Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 02-28-2015, 10:46 AM   #81
Thinks s/he gets paid by the post
 
Join Date: Feb 2013
Location: Toronto
Posts: 1,417
The fall in Natural Gas prices from 2009 to 2014 was a huge bonus for us with four teens. Heating water, heating the house and cooking became less expensive by 70%. Hot water and heating costs were big. Electricity is mainly due to AC in the summer months and can really add up - there seems to be less concern about open doors and windows in the summer for some reason! CFL and LED bulbs have made it harder to have great credibility when complaining about lights left on.
__________________

__________________
6miths is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-28-2015, 09:04 PM   #82
Full time employment: Posting here.
 
Join Date: Aug 2007
Posts: 894
Quote:
Originally Posted by haha View Post
Teenage boys are not taking those long showers to get clean.

Ha

Especially when they're taking more than one shower a day.
__________________

__________________
Eat, Drink and Be Merry.
tulak is offline   Reply With Quote
Old 02-28-2015, 11:24 PM   #83
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,531
Quote:
Originally Posted by Fred123 View Post
I've always found that it's helpful, when debating a study, to read the actual study. It's interesting. The quick summary is that, even for low income families, $400/month/child is a fantasy. The minimum cost is about twice that.
Thanks for the link.

From the study, families with incomes under $61,000 spend $9,500 to $10,400 per year to raise a kid (depending on age). The bad news is you're right - that's way more than $400/month (roughly double).

The good news is:
-Those are averages - we can be better than average, right? How else do you save $1.x million by age 33? Amiright?
-The annual cost variation between an infant and a 17 year old is only about $1,000 per year. Assuming we trust this study, I'd like to introduce this study as evidence to refute everyone that suggested teenagers are more expensive than younger children (although I think you're right, the study disagrees).
-The ~$10k per year figure from the study includes $3,100 for housing and $2,200 for childcare in the younger years. Net those out and you get almost exactly $400/month.

OP, like many early retirees, plans on a paid off house with a separate line item for maintenance. The study you link includes mortgage principal and interest payments in the housing cost, so you can write off a lot of that $3,100. The taxes, insurance, maintenance etc on a slightly larger, slightly more expensive house will still be there, but it's not $3,100/yr (and maybe OP is handy).

I'd say you can get by without much spent on childcare as early retirees (= full time parents). In the later years - sure you'll have to pay a little here and there for school activity fees (we're up to $25/yr for our kids!). That study includes private school tuition payments in their average. Find a decent school district instead.

Economize a little here and there (LBYM and all that), take out most of the housing and most of the childcare/education expenses, and you end up with right around $400/month.

Cool study, bro. You can spend around $400/month as the OP budgeted (plus a paid off house, maintenance and upkeep on the house, plus health insurance premiums). Or you can spend $1000/mo. Or $10,000/mo. If you're FIRE'd and a good parent, your kid will probably turn out pretty swell.

OP hasn't checked in since Feb 17th, so maybe we scared her away.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 02-28-2015, 11:58 PM   #84
Thinks s/he gets paid by the post
Katsmeow's Avatar
 
Join Date: Jul 2009
Posts: 3,399
The main reason for young kids sometimes being very expensive and comparable to teenagers is child care. In the OP's case though I would discount child care as a major cost.

But, I'm not here to debate that study or not. I just know what I've had to spend on my 3 kids who are all at least 18 now and how the costs changed over time (and it wasn't in a downward direction). And, unfortunately, we had some very high expenses due to some particular needs of our children (some medical and some not) that led to some exceptionally high expenses that I agree are atypical but can nonetheless happen.

Anyway, I think I've beaten this horse to death and unless the OP returns with questions I'll just leave it.
__________________
Katsmeow is offline   Reply With Quote
Old 03-01-2015, 03:02 AM   #85
Recycles dryer sheets
 
Join Date: May 2013
Posts: 119
Quote:
Originally Posted by FUEGO View Post
Thanks for the link.

From the study, families with incomes under $61,000 spend $9,500 to $10,400 per year to raise a kid (depending on age). The bad news is you're right - that's way more than $400/month (roughly double).

The good news is:
-Those are averages - we can be better than average, right? How else do you save $1.x million by age 33? Amiright?
-The annual cost variation between an infant and a 17 year old is only about $1,000 per year. Assuming we trust this study, I'd like to introduce this study as evidence to refute everyone that suggested teenagers are more expensive than younger children (although I think you're right, the study disagrees).
-The ~$10k per year figure from the study includes $3,100 for housing and $2,200 for childcare in the younger years. Net those out and you get almost exactly $400/month.

OP, like many early retirees, plans on a paid off house with a separate line item for maintenance. The study you link includes mortgage principal and interest payments in the housing cost, so you can write off a lot of that $3,100. The taxes, insurance, maintenance etc on a slightly larger, slightly more expensive house will still be there, but it's not $3,100/yr (and maybe OP is handy).

I'd say you can get by without much spent on childcare as early retirees (= full time parents). In the later years - sure you'll have to pay a little here and there for school activity fees (we're up to $25/yr for our kids!). That study includes private school tuition payments in their average. Find a decent school district instead.

Economize a little here and there (LBYM and all that), take out most of the housing and most of the childcare/education expenses, and you end up with right around $400/month.

Cool study, bro. You can spend around $400/month as the OP budgeted (plus a paid off house, maintenance and upkeep on the house, plus health insurance premiums). Or you can spend $1000/mo. Or $10,000/mo. If you're FIRE'd and a good parent, your kid will probably turn out pretty swell.

