Any Fat to Cut?

[jpg7n16]

Fortunately we do have some emergency savings and plan to save our entire tax return to use as a cushion throughout the year as well.

I agree with Brian that you need to adjust to remove your tax refund. That's more money each month when you need it.

Use http://www.irs.gov/Individuals/IRS-W...ing-Calculator when it becomes available for 2013.

Income (Net)
Me- $2,800
SO- $2,400
Total- $5,200

Net of what?


Other things I would like to know:
- You say you have an EF, how much is in there?
- What are the balances on the debts you have? What are the interest rates?
- What retirement savings do you guys have?
- You're about to have 3 kids, what life insurance coverage do you have?
- Have you updated your will/beneficiaries?

Spending/Bills
Mortgage/Insurance/Taxes- $1,400
Car Payment/Insurance- $300
Student Loans- $215
...

Spending/Other
Groceries- $500
...
Daycare (anticipated)- $1900

When I review a budget, I like to start with the top 5 expenses. Most budget problems can be solved this way. Let's look at your's.

What are some creative ways you can think of to reduce these expenses?

Daycare - $1900
Mortgage - $1400
Groceries - $500
Car Payment - $300
Student Loans - $215

A couple options that jump into mind are:
- have relatives sit for your kids every so often/find cheaper childcare providers.
- when's the last time you refinanced your home? What rate are you paying? have you considered refi to lower payment?
- what assets are available to help reduce the balances and get out of debt? you've got $600/month to your car loan, student loan, and CC debt. If you could pay those off, that's an extra $600/month you can keep.

Hopefully that helps

[MonkeyMama]

Living in a higher cost area, anyone I know with 3+ kids hires in-house help for their children. They are not paying $15-$20 per hour - that is ridiculous. You can find plenty of people to watch your kids for $10/hour. Most our friends have college students or other moms (looking to increase income) to watch their kids for closer to minimum wage. Au pairs are also common for those with bigger homes and the room. I have a teacher friends with 4 kids who hires an au pair. These are not "big income" luxuries. It's just that the cost of daycare for 4 under 4 is totally insane in comparison. Not to mention the hassle of carting all those kids out of the house every morning before work. I would really be looking hard at other options - they are out there. The thing is someone will generally come to your home and watch multiple kids for a set rate, whereas any daycare is going to charge "per child." Talk to anyone and everyone you know with more than 2 kids, to see what they did or are doing in your shoes.

On the tax withholding- yes yes yes. HAving twins will be a huge bump up to your 2013 tax refund (received in 2014). I would set your tax withholding to more breakeven. If you are getting $3k-$4k back annually, lower your tax withholdings by that much. You will still be getting a decent refund with the twins. Child tax credits alone could add $2,000 to your refund.

Other than that, I do agree with esb. This is a very temporary situation with the daycare. You, or your spouse, are probably are not making much of anything after you figure the cost of daycare, income taxes, working costs, etc., etc. BUT, to keep working is definitely an investment in your future. It's a short-term investment - it won't be like this forever. We made the opposite decision because my dh hated his job, was laid off before our first child was born, and his fairly decent income would 100% go to income taxes, daycare, working costs, etc. He decided to stay home. I can't say we ever would have made the same decision if he had his "dream job." That is a whole other ball of worms. Investing in his career probably would have taken precedence. Even so, we were willing to invest significant sums into daycare to save our sanity and for a variety of benefits. I always got a lot of flack for that, especially since we tend to be pretty fiscally conservative. It was the best choice for our family. All I could ever think was, "Yeesh, it was just a couple of years!" Committing to $1900/month for the next decade or two, of course would be totally insane. But sometimes short-term sacrifices pay off in the long run. On the plus side, you will be really used to living without that money, and that will buy you a lot of options in a few years when your kids no longer need such expensive daycare.

I'd also consider working more to get the underlying debt paid off. That is a lot of squeeze on your monthly budget - all the payments. Again, if you want to wait a year and take a breather and survive having twins (lack of sleep can take a serious toll on sanity and health), I think that is totally understandable. But other than that, there is probably really no good time to get a second job. I would do it just long enough to clear as much debt and payments as possible - another very temporary investment.

[sblatner]

I'm actually okay with the cost of the daycare. We were paying $1600 per month for two kids 14 years ago (in a cheaper at home daycare) so $1900 doesn't sound that bad to me.

Daycare is a temporary issue. Within five years, it will be gone. If you send your kids to public school, you will be getting a "raise" when you no longer have to pay for daycare.

There is something to be said about taking your kids somewhere, knowing they are well taken care of, getting good meals during the day and coming home to a house just as you left it that morning.

Also, not sure if it still exists, but if one or both of you have access to an FSA plan at work, you might be able to pay for some of the day care costs with pre-tax dollars.

[esb3357]

Honestly, I have NEVER heard of the starting salary for a nanny to be $15-$20. I know SOME nannies charge that even here, but that's RIDICULOUS. Honestly, if I were you , I would post an add on care.com or sittercity.com. I would offer what you are comfortable with. There are alot of people who are students and go to school nights that would love you job. You might even find a mother with children in school who would be willing to watch them if you flexed your hours so one of you were home by 3pm. Now with any of these people, always check other postings, references, background checks and see your comfort. Heck you can ALWAYS install nanny cameras.

