to. Our thought was that they would pay us back once they start work and that money would go towards a down payment for their home. We want to find that sweet spot where were not handing them anything, but also give them a head start.
Were of the same mindset with preschool, our youngest was going everyday for 4 hours until the pandemic, even with my wife at home.
OP didn't say full time. Our preschool was 9-2 three days a week, and it was $365 a month per kid.
He was going 5 days a week Sept - June in the morning for 4 hours and would come home for lunch.
Yearly tuition was 12k, which is crazy i know. Our two older went to the same school and and based on their experience felt it was worth it when they transitioned to kindergarten.
Looking back, when we were both working, a lot of it was guilt, lol. If we were to spend that much time away from them, we justified the cost and were fortunate to be able to do it.
Last edited by LostInNJx4; 08-26-2020 at 08:56 AM..
Location: Chapel Hill, NC, formerly NoVA and Phila
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As someone who just launched my oldest into college this year, this is what we did for college savings. I was like you in that I wanted to "control" where I invested our college savings. So from when my oldest was born, I started saving the maximum into an Education IRA (also known as an ESA). The maximum contribution per child is piddly (only $2,000/year) but we didn't have that much left over to save for college anyway, so that's what we did. So from 2002 until 2019 we put away $2,000 per year for her. That account is currently worth ~$60K. You can invest it pretty much anywhere as long as you use the ESA umbrella. For example, we put some of it in Vanguard mutual funds.
My daughter goes to a Florida state university which is out of state for us but has relatively reasonable out-of-state college costs. And that $60K should cover just about 2 years there. FYI, Florida state schools get lots of New Jersey students because the the out-of-state total costs aren't that much more than in-state NJ costs.
BTW, we did have other plans to pay for the remainder of her college. We expected that our 15-year mortgage would be paid up a few years before she started college, so we planned that we would cash flow the rest. Instead, we had a job transfer and ended up using some of the equity in the home that we sold to invest in a 529 for our kids.
And for Flyingsaucermom, we told our kids the limit of what we will pay for college. My oldest was told that limit was $35K per year which more than covered in-state pubic schools, covered some out-of-state pubic schools and a few privates that gave merit. She applied to 8 schools, 7 of which fit our parameters. The 8th was more expensive ($52K per year) and is not known for giving merit, but she insisted on applying and, of course, got no merit. To this day, she says that was her first choice, and would have gone there if we let her. But it was simply not worth the extra cost. It didn't offer anything that her current school doesn't offer. She knows she is very lucky to be getting her college paid for and is very appreciative.
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