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Home > Upcoming budget change musings + Kiplingers not much help

Upcoming budget change musings + Kiplingers not much help

March 29th, 2011 at 01:35 am

I know, I'm chatty today! Wink


This month's Kiplinger's is the "save $50 per day" issue where they give you all sorts of tips. Unfortunately none so far have applied to me. Lots of stuff about getting the most out of your car (don't have one), reducing bank fees (don't have any), and all these other ways to save money on stuff I don't spend money on anyway. They have advice on stuff I do spend money on, such as tips for getting $40 wine for $20 (never spend more than $15 on a bottle, and even that's rare).

Oh well. I haven't read last month's main story, "how to save a million dollars." Maybe that'll be more applicable. Wink

I'm trying to plan ahead today, because I know we have some big changes coming to our budget. NT wants to cut back to just one class per semester; busy, stressful job plus being a dad are too much for taking 2 classes as well. This means his student loans will come due once he isn't enrolled at least half-time. Right now we're only paying interest on them.

Classes are $375 per credit at his college; since tuition increases every semester, I'm assuming they'll be at least $400 per credit in fall 2011. His class will be either 3 or 4 credits, so $1200 or $1600. Then there are other fees, which look to be about $1100 per semester. I guess if he takes one class each of two semesters, and each class was 4 credits, that would be $2700 per semester, or $5400 for the year. We'd have to come up with the first $2700 by the beginning of October, so that gives us 6 months. I suppose I can divide the $5400 by 12 months and it's $450 per month. (We could probably get private loans even if the reduced credit load doesn't qualify for federal, but I thought I should see if we can afford it without.)

Also, when NT's student loans come due, it looks like they'll total $435 per month. That makes $885 per month we'll have to come up with.

Sounds daunting but it's not really that bad. Once our tax bill/lawyer fund stuff is figured out, we have $845 in the budget for education/extra debt repayment. Plus, we already pay $139 per month on his student loans, to cover interest so it doesn't build up. That means we have $984 in the budget, more than enough to cover tuition and student loans.

Since we'll be eliminating a bit of the "estimated future debt" of NT every time we don't take out a loan for a class, our total debt number will be reduced. Plus we'll be paying some principal on his actual existing student loan debt.

Of course, my mind can't help straying even farther into the future, and the possibility that we'll have another child someday. Probably the earliest would be March 2011. Medical costs should be OK, but we have to think about unpaid parental leave. (Which we have plenty of time to save up some money to cover.) And eventually (June or July 2011) additional daycare for a new baby. (And/or reduced work for one of us to stay home with kids, or to take turns, etc.)

Whatever the arrangements are, it'll either be more expenses or less income. The lowest we could probably get away with would be $650 more per month (what we pay our current daycare lady for AA). Maybe she would give a little discount for a second kid, who knows? If one of us stayed home, it would definitely cost us more than $650 a month in lost income (or even $1300 per month, if you figure AA's daycare cost would go away), especially if you figure in extra healthcare costs.

So minimum, we're going to have to come up with $650 per month starting (at the earliest) in June 2011, either by cutting things out of the budget or by increasing income. Plenty of time to think about it, but it wouldn't hurt to brainstorm a bit now.

We have $99 per month more than we need in the above estimated education budget, but then again, with tuition costs increasing every semester, we can't exactly count on that as future wiggle room.

I currently put $50 per month into EF savings, but we should get the EF to a comfortable level this year, so we won't really have to add to it any more unless we use the EF for something. With most of NT's flat income going into savings anyway, we won't really have to worry about that. So that $50 per month will probably free up next year.

One of AS's student loans will finish up next year, freeing up $62.

I have $130 for misc. expenses that aren't quite emergencies but can't be covered by the grocery/household budget. It's nice to have, but not necessary.

So that's $242 right there, without even making any real cuts to our lifestyle. Not too shabby. Smile If even one of us gets a raise or a regular freelance gig, we could fill some more of that gap pretty easily.

Of course, if one of us changes jobs and it reduces our overall income, or if we ever decide we need to get a car, that will change all of our calculations. But it's good to get an idea of what we would do on our current incomes and budget.

