Baby on the way!!

[elessar78]

So found out about two weeks ago that I'm gonna be a dad! Okay, possibly, it's still pretty early (6 weeks) so we're praying that we hear his/her heart beat at our next appointment.

So me being me, I'm excited and hopeful but at the same time concerned about our finances. I've got our budget down to a T and we're taking care of all our financial obligations (paying down debt, funding retirement, savings etc) but now we have to put our aggressive debt paydown on hold while we sock away cash in the bank. I was scheduled to be debt free in 11 months, but having a kid will trump that any day.

The anxiety comes in when we have the discussion of my wife either going part time or becoming a stay at home mom. I've crunched the numbers, but unfortunately because of our debt, it would be really tough. Our budget is as follows:

Take home pay: $4100 (combined, mine alone $2300)

Rent: $880
Utils: $100 (really, we live in an apt)
Savings: $670
Student loans: $335
CC: $165
Cell: $100
Pers. loan: $200
Church: $100
Car: $210
Spending: $1100 (food, gas, entertainment, misc)
-----------------
Total: $3695

Any suggestions how we can make this work? Thanks in advance.

[disneysteve]

Congratulations!

Can you break down that huge "Spending" category for us?
How much time is left on the car loan, student loans and personal loan? Getting rid of them will help a whole lot in cutting income since $745/month is getting sucked up by those things.

[elessar78]

Thanks!

Student, car loan, pers loan, and CC=11 months.

Spending breakdown:
Gas: $100 (my wife gets reimbursed for mileage)
Groceries: $200
haircuts: $32
Restaurants/Entertainment:$300
Misc:$468

[peterj]

Well i am not best saver, but your having a child u will need to cut out dinners and entertainment, that will save u alone 300 dollars, cant u see that?

[disneysteve]

I think you are in pretty good shape if you can be debt free within a year. I'll assume you are snowballing (either by highest interest or smallest amount) meaning that 3 of those debts will drop off sooner than 11 months, freeing up those payments. That freed up money can go toward snowballing or, if needed, could go to cover living expenses while your wife is not working. Yes, that would delay your debt repayment but it would allow you to work around her not working.

And yes, your entertainment budget probably needs to be trimmed. Plus, some of your expenses will increase with a baby - another mouth to feed, diapers, doctor bills, etc.

[graceful]

Congratulations!!!

[Radiance]

Congratulations!

And this is a post about how babies don't need much. If you guys can get to work with only one income that would be great savings on day care!

http://www.savingadvice.com/forums/general-discussion/47873-dealing-money-emotions.html

[elessar78]

Thanks everyone!

Yeah, I just called a place and full-time day care would cost just under $8,400 annually. Which coincidentally is what we are currently putting away as savings. So with two incomes we could afford day care, but we are big proponents of mom staying at home with the kid for the first two years.

[elessar78]

I think you are in pretty good shape if you can be debt free within a year. I'll assume you are snowballing (either by highest interest or smallest amount) meaning that 3 of those debts will drop off sooner than 11 months, freeing up those payments. That freed up money can go toward snowballing or, if needed, could go to cover living expenses while your wife is not working. Yes, that would delay your debt repayment but it would allow you to work around her not working.

And yes, your entertainment budget probably needs to be trimmed. Plus, some of your expenses will increase with a baby - another mouth to feed, diapers, doctor bills, etc.

Yes snowballing. So you're saying to keep attacking the debt first instead of socking away extra cash for savings?

[Radiance]

Can she possibly do something from home that generate some income?
Not in the first 6 months, but after baby sits you do get some usable time.
Can she/would she babysit for one more kid, maybe an older one?
Can she/would she tutor a kid?
What else does she likes to do?
wahm.com is a good site for ideas.

I do think paying off some debt might help lower your monthly expenses.
Consider consolidating via a personal low interest loan at a credit union, that is how I did it.
not debt consolidation plan, just take a personal loan with the porpose of consolidating debt, should not show on your credit

[disneysteve]

Yes snowballing. So you're saying to keep attacking the debt first instead of socking away extra cash for savings?

You've got about 7 months before your wife would have to stop working if all goes smoothly. During that time, you could get rid of some of the debt, maybe the CC and the car, for example. That would free up $375/month in income by the time your wife stops working.

If you are going to see a drop in income, you want to work on cutting expenses prior to that time. In your case, the best way to cut expenses is to repay debt. Building savings is nice, but it doesn't lower your monthly bills at all.

You've got $910/month going to loan payments now. That's a lot of money. It would be a lot easier to have your wife home if your expenses were $910/month less.

I'd keep snowballing AND work on cutting the other expenses, like the restaurants/entertainment tab. Getting debt free will give you a lot more flexibility than increasing savings would.

[elessar78]

Should I also momentarily discontinue funding my wife's ROTH? That would be $260/month.

[disneysteve]

Should I also momentarily discontinue funding my wife's ROTH? That would be $260/month.

That's kind of a judgement call but I think getting debt free ASAP will benefit you guys a lot. If you can stop those contributions for a few months and be debt free by the time the baby is born, that would be nice and make it easier for wife to stay home. Just be sure you resume those contributions as soon as possible. Remember, you can keep funding her Roth even if she isn't working (assuming you have the money).

[zetta]

Your current plan is to be debt-free in 11 months. Could you get there in 9 months by cutting back in one or more of the following catagories?

Savings: $670
Church: $100
Restaurants/Entertainment:$300
Misc:$468

Of course, you have to consider the current size of your emergency fund, and weigh whether it's better to have the reserve or to improve your cash flow by reducing debts.

[LivingAlmostLarge]

Congratulations! How exciting! You must be thrilled.'

What will the Labor and Delivery cost you OOP? Is that what you are saving for?

I'm due February and it'll be free to take the baby home. I paid my $10 co-pay and we're in the clear.

But there are expenses coming up, though I am trying to get stuff used. Stuff like a car seat mostly $200 or so, and stroller. My DH called me a cheapskate this morning for not wanting to buy stuff for the baby.

Besides being cheap, I think it's better for the environment to get used baby stuff.