We're DINKs expecting our first this later this year and wondering how you stay on the ER track once you have a kid, while added expenses are not too bad when they're little (daycare is the biggest shocker) it seems like the potential for spending rapidly increases once they get a little older and then accelerates through the college years (if you're paying for their tuition).
How to stay on track for ER with a kid?
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Arif
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Double Income No Kids! The first time I heard that was from our realtor. There are tons of ways to save money with kids. First, don't buy a lot of new born clothes since they grow so fast that they'll grow out of a lot of stuff before you get a chance to put it on them. While daycare and diapers are expensive the rest of the expenses can be managed. I would suggest coming up with a budget just like you did before the kiddos. You might have to cut back but once you have a plan just stick to it.
ArkTinkerer
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One big thing to look at--if one of you has only modest income ($25K?) or even if you have moderate income ($50K) take a long hard look at staying home--especially if you have a second child. The costs and stress of having two working parents as opposed to one staying home makes it much less advantageous to have the second income. With two incomes, eating out, paying for services that could be DIY are much more common and will eat quite a bit of the additional income. Shortly after our second arrived my wife stayed home. It took some convincing at first but I think it made a huge difference in our quality of life. She was able to handle a lot of the issues with our rental properties and so those were better managed and my stress load went down. It allowed me to make decisions about w*rk that helped us out in the long run.
And, if both of you make really good money (100,000 plus), it can still be sensible to have the lower paid person stay home. Although I was in Big Law, DW made enough that my first dollar was at highest marginal rate. We decided not worth it to have both of us not seeing the kids. I stayed home 15 years, and we continued to save. Granted, my limited retirement contributions for my part-time work during those years delayed ER by five years (we think/hope), but neither of us regret my staying home--and, on one level, I already had 15 years of semi-retirement before coming back to the real legal world.
More generally, yeah, you will save less than if you didn't have kids. But if you have a good start, the compounding will continue. Just keep contributing and enjoy the journey.
With two kids entering in college in the next 2 and 4 years, I wish we had saved a bit more. We prioritized retirement savings and do have a chunk of cash available to each for school, but in retrospect, it would have been nice if there was more. In our case, I suspect we'll pay as we go for about half their college costs (in state university).
I disagree with this tactic. If either my wife or I would have quit to stay home with either child 20 years ago, at least one of us would not have progressed and made six figures last year. Turns out we bit the bullet on the child care. Both kids turned out fine and DW and I both progressed to over six figures last year. Friends who gave up one of those careers are regretting it now 20 years later. Just my 2 cents.
Also consider this. I have seen way too many mid-life crisis divorces. Now the stay-at-home parent has been out of the work force for X number of years and even though your may split the marital assets, including whatever was saved for retirement, the stay-at-home parent is now looking for a job that likely will be at a pay way below their working ex-spouse. I cannot tell you how many of my girlfriends found themselves in this position when their kids were in high school or just off to college. No one ever thinks that will be them. Especially in the early years of the marriage. But isn't the divorce rate something like 50%?
The compromise may be to work PT in your profession, if possible, so you keep one foot in the door. When the last kiddo goes off to Kindergarten, you go back in FT.
Looking back, I too wish I would have saved more for college. It is just so much money now. Maybe it has always been high relative to salaries. But even for a state university you are looking at $100 grand/kid (assuming they live at the school) in today's dollars.
LBYM.
I neither agree nor disagree with the concept of a SAHP. In our particular circumstances, it was a good choice. But, if one or both parents have 8-10 hour a day jobs, and don't work many weekends, and don't have heavy travel and call commitments, the calculus would be different.
Each couple has to decide what they want to do. And, if the subjective/family life factors are not compelling in an individual couple's book, it still is worth running the numbers. In our case, the numbers were convincing enough that we decided that I'd stay home and at least one of us would be able to see the kids every day.
In no event would I characterize anyone's decision as incorrect or something that I have standing to disagree with (well, at least as long as they are supporting their own family!).
MikeWillRetire
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For many people, their salary rises faster than inflation as they get older, so it is easier to afford children. That was true in my case.
I also learned along the way that if you can afford daycare, then you will be able to afford college (local state university).