12 Responses to “Upcoming budget change musings + Kiplingers not much help”

  1. creditcardfree Says:
    1301359528

    I know you will work that budget out just fine. Once we had two kids it just seemed easier to stay home with them, but that's us!!

  2. ironicone Says:
    1301361011

    NT can always take a cheap easy class at the community college along with the more expensive class at the school. That way, he can still qualify for deferred status while still not being too stressed or costing too much additional money

  3. ceejay74 Says:
    1301365057

    ccf, to be honest, I'm a bit tempted to try it. Especially since work seems to continue to deteriorate. I feel my job is secure, but my job just sucks, and so does the workplace itself. And I actually seem to be a lot more maternal than I thought I'd be; maybe (just maybe) I could swing being a SAHM for a couple years. Smile I don't think that's the direction we'll go, but I don't want to rule anything out until we get closer to "go time."

    I'll probably run the numbers to see what it would be like, if AS gets pregnant. However, I'm really concerned that health insurance would be prohibitively expensive for me and AA. I'm not sure NT's job even offers spouse/child coverage, and if they still do, I remember it being quite costly to add someone to the plan. And I have the largest salary of all three of us. Stupid America! If we lived in England already, healthcare wouldn't even be a consideration.

    NT would probably go nuts being a SAHD. And AS really needs to build her career if we're ever going to England. I'd probably be the best bet, but like I say, I can't fathom how much it would cost. I just don't know if we could swing it.

  4. ThriftoRama Says:
    1301367955

    The healthcare aspect of children is really disheartening. We spent about $5,000 out of pocket to have each of ours. Then there is the daycare. It is prohibitively expensive. Given our increased taxes, cost of daycare for two kids, lack of flexibility when they are sick or school is closed for holidays, it was pretty clear to us we couldn't afford to have two working parents. I don't enjoy being a SAHM, but I do recognize the benefit to the family unit. Plus, I am lucky because I have the kind of career where freelancing is a viable options,so even though I work until late into the night, I'm able to bring in some money with minimal childcare costs and still keep my hands in my career.

    If you are planning to have another baby, I say get as much college as you can finished. It's even more exhausting when there are two.

  5. MonkeyMama Says:
    1301369414

    It's really the two kids (two kids in daycare) that is crazy expensive early on. That said, it is just a short-term problem. Plan ahead and you will be fine. (At ages 5 & 7 - public school is 8 hours a day, and care for school-aged kids for days off school is dirt cheap).

    Likewise, I wouldn't sweat the healthcare so much. I have much preferred to have a private policy over the years. Sure, it's expensive, but then I am not at the whim of employment (as long as I can pay the bill). With two other incomes, I think you can afford some insurance. There is other insurance out there. I am actually offered health insurance through my job (for me only), but I think it is pure crap. I felt that way about my last job, so how I started down the road of private insurance. Watching my friends and relative struggle through layoffs and disability, I figured I am better off in the end. At least my insurance won't triple of go up 10 times just because I get disabled and unemployed. Rolleyes It will stay as is.

    I've never minded paying for good healthcare, but I guess that is doubly so considering our recent health issues. Glad I didn't settle for crappy insurance because it was "free."

  6. ceejay74 Says:
    1301370692

    Wow thriftorama, that's about the opposite of what I was thinking...I mean, $1300 for daycare for 2 kids will be a lot, but the lowest-salaried among us brings home $1760, plus puts 5% in 401(k) and gets healthcare. Even with my crappy health coverage I was able to get a C-section for a couple thou. So we'll feel the cost, definitely, but seems SO much more doable than one of us staying home. And the lower taxes you get with the extra deductions/exemptions of a kid definitely helped. As for flexibility, workplaces pretty much have to deal with it when we have a sick kid or other emergencies.

    With someone staying home, we'd lose at least $460 (salary minus childcare savings) + $125 401(k) + healthcare coverage.

    It just doesn't add up, to me, that it would be financially beneficial for one of us to stay home. Maybe our circumstances are really different from yours. (Obviously the three parents, but there must be some other factors as well.)

