Author Topic: #2? yes or no?  (Read 4708 times)

Offline cjsy62

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#2? yes or no?
« on: July 24, 2012, 04:23:34 PM »
I already have the answer made up in my mind but I'm interested to see if other sp members are in agreement.

The facts:

I'm 30.  My husband is 36.  We have one daughter, age 5. We live in Connecticut.

Combined income (after taxes) is 70,000 (50/20). I work in high end residential architecture (unlicensed) and teach a few classes at a local art college.  My husband works part time at a liquor store and is a self employed illustrator.

Debts:
140,000 in combined students loans
6,000 car loan
175,000 mortgage

No savings.  I know, I know  :(


I've been itching to grow our family for years now but my husband was laid off, unemployed for two years, employed part time for six months and then laid off again.  I believe he has a stable part time job now but his main goal is to make a decent living purely from his artwork.

We just got out of credit card debt and now tackling our car loan and then student loans.

I'm not sure if I'm over thinking how much a second child will affect us financially but in my mind we can't afford to do it.  My company only offers a $350 stipend for health insurance, so prenatal care and delivery costs alone is a stretch for us!  Not to mention how much we would need to save up for maternity leave.  I'm the breadwinner after all. 

Our friends and family say that we will figure it out and we'll make do, but is it so bad that I refuse to "make do" with a situation?  Whatever happened to being prepared and wanting to give the best for your kids?  I think it's a no for kid #2 for now.  Maybe in a few years we'll be in a better place?

So can you back me up on this?  Or do you think I'm over analyzing?








Offline LdMorgan

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Re: #2? yes or no?
« Reply #1 on: July 25, 2012, 12:47:32 AM »
Because you already have your decision made I'll offer my thoughts, for whatever they may be worth.

You should grow your family because that is what you need to do.

Life will find a way, and your family life will adjust to a new member just as it adjusts to a change in income or occupation or residence.

The time to live is now, while you are living.

No one can know what the future will bring, so all you can do is spit in the eye of the future and do the best you can day by day, regardless of the unknown problems that may arise.

If you wait too long, for any reason, you will have waited too long--and then the reasons will not seem to be nearly enough.

Offline Oil Lady

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Re: #2? yes or no?
« Reply #2 on: July 25, 2012, 03:44:32 AM »
Not compleely off topic for me to ask this but................

Does your husband have an online art gallery?

Offline Saint

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Re: #2? yes or no?
« Reply #3 on: July 25, 2012, 06:09:07 AM »
1. you've got a handle on the big picture as well as the little details and you're forecasting "what if's" - that's good
2. the financial pressures will add stress to your relationships, hubby will need to step up his side of the income equation to mitigate this
    -- it would be awful to grow your family only to have the strain of finances damage your relationships
3. at 30 your opportunity window is starting to close. my wife and I tried (and tried and tried...) and while we were blessed with a daughter (went for more...and tried and tried...), our options for another natural child are now exhausted. we wanted to grow our family, but at 45 without serious technological intervention - and lots of potential implications (complications with pregnancy and birth defects increase significantly with age) its not going to happen - so its not going to happen.

so with all that, you can probably tell where I'm coming from; maybe you don't "try" you simply don't "actively prevent" and take it from there.

Offline summer98

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Re: #2? yes or no?
« Reply #4 on: July 25, 2012, 06:51:12 AM »
Having a child should not be entirely an economic decision. If you are worried about finances, try to pay off the car loan and then go for the second child.

As someone who has struggled for years with infertility and is not yet 30, let me tell you that waiting may be the biggest mistake you'll ever make. We are designed to have our children before the age of 25, and the "window" begins to close after that, and closes at different rates for every woman. You don't want to wait a few years only to find out your fertility started diminishing now.

I have one last comment about the debt: pay off the student loans LAST. The only thing they can do to you if you default is seize your tax returns and garnish your wage; if you default on your mortgage, you will lose your house. They can also be forgiven or deferred if you end up in a hardship situation. Your mortgage company won't do the same. Also, be careful how you pay them off; some of the loan companies have a tendency to apply everything you send them to "future interest" even if you mark "excess to principal" on the check. You may have to save up and pay them all at once.

Offline cjsy62

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Re: #2? yes or no?
« Reply #5 on: July 25, 2012, 12:14:10 PM »
  1
« Last Edit: July 25, 2012, 12:31:59 PM by cjsy62 »

Offline cjsy62

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Re: #2? yes or no?
« Reply #6 on: July 25, 2012, 12:18:24 PM »
Not compleely off topic for me to ask this but................

Does your husband have an online art gallery?



www.jessedavidyoung.com
https://www.facebook.com/ruinedeye


As you can see his genre is horror/scifi/fantasy, but he's "classically" trained and is an amazing oil painter.  One of our current projects is affordable commissioned oil paintings.  I'm hoping we can earn some more money with more bread and butter type projects.

Offline cjsy62

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Re: #2? yes or no?
« Reply #7 on: July 25, 2012, 12:20:17 PM »

I have one last comment about the debt: pay off the student loans LAST.

