New babies means a new budget. Wife and I are working through it over next few weeks.
Because they are preemies, we have decided to avoid daycare for first 9 months. Our boys are at high risk of infection and sickness, so we need to protect them from diseases like RSV and other illnesses.
Issue 1- tax return is expected to be 4k (refund in 07 without kids was 3k+). The plan is to change wife's withholdings and bring home about $400 more per month.
Issue 2- wife's student loans were paid off with 2007 tax return. Monthly savings of $220.
$620/month should pay for diapers and formula.
That should allow the Roth's to stay in the budget at $875/month for 2008 and maybe 2009.
Issue 3- I am losing 10k cash income per year from soccer because my work schedule is moving from 8-5 to 2-10. The benefit to this is we will not need to pay for daycare.
Issue 4: My wife's car lease is up in Aug of 09. That is $350/month we need to keep in budget to get her another car. She puts around 50k miles on car every 3 years for work (travels quite a bit locally). More than likely another lease. We will owe close to 4k when we turn this lease in as well.
Issue 5: My truck payment of $700 will be done in Aug of 2010. This money comes into budget for something.
Suggestion 6: Take the $700 truck payment and apply it to 2nd mortgage (7.5% interest rate). 2nd mortgage is 55k or so right now. My math had the $700 paying this off in 5-7 years at around 2015.
Suggestion 7: take the $700 car payment and $400 mortgage payment and start a multiprong weath building strategy:
$300 for college fund twin A
$300 for college fund- twin B
$500 into new car fund for me
All $1100 is actually the same account because all needs are medium term. PRPFX is fund I use for this account (this is also the mortgage paydown account/ secondary emergency fund).
Overall plan up to this point is to retire at age 53 (kids will be 18 then). We have 160k already set aside, and set aside close to 17k per year for retirement.
Thoughts?
New budget
April 15th, 2008 at 08:44 am
April 15th, 2008 at 09:58 am
College fund is the LEAST important thing.
You can always finance an education, you can never finance a retirement!
April 15th, 2008 at 10:07 am
The reason to use a taxable account for education is obvious. The money in this account could be used for house expenses, education expenses or retirement.
April 15th, 2008 at 01:17 pm
My sister's SIL was handicapped. Her MIL had worked because she liked it but after my BIL's sister was born she stopped. NOT something you can plan for.
April 15th, 2008 at 01:37 pm
I would suggest that you do look into the 529 plans for at least part of the money, though. It's beneficial for all the same reasons that a ROTH IRA is -- growing that money tax free can make a big difference. If your kids decide not to go to school, you can treat yourself to some classes when you retire!
April 15th, 2008 at 05:08 pm
April 16th, 2008 at 06:24 am
1) in a 529 money must be used for education or we are penalized on withdraws. No guarantee my kids will want to go to college.
2) the money in the 529 has same timeframe as other goals, it makes sense to me to keep all money in one place to gain economies of scale with investing (one $300 deposit is better than 3 $100 deposits from a tracking standpoint).
PRPFX is the investment of choice for all of above, so it is highly tax efficient (gold and silver do not pay dividends).
April 18th, 2008 at 08:34 am
To gain economies of scale, you can start with one 529 plan, and wait until it is big enough to split before moving assets to the other. Or alternate months, sending $200 at a time, for instance.
April 21st, 2008 at 04:41 pm
Likewise, I am not keen on 529s, personally. So hey, you are not alone.