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    Baby - Need Financial advice

    Found out recently that the wife is pregnant and im looking for advice as this will be out first child. Heres our current cash flow, savings, retirement and debt.....

    Age 28
    Income - 45000 (mine) 33000 (wife)
    savings - 12000
    401k - 3500 (mine) 2000 (wife)
    Roth - 15000 (combined)
    Student loan - 25000
    Mortgage - 75000
    Credit cards - zero
    Monthly expenses - 1700/1800 (mtg/elec/gas/phone/car ins/etc)

    we have approx a 7 month emergency fund. we figure that child care is going to be approx 600 a month. I guess i am just looking for advice on what to watch out for and if anyone has any ideas on if my wife was to decide to stay home of any ways to earn additional income. I can afford to pay our bills by myself but we will not be able to contribute to retirement how we have been so far or pay additional principal down on the mortgage etc etc. Any ideas? thanks for your help

    #2
    Can wife make arrangements with employer to work from home?Alternatively, do a job share? Are her skill sets amenable to non traditional work hours? How would her skill sets transfer to work from home that is allowable meeting community standards?

    Would this arrangement be short term or long term like when child goes to school? Would wife be willing to meet requirements to offer day care in your home? What training, licensing would be required. If that doesn't work, what 2nd job would you be willing to do to add to income?

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      #3
      This would only apply if you both continued to work, but if your employer offers a Flexible Spending Account for daycare expenses you should take advantage of it. It allows you to pay for childcare with pre-tax money, which will save you a good bit in taxes.

      Comment


        #4
        "What to watch for" is a huge question! My daughter is getting married in 3 weeks and a son in college. I had both of them in college last year. What you need to watch for is how expensive kids are! It is a huge expense. You cannot start saving early enough. College in Texas at a state school is $20,000 per year for everything. By the time, your child goes to college, who knows!!!

        What about life insurance, disability insurance? When a child enters the picture, you really need to make sure financially your family will be fine without one of the wage earners.

        Staying home with the child is huge. But, before she quits, start living on your income alone. Save 100% of hers and see how you guys do. You might find you can easily do it. Depending on her skills, taking her out of the job market may be not a good idea, and working part time might be better.

        There are many more things to consider but this is a start.

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          #5
          Congrats!

          Comment


            #6
            You're talking about $600 a month in child-care. You're not mentioning the extra food, diapers, clothing, furniture, toys, and doctors visits. Babies eat a lot. Diapers aren't cheap. A baby outfit costs about as much as a pair of jeans. A crib is a couple hundred. Toys will nickel and dime you to death. And Dr's... well, pray for good health. Plus $600 a month. So call the cost of a baby/child about $1200 a month to be realistic. Adding in your $1800 a month now, your wife would be working in order to be able to afford retirement and the nice things in life. I'd find a way for you guys to have split shifts somewhat - like you working 7a-3p and her working 11a-7p. That would cut your child care in half while still letting you guys spend time together, while balancing the stress of being with your kid. Your wife would be able to sleep in a bit more, and you would be able to take care of your baby in the afternoons. It doesn't always work that way, but your wife might be able to switch to part-time and take a pay cut but still be contributing.

            I'd definitely start saving 100% of your wife's pay and see how you do. Make sure you open an ESA with your financial adviser as well. You're only allowed to contribute $2,000 a year from birth to age 18, but that will grow enough to cover a state school for college. At $20,000 a year now in Texas, that's $80,000. You put $36,000 into a mid growth mutual fund, you'll be able to cover at least half of your babies college, and hopefully scholarships can pick up the rest.

            Good luck.

            Comment


              #7
              Saving 100% of wife's pay is a great start (practice and building a cushion).

              My view is somewhat opposite. When we had our children we planned far in advance and knew we couldn't contribute to savings/retirement likely for a few years. Though there were some expensive surprises (health insurance #1 for us), we found with a spouse home we saved far more than he could have made. For reference, my spouse gave up a $50k wage. When you drop down to one income you save so much money on taxes (it is possible you will pay no income taxes on a $45k salary. We paid no income taxes at that income level when we had our first child). When you consider the taxes paid on the second income and childcare. & the costs of working and commuting, etc. You aren't really losing anywhere near $33k in the end with your wife staying home.

              With your wife home you can focus on home cooked meals to save money and cutting out any expenditures on convenience, etc. (Assuming you don't already home cook, etc.)

              We've personally found it takes only a few hundred dollars a month to replace a $50k wage because we would have spent so much on daycare and taxes (daycare is REALLY expensive here though).

              Anyway, you can change your tax withholding on your paycheck to increase your net paycheck when your wife stops working - just FYI. Your tax burden will most definitely decrease.

              We didn't find diapers and clothes and that all that expensive. We saved so much in groceries with a spouse home that most of those expenses kind of evened out. You may be surprised that you do have some money left to invest.

              That being said, if your job is not really secure, considering the economy, she may be better to go part-time. Most the women I know who work wish they were home and most who are home wish they work (the ones I know) BUT the ones who work part-time usually seem pretty content. It may be a good intermediate move until she knows what she wants. She won't know until the baby is born. & even then it might be a while. She may want to stay home and she may changer her mind later. It happens all the time. Switching to part-time is good middle ground.

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