OP hasn't checked in since Feb 17th, so maybe we scared her away.
A couple of comments:

- You get part of the way to $400/month by assuming you can eliminate all of the extra expenses for housing. The extra housing cost is eliminated by prepaying rather than taking out a mortgage. But the only savings here are on the interest payments on the difference in price between the larger and smaller houses. That certainly doesn't eliminate all or even most of the difference for housing. I'll be generous and assume you save $110 in interest of the $310/month allocated for housing. And that assumes no expenses for child care, which means that you will never, ever hire a babysitter, or pay for music lessons or sports training, or let them participate in any of the myriad of after school activities that all of their friends participate in.
- Your plan also assumes that nothing ever goes wrong. Kid has adjustment problems and needs psychological treatment? Not included. Kid is very active and has lots of injuries that require ER visits? Not included. Kid struggles in school and needs tutoring? Not included. Kid is extra bright and wants to participate in special programs? Not included. Don't know of many parents who haven't had at least one of these occur. But I guess it's possible.
- The $800/month budget in the study is for families with modest incomes. Nothing in this budget includes, for instance, vacation expenses.

So, I guess it is possible to raise a kid for as little as $600/month, as long as she never travels or goes on vacation, stays perfectly healthy and doesn't require much in the way of medical care, has no special needs, and doesn't participate in any life enriching experiences.
__________________
Fred123 is offline   Reply With Quote
Old 03-01-2015, 02:13 PM   #86
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,531
Fred,

The housing costs in the study include principal and interest, and paying cash for the house would get rid of those costs. Sure, there are opportunity costs on the marginal increase paid for the extra bedroom or whatever (maybe $10-20k in my neighborhood). I imagine a lot of that housing cost is mortgage payments but I didn't see a good break down in the study.

I also want to point out that raising kids for the 30-something FIRE household has different costs than raising kids in a household still working. Many FIREee's have paid off houses and near zero child care expenses, therefore little ongoing child-related expenses in those categories.

As for "things going wrong" - these averages include all those instances of things going wrong. Therein lies the problem in using averages. You might have $20k in above average expenses if a low probability event occurs, but the averages are still the averages. I'd just go back to work if I needed $20k/yr to keep my kid alive and successful instead of saving the extra half a million required to fund that expense whether I need it or not.

As for education, the study said half of respondents in the study reported zero child care or education expenditures. Sounds about right as ours is very close to zero (currently $25/yr for school and $53 for a week of summer camp for 1 kid). You'll have to trust me that my kids don't lack enrichment opportunities (we're borrowing robotics kits from their elementary school's robotics laboratory over spring break for some hacking fun times ).

I can't tell where piano lessons or sports expenses would fall - misc or education/child care. I'll certainly concede you can't do travel sports or pay for high level arts training on $400/month total. Rec league stuff or school programs are another story.

The study's comments on the marginal cost method of determining child-related expenditures is telling (see page 18). Basically, things like vacations and entertainment expenses tend to stay moderately low or even decrease when you add a child(ren) into the household. I think I mentioned earlier in the thread that we won't be hiking the trail to Machu Picchu, popping off the Bali for a long weekend, or much other crazy travel with our 2 year old in tow. The zoo? Parks? Maybe a short road trip? Yes.

Similarly, parental bar visits tend toward zero post-kids and most entertainment expenditures seem to revolve around the kids (and often with parents of kids' friends in our case).

Some might need $1000/month to provide a reasonable lifestyle for their kids, others $400/month. What's reasonable, right?

And maybe it boils down to how one budgets for 5-6 decades of retirement. Our house is our house - I don't view it as a kid-related expense since we can't find much cheaper housing with similar characteristics.

Our cars, the same. Although we might drop a couple thousand extra on a larger car at the next upgrade, and that'll probably be a one time thing since the oldest will be out of the house by the next car replacement cycle.

I guess I view the budgeting exercise much like the OP - forecast those expenses that are discrete and relatively easy to predict and then acknowledge there will be some lumpy expenses that are very specifically kid-related.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 03-03-2015, 03:08 PM   #87
Recycles dryer sheets
fanmail's Avatar
 
Join Date: Sep 2012
Posts: 57
Quote:
Originally Posted by BumblingtoFI View Post
1. When you buy a house does it then count as part of the nest egg you can compute your safe withdrawal rate against? I've been thinking of whatever we spend on a house as a sunk cost since I don't trust that real estate actually appreciates, but I guess it's an asset that has value as well.

3. I'm confused about the riskiness of this plan and the advice that it's better to have a 2.5% withdrawal rate. Doesn't the 3-4% SWR math work regardless of how long you are in retirement?

Thanks again for all the input!
1. No, I wouldn't count the house as part of your assets for a SWR. Your primary residence is very unlikely to generate growth or dividends or bond coupons that you could use for expenses without renting it or selling.

3. The 3-4% SWR math doesn't necessarily work indefinitely. Inflation, unexpected expenses, and extensive bear markets could eat into your principal dramatically. The longer your retirement timeframe, the lower the % SWR needs to be for success.
__________________

__________________
fanmail is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Newbie here...42 and getting close? Travelwanted Hi, I am... 16 03-21-2014 12:57 PM
48 And Hopefully Getting Close nakadude Hi, I am... 3 06-20-2013 07:01 PM
Getting pregnant and changing insurance soupcxan Health and Early Retirement 18 11-20-2011 08:27 AM
To close, or not to close? (No-interest credit card accounts). Amethyst FIRE and Money 6 05-24-2009 12:12 PM
ETFs that are "close" but not "wash sale close" FinanceGeek FIRE and Money 1 11-18-2007 11:08 AM

 

 
All times are GMT -6. The time now is 06:52 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.