With regards to paying my student loans last, it is our understanding that student loans stay with you even if you claim bankruptcy.  We're underwater on our house.  We bought it in 2007 for 195, modified it in 2011 at 185 and  now owe 175.  We would LOVE to relocate to Texas where we have family but comparable homes in our area are selling for less than 150!  So I suppose I'm trying to be strategic just in case we decide to walk away from our house.  I don't know if that makes any sense.  What do you think?

Offline cjsy62

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Re: #2? yes or no?
« Reply #8 on: July 25, 2012, 12:30:23 PM »

    -- it would be awful to grow your family only to have the strain of finances damage your relationships

 maybe you don't "try" you simply don't "actively prevent" and take it from there.

HAHAHA This is EXACTLY how we got pregnant the first time!  We were on the whatever happens, happens plan and between layoffs, the building industry slowing down, not getting raises blah blah blah we've felt  A LOT of financial strain.  I feel like there's no end to the debt tunnel since our income hasn't change much in the past five years.

I joke around with my husband all the time that within our first few years of marriage we had our first child, bought our first house, and one of us lost a job.  If we were able to get through that... well we can get through anything!

Ultimately though, I think you all are right.  Thank you for your comments.  I really appreciate it.  I didn't expect people to be so encouraging.  I have a feeling we'll end up paying off that car loan and go on the whatever happens, happens plan again.

Offline summer98

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Re: #2? yes or no?
« Reply #9 on: August 03, 2012, 01:13:58 PM »
With regards to paying my student loans last, it is our understanding that student loans stay with you even if you claim bankruptcy.  We're underwater on our house.  We bought it in 2007 for 195, modified it in 2011 at 185 and  now owe 175.  We would LOVE to relocate to Texas where we have family but comparable homes in our area are selling for less than 150!  So I suppose I'm trying to be strategic just in case we decide to walk away from our house.  I don't know if that makes any sense.  What do you think?

Then instead of paying down either loan, I would squirrel away cash until you make the decision one way or the other. It is true that student loans stay with you in bankruptcy, but it is also true that you can defer the payments if you encounter economic hardship. What I would do in your place if I decided to relocate is squirrel away the cash and use it as a downpayment on a place in Texas before walking away from the current home. Once I was settled in the new state, I would start paying down the new mortgage and then tackle the student loans.

Offline NotoriousAPP

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Re: #2? yes or no?
« Reply #10 on: August 03, 2012, 04:29:28 PM »
Based on the financial liabilities you've already mentioned you're unlikely to get financing for another home if you try to secure it before you walk away from your current home or especially after.  I'm not sure how difficult new financing would be if  you arranged a short sale with whoever holds your current mortgage.

Offline ncjeeper

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Re: #2? yes or no?
« Reply #11 on: August 03, 2012, 04:49:34 PM »
I've been itching to grow our family for years now
Try hydrocortizone cream for the itch.  :D

Sorry dont have any other useful advice.

Offline ttubravesrock

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Re: #2? yes or no?
« Reply #12 on: August 03, 2012, 09:32:49 PM »
Is the 5 year old ready to start working? 

Now that my joke is out of the way, I will do my best to offer advice. 

First, congrats on paying off your credit card debt!  That is a good start.
The student loans are extreme, and the mortgage is extreme.  The car loan is manageable.
Also, it sounds like you guys want to move to TX. 

I might make a couple assumptions, and if I do, it will be bold text, and you can feel free to correct me.  My methodology comes from Dave Ramsey.  I highly recommend you listen to him, and maybe even give him a call.  He is on AM radio almost everywhere, and I think he has a TV show somewhere too. 

Before you go on, you need to make a $1000 - $1500 emergency fund.  This is not your checking account or anything you have easy access to with your debit card.  This is money to spend if your car dies, roof leaks, water heater breaks, etc.  If you do end up having to break into your emergency fund during the following steps, bring your fund back before continuing with the steps.  The purpose of the emergency fund is obviously to make the emergency less of an emergency.

After you have an emergency fund, the first thing you need to do is make a budget.  Budget should not be a scary word to anyone, it is really easy to do. I will make a template budget for you after I lay out the steps.  Sit down EVERY TIME YOU GET PAID with pen & paper and make a budget.  This should have three columns.  Column 1 is WHAT you will spend money on.  Column 2 is HOW MUCH money you will spend on column 1.  Column 3 is IMPORTANCE.  Try not to worry about the order when you write them down.  Don't skip anything, not even the $4 every Monday for coffee.  When you are ranking the importance of each item, you obviously want to keep a roof over your head.  You obviously want to eat food.  You obviously want to keep at least a bare minimum of utilities (electric, water, gas, trash).  Other things have various importance to different people.  (I may not be able to live without Netflix, but you probably could if you needed to.)  At the top, list the number on your paycheck(s)

