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Budgeting in ER with kids, major expenses and long time horizons
Old 02-09-2018, 11:47 AM   #1
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Budgeting in ER with kids, major expenses and long time horizons

I'm curious how people think about budgeting over these long time horizons when ER. We are 47/53, but have young children and not yet ready for the 'downsizing' phase of life.

I have a decent handle on our current expenses and am happy to report that we were well under my 'low spend' scenario for 2017, even with a few areas that could use some significant trimming. That said, we didn't have any big one-time expenses last year.

Any good guides you've come across in estimating spend as kids grow? How are you managing those larger lumpy expenses like home maintenance/improvements, cars, etc when you think about budgeting for the future?

I've basically assumed we spend ~15% of home value annually on maintenance and improvements, but obviously this ends up being somewhat discretionary, so can help with short term adjustments to withdrawal rate.

I'm at a bit of a loss to projecting spend for kids and have tried to offset this uncertainty with conservatism in the budget, but if anyone has suggestions for resources or real life spend, would love to hear it. I think we have a good handle on education expenses, but it's the things like activities, birthday parties, etc... for an upper middle class life that I can see really adding up in an unexpected way.
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Old 02-09-2018, 12:06 PM   #2
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Quote:
Originally Posted by tb001 View Post
I'm curious how people think about budgeting over these long time horizons when ER. We are 47/53, but have young children and not yet ready for the 'downsizing' phase of life.
I also have kids and not yet ER, hoping to ER before any of them leave home. I am assuming that my expenses will grow by 5% annually until they leave home. And then college expenses will occur, but I don't count those in my normal spend at this point.

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I've basically assumed we spend ~15% of home value annually on maintenance and improvements, but obviously this ends up being somewhat discretionary, so can help with short term adjustments to withdrawal rate.
Is this a typo? 1.5% is reasonable maintenance expenses, but if you have major remodels I could see that costing 10-15% of your home value.
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Old 02-09-2018, 12:26 PM   #3
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Raising my hand here.... I retired 3.5 years ago with then 12 and 14 year olds. Now they're 15 and 17.

Some kid expenses went down. Mainly because I had more time to deal with stuff myself... This includes transportation costs, etc.

Some expenses have started to creep up... My older son has his permit... my car insurance didn't go up when I added him to the policy - but my umbrella insurance did. I'm expecting a big hit on insurance when he gets his license this summer. We don't plan to get him a car - he can use DH's 23 year old truck when it's available.

We spent a fortune in childcare/afterschool care, etc when they were younger... depending on your age - dropping those expenses could be a HUGE savings.

Other kid expense have stayed the same (sports fees, piano lessons, etc.) We continue to set aside funds for their college - it's part of our budget to earmark these funds.

Housing expenses haven't really changed. We will eventually downsize... but we have a paid off house so our carrying costs are just maintenance, utilities, and taxes.

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Is this a typo? 1.5% is reasonable maintenance expenses, but if you have major remodels I could see that costing 10-15% of your home value.
I think it depends on WHERE you live and how pricey your house is. We live in a pricey area - so 1.5% is probably closer... but if we lived in a low COLA area 15% might be closer... The value of the house has little to do with the running costs. Square footage is a better indicator, probably.
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Old 02-09-2018, 01:25 PM   #4
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Ha! Yes, a typo indeed!! 1.5% is correct... We're in a high COLA area, so housing is expensive, but then so is maintaining a large house... It's actually closer to 2.5% if you include monthly maintenance services, but I have those as separate line items. This is more the bucket for things like a new roof, updating, etc... Those 10K+ expenses that can often be deferred, but not indefinitely...

We expect to have a paid off house, so mortgage expense will be taken off the table. I would anticipate downsizing, but we could likely have 15+ years in an expensive home.

Our kids are still very young (2.5 and 7 weeks!), so in my future budget I've basically cut out the nanny, but still assumed some childcare help in the hopes that between this and preschool costs, these expenses would just shift to other things in later years and we'd even out, but the unknowns are so big! I've budgeted seperately for college savings, increases in things like cell phone, technology/computer spend, but insurance increases, for instance, didn't occur to me. Makes me wonder what else I may be missing!

Curious what a reasonable budget is for things like the sports fees, music lessons, etc...I know this likely varies significantly by area, but just trying to get a ballpark for what's not crazy. We've set aside $500/mo per child, but all it would take would be a DD who has an interest in horses to kill that budget fast and her grandmother is doing everything in her power to make sure that happens!


ETA, Rodi, I see you live in SD. We're looking at selling our house in the bay area and relocating to NoCo SD, so would be similar COLA!
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Old 02-09-2018, 02:36 PM   #5
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There is no limit to what you can spend on kids IMO, but you are in charge. Set a budget and roll with it. If you run out of your kids' activity budget, reevaluate priorities and needs and change the budget if you want to. It is very easy to get caught up in keeping up with the Jones' with kids activities.
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Old 02-09-2018, 02:55 PM   #6
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There is no limit to what you can spend on kids IMO, but you are in charge. Set a budget and roll with it. If you run out of your kids' activity budget, reevaluate priorities and needs and change the budget if you want to. It is very easy to get caught up in keeping up with the Jones' with kids activities.
I am philosophically in agreement with this wholeheartedly! Just that so much has changed since I was a kid... for example, I had no idea that parents were asked to donate to schools annually, as appears to be the case here. And I know some of the sports stuff can be very costly, but have no idea what very costly means in reality!

DH and I are fully on board with setting limits and budgeting, especially for the things that we don't place a high value on (there will be no new cars for the kids!), but do want to be sure we're reserving enough for a solid upper middle class upbringing for them, especially where it concerns things like extra activities.
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Old 02-09-2018, 03:43 PM   #7
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We're early retired and living on ~$35k/yr with 3 kids age 5, 11, and 12. So far we haven't seen any big spikes in cost. We own our own 1800 s.f. house which we bought before we had kids and might keep once they are out of the house, though "downsizing" might actually cost us money since we might move to a newer, nicer, but smaller townhome/condo situation.

There has been a slow gradual increase in food costs as the kids get older (and I swear sometimes they eat more than me and I'm a big dude!).

Clothes must be getting more expensive (toddler clothes are a few bucks per item; new shirts and pants for the tween daughters seem to be $10-20 per item). Shoes are similarly more expensive. Though they don't seem to outgrow stuff in 3 months any more (it's more like 6-12 months ).

On the cost reduction side, we no longer pay for diapers or child care. All day summer camp, which was basically child care, has dropped to $0 since we're on vacation much of the summer and available to take care of our own kids the remainder of the time.

We've elected to keep educational costs low by skipping the $2,000 lux "field trips" to DC, NYC, Italy, Spain, etc since we tend to vacation in those kinds of places quite a bit and we do so at about 1/10th the cost of the school sponsored field trip.

I'm expecting costs to ramp up quite a bit in 2-3 years as our oldest 2 start driving. We only have 1 car right now, so I figure I'll need to get a second car ($5000-6000 for a used Honda/Toyota sedan most likely). And insurance won't be cheap. And a few years after that expense comes college, however we have 3 years tuition in a dedicated 529 for the oldest 2 so they'll probably have a mostly-paid way through college.

As others have said, costs are what you want to make them for kids.

Your 1.5% housing cost for maintenance seems reasonable to cover routine repairs and long term capital expenses like roof and HVAC. I've done several large projects at our house in the 4 years of early retirement and it's still running under 1.5% of home value each year.
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