But I will admit that the two-income lifestyle, with children, is very difficult. Drop the kids at daycare, rush to work, rush back to daycare, rush back home......and when you get home you have to cook, clean clothes, etc.
But it does make retirement easier because you will have two 401k's, and larger social security checks.
I also learned along the way that if you can afford daycare, then you will be able to afford college (local state university).
But I will admit that the two-income lifestyle, with children, is very difficult. Drop the kids at daycare, rush to work, rush back to daycare, rush back home......and when you get home you have to cook, clean clothes, etc.
But it does make retirement easier because you will have two 401k's, and larger social security checks.
+1
We have our first due in less than 2months. DH likes her job, and its home-based... so we will do the rush here, rush there thing for the next 15-20 years. I am planning on being done with megaBS IT in 18years here. Thankfully one of us is already at six figures so it should make retiring easier.
Oh, I did the math and I came to roughly $16,000 in costs for the first child, for the first year of birth...This assumes an 80/20 health plan and $200/month infant care with Mom taking 2months off.
Obviously the most expensive part is the daycare, followed by the medical costs for delivery and well-checks, followed by crap catchers and wipes...hopefully no formula or that adds $6,000.
Obviously the most expensive part is the daycare, followed by the medical costs for delivery and well-checks, followed by crap catchers and wipes...hopefully no formula or that adds $6,000.
haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I realize that law is not software development or medicine, but can you really be out for 15 years and come back at a professional level? All your contacts are gone, you no longer know the judges and clerks, It sounds quite hard.And, if both of you make really good money (100,000 plus), it can still be sensible to have the lower paid person stay home. Although I was in Big Law, DW made enough that my first dollar was at highest marginal rate. We decided not worth it to have both of us not seeing the kids. I stayed home 15 years, and we continued to save. Granted, my limited retirement contributions for my part-time work during those years delayed ER by five years (we think/hope), but neither of us regret my staying home--and, on one level, I already had 15 years of semi-retirement before coming back to the real legal world.
Ha
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Well, I definitely did not come back at the same level as my former peers (or where "I would/could have been"), and although hard to compare, probably at slightly lower level than where I departed from.
It helped that I'd been 1/2 time/adjunct professor (in an unrelated area of law) to keep resume fresh. We moved states for DW's job, so contacts were irrelevant (and I had barely done any work in my home-office location back in the day anyway).
Had very strong academic resume to start with, which helped; had to take/pass bar in new state which showed still had brain cells; offered to work at 1/2 price of going rate as probationary period of 3 months, which also helped. Three weeks into the job, we converted to regular status.
Some serendipity involved and it isn't like all of my inquiries at firms were successful--but it worked out. And DW probably couldn't have done it--as you noted, medicine is harder to drop back into after such a layoff.
I found the early childhood years to be much more expensive than the elementary school years, where we are now.
Between nanny expense and preschool programs we were paying 40-50k a year for the little guy. Now he's in public school with just occasional sitter help, all told it's much less expensive. Unless we switch to private school at some point, the early years will be the most expensive until we get to university.
Beyond child care, the other expenses can be as cheap or expensive as you make them. Consider buying used, especially for durable goods - Craig's list is your friend. You may also find a second hand or consignment store for clothes and toys.
I agree with the OP that you shouldn't prioritize university savings over retirement. You can borrow for education, not for retirement. Hopefully you can keep both on track.
There's lots of info here and at Bogleheads on 529 programs. I'm a big fan of them, myself.
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FUEGO
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Hey Soup,
There is a concurrently running thread that you might want to check out. http://www.early-retirement.org/forums/f26/33-pregnant-and-getting-close-to-er-75934.html
To summarize, it's me agreeing with the OP that you can get by in FIRE for $400/month for a kid assuming you have a paid off house and won't need child care any more. On the flip side, everyone else says $400 is impossible and it's closer to $1000. A link to an official government study is included.
There is a concurrently running thread that you might want to check out. http://www.early-retirement.org/forums/f26/33-pregnant-and-getting-close-to-er-75934.html
To summarize, it's me agreeing with the OP that you can get by in FIRE for $400/month for a kid assuming you have a paid off house and won't need child care any more. On the flip side, everyone else says $400 is impossible and it's closer to $1000. A link to an official government study is included.