    MonkeyMama, that's quite interesting. I've never thought about getting my own healthcare if I'm employed. Is it complicated to switch over? Mine & NT's are basically "free" for ourselves, but if one of us stayed home & had to be added to the other, it would cost so much, and for such poor coverage.

    I mean, we could definitely afford to live on 2 incomes, even with all our debt payments, but it does seem like we would lose money even in the short-term with full-time daycare. Dunno. It's not all about the money, of course, but it's one consideration.

  7. Petunia in an OP Says:
    1301406603

    We also have our own health insurance. It seems like a huge hurdle until you jump over it. I think Mr H would try to go without it (he never goes to the doctor) but I know a medical issue could wipe us out financially. It's kind of pricey I suppose, but we've had it this way for nine years so we're used to it.

  8. ceejay74 Says:
    1301408804

    I suppose I should at least look into it before I dismiss the idea. It seems so scary because it was really hard for AS to find affordable insurance during her layoff period while she A) had a pre-existing condition and B) was eligible for (hugely expensive) COBRA. Those two issues disqualified her from several plans. Actually, it was getting rejected from a couple plans that made her eligible for the one she ended up with!

  9. ThriftoRama Says:
    1301443170

    Well, for us, I made a decent living, but hubby makes three times as much as I did. When you combine the two incomes, it bumps us into a higher tax bracket, and due to the nature of our jobs, we both end up having to work late hours. I worked in media, and my profession doesn't give two craps if your kid is sick and there is no one to pick him up, the deadline must me met, and every day there are multiple deadlines. Closest relative who could pick up the kid in that situation is an hour away, so it wouldn't work.

    Full-time care for two kids here is about $1600 to $2,000 a month. For us, the inflexible job and the daycare costs just didn't make sense.

    As I said, I can freelance, so I am doing that, and making about a third of my former salary, but with so much more flexibility. And, the work keeps building up, so I could feasibly have enough work to make my former salary by the time the kids go to kindergarten, and then I still retain the flexibility.

    I do miss the 401k, but we still have hubby's, plus my IRA, which when my income goes up, will become a SEP-IRA, and my contributions will be closer to a 401k.

    It was a long-term plan, if you will.

    But yes, please get as much college in as you can if you want another one. Two kids isn't double the work, but it is more. And although one is a lot of work, there will be even less free time with two.

    Let me add that we did give up some income, probably less than $1,000 a month, but frankly, we are doing just fine without it. We have actually been able to do just as much.

  10. ceejay74 Says:
    1301445500

    Ah, that makes a lot more sense. We all make roughly the same income--$30K, $45K, $49K--so it makes it a bit harder to decide who would go. (At first glance it's the first one, but that job while low-paying is potentially the most important for our future.) And we're lucky to have found cheap daycare, but those cheap options are very very limited, so costs could skyrocket if the few dear old ladies retire or don't work out for some reason.

    If we did it, my initial thinking was that I would prefer the SAH parent not have to freelance. It sounds kinda crazy. But it would be a solution if we wanted to try and keep our cashflow the same as it was with all three working.

    Hmm...now that's another possibility to consider!

  11. ThriftoRama Says:
    1301448246

    I made about 43k a year. Hard to give up, but, as I mentioned it just didn't make sense once you crunch the numbers and consider the demands of the job. Plus, at the time I had kid #1, my dad was dying of cancer, and I made the decision that I would rather spend time with him than at my desk. No regrets. It hasn't always been easy, but it is working out.

  12. Petunia in an OP Says:
    1301495775

    When Daisy was born I dropped from full time to part time. Full time my income was about 2/3 of household income, and part time it was over 1/2, including health insurance and 401k (Mr H has had neither of these benefits with his job). When Daisy was two I left the work place entirely. On paper I would have been the one to keep my job but that would not have worked well on many levels.

    And, it's worked out. Not always perfectly (my blog is a testament to that!) but we are in a decent place financially and in other ways. You might be surprised, as you dig a little deeper, how things can work out.

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