The world's full of possibilities. Personally, I think that is really really high. No matter where you live. Even in New York city that were not paying those rates. Have you asked your child care minder if there is a "family discount"

[bmarie]

Wow, I have to say- I did not expect the "attacks" on the daycare issue. We have done our research on this and although most of you are saying you would NEVER pay that amount or have NEVER heard of people paying those amounts... it's true. We live in the city/state with THE most expensive daycare rates in the entire country. It's really not that we are just going with anyone and not looking for cheaper alternatives. Yes, I probably could find a college student who will work for $10/hour to watch one kid... but not three... not here. It is not unheard of to pay a nanny for 3 children $15-$20 and I know people that do. In fact, most people I know who have kids in daycare are paying way more than we are so until I heard back from you all, I felt like we were really lucky with what we found. My friend that just had twins is paying $500 per WEEK just for her infant twins, and an additional $200/week for her toddler. And these are not "fancy" centers or Montessori schools or anything like that. Yes, it's a lot. Yes, in some ways my husband IS just paying for daycare. But that is what we chose. One of us not working would make it very tricky to insure a family of five and pay all of our bills, not to mention as I previously stated, we both really enjoy our jobs. And once again, an au pair might work really well for some people and we HAVE looked into it- but you need to house them and we are already going to creatively cramming the five of us into a 1,000 square foot 2-bedroom home, so once again- that is NOT an option for us!

I do appreciate everyone that is trying to help with the actual budget without judging our daycare situation and/or choice to work.

To answer other questions:

- Our net is about $6,500/mo
- We both have %100 insurance coverage through our work, have life insurance to cover our home, no will as of yet but realize this is something we need to do
- We have about $3,000 in savings- it's not a lot, but it's what we can do for now
- We contribute very minimally to retirement- by the end of the year, my work does an automatic %15 retirement- again, we do what we can
- Our only debt is a line of credit that is at a fixed rate of 8.99% and is down to $1,600 w/ a fixed monthly payment of $115. Our top priority right now is getting that to $0 by the time babies come.
- Refinanced our home last year but could only get a rate of 5.25% based on the fact that we are significantly under water on our home because we purchased in 2006 with nothing down and our home value has decreased every day since then
- We have two cars but are going to have to go down to one when babies arrive to save money- our car loan is at a rate of 2.5% with a remaining balance of $6,000 which will be paid off within the next two years- possibly sooner.


We are just trying to keep our head above water at this point and work with what we've got and our situation. It's not realistic at this point in our life to contribute a lot to savings, retirement, etc. Rather, we are simply looking to get and stay out of debt.

Thanks again for your help.

[leonidas]

Husband quitting job is a bad idea. In this job market it would be difficult to gain re-entry into the workforce after an extended absence. Even if for current financial reasons. Plus, health insurance may come from his employer. So, my advice is to look into getting a deferment on student loans. Obviously, if they are private that isn't possible. But if not I'd be looking into that even if you only defer them for 1 year. That would really help offset the extra costs of twins. I also suggest a membership to Costco or Sam's Club. Costco has excellent quality baby items and the savings is substantial. The membership fee is nothing compared to the savings. Plus with a baby shower coming up I would be asking friends and family to chip in for a membership. Or maybe a friend has a membership and would coordinate monthly shopping trips. Estimated savings $600-$1000 the first year.

As far as hiring a live in nanny, not a bad idea. Just make sure you understand if things don't work out he/she would be a tenant and would have rights according to your state's laws. Might have to go through an eviction process witch can take 3 months and must be litigated. Which can be expensive not to mention create a stressful living environment for the children. You might try to negotiate a cash discount from your daycare provider. Unless you actually get your providers EIN or SSN and provide them with a year end 1099 you can't force them to be honest. So, if you haven't gotten those numbers I would suggest you do because you will have proof of your costs and can get a deduction on your taxes based on actual numbers and not estimates. Again, you can't force honesty so asking for a cash discount might net you significant savings.

Good luck!

[JoeP]

If you have a phone contract, when it is time to renew, don't get one again! Consider prepaid or no-contract plans.

[breathemusic]

I notice that you mentioned you do a little couponing. Have you considered getting more aggressive with it? I know it takes time, and I'm not saying you have to become one of those extreme couponers, but if you can stock up on things like diapers and shampoo and detergent and stuff when the items are on sale and you can use good coupons, you can save a good bit of "grocery" money throughout the year.

It's not going to be TONS of money, but when the budget is tight, every bit helps.

[magnoliathunder]

...Depending on your profession, perhaps you could do additional work out of your home when/if time is allowed. I write articles online, and recently was lucky to get on with a group that pays well for writing (more than $700/month for about 10 hours of work a week). Well, that's a good rate for me at least for online income. Perhaps your skill set can be marketed online for a good profit? That way you can work from home at times that are good for you, whether it be on weekends or evenings when you have little going on.

There are income streams online; you just have to know where to look for them. Any possibilities here?

MoneyTips4U: Please pardon my intrusion into this thread: I am new to this site and couldnt find a way to private message you. Can you email me (it's in my profile) or in some way give me information regarding the group you write for online? I would like to supplement my income with online writing as well and would appreciate any leads on how to start or contacts I could begin with. Thank you and again, please forgive my intrusion here.