Example Budget

PAYCHECKS (Assuming monthly)      
Husband                          $1,000    
Wife                                 $2,500   
ITEM                                  COST    Importance
Mortgage                        $1,200    4
Electric                               $175    3
Water                                 $50     1
Gas Bill                                $50     2
Internet                              $75     8
Cable                                  $75     12
Cell Phone                         $100    12
Student Loans                   $800    10          subdivide this row
Car Payment                      $350     9
Auto Insurance                  $100     6
Groceries                           $600     5
Restaurants                      $150    12
Netflix                                 $25     12
Art Supplies                        $50      7
Tobacco Products              $100    12
Alcohol                               $100    12
Misc. Dues/Memberships   $100    11          subdivide this row
Misc. Purchases                 $100    12          subdivide this row

You can do the math and see that not only is the budget tight, but your list of costs is actually more than your income.  Remember these are all assumptions. To get to where your income is equal to or more than your expenses, everything with an importance over 10 must be deleted.  Since these are the least important, it should not be too hard to delete these expenses.  You should make your own decisions on the importance of these items. Your other option is to see how you can make these numbers smaller.  Maybe switch to the $8 Netflix to save $17.  Maybe cut the groceries down to $400 to save $200.  Maybe make it a game with yourselves how low you can get your electric bill.  Maybe you can cut it down to $100 and save $75.  Maybe you can switch your auto insurance to liability only and save $25.  Maybe you can eliminate texting and internet from your phone and save $40.  You get the picture.

Now that you have made some changes, your new budget might look like this.

ITEM                                  COST    Importance
Mortgage                        $1,200    4
Electric                               $150    3
Water                                 $50      1
Gas Bill                                $50     2
Internet                              $75     8
Cable                                   $0     12
Cell Phone                          $70    12
Student Loans                   $800    10          subdivide this row
Car Payment                      $350     9
Auto Insurance                  $100     6
Groceries                           $400     5
Restaurants                        $0    12
Netflix                                 $10     12
Art Supplies                        $50      7
Tobacco Products                $0    12
Alcohol                                $0    12
Misc. Dues/Memberships    $0    11          subdivide this row
Misc. Purchases                  $50    12          subdivide this row

Sorry that one doesn't have as straight of lines, but if you do the math after the changes, we have $150 to work with.  If you are happy with that amount, good.  If you want that number to be bigger, make more changes to the spending. 

Next, we should have a yard sale.  Pick some items you own that are indispensable and put them off to the side.  These items are NOT for sale.  Everything else is for sale.  This might be a decent opportunity for your husband to sell some artwork as well.  I think you could probably make$1500 from this sale without getting rid of any furniture or appliances.  I will assume that you each have a car worth ~$7,500, for a total vehicle value of ~$15,000.  Have a talk and decide if it is worth it to sell ONE or BOTH vehicles.  You could sell one, pay off the car loan in one fell swoop, and then buy a $1500 moped or beater.  You could sell both, pay off the car loan in one fell swoop, spend $4000 on a slightly nicer beater, and have $5000 cash left over. Yes, that leaves you with one vehicle, which may or may not be feasible.

I will pretend that we had the sale, sold one car and bought a beater for $1500.  There is no more car loan, and your insurance  should only have liability on the beater, so that payment probably went down $25 or so a month.  Now we have $1500 cash and $175 every month to work with. 
The $1500 cash is your emergency fund.  Bury it in your yard, put it in a free savings account, do whatever you have to to make sure that you only spend it in an emergency.
Now I will assume that your student loans are not consolidated are are distributed like this: (W=wife, H=husband)

W    $25,000.00       $100
W    $20,000.00       $100
W    $17,500.00       $100
W    $15,000.00       $75
W    $12,500.00       $75

H    $15,000.00       $100
H    $12,500.00       $75
H    $10,000.00       $75
H    $7,500.00         $50
H    $5,000.00         $50       

We will make the minimum payment on all of the loans (Mortgage and Student Loans).  Take that extra $175 and put it towards that $5,000 student loan.  Every time your expenses drop and/or your income goes up, that extra money goes towards making the $175 bigger.  By the time this $5000 loan is paid off (my guess is 10 months) because you will find ways to increase your pay and/or decrease your costs) you will probably be paying $450 extra every paycheck. Now take this $450 PLUS the $50 you were putting towards that loan as the minimum payment.  The $7,500 loan, which is now $7,000 will get this extra $500 every paycheck.  By the time this loan is paid off (again, less than a year (9 months) because your income will go up and/or costs will go down), you will be paying $650 extra every paycheck.  Take this $700 and apply it towards the $10,000 loan ($8500 now).  By the time this is paid off (9 months) you will be paying $825 extra each paycheck.  Now pick one of the $12,500 ($10K now) loans and pay $900 extra each month towards it.  This will probably take 10 months and you will be paying $1000 extra by the end.  We need to knock out the other $12,500 loan ($9K now) and then summarize our progress.  We will knock it out in 8 months and be paying $1150 extra each month by the end. 

In less than 4 years (46 months), we have eliminated the car loan ($6,000), reduced our expenses, increased our income, and knocked out 5 of the 10 student loans.  Take a look at the new estimated balances.
W    $20,500.00       $100
W    $15,500.00       $100
W    $13,000.00       $100
W    $11,500.00       $75
W    $00,000.00       $00

H    $10,500.00       $100
H    $00,000.00       $00
H    $00,000.00       $00
H    $0,000.00         $00
H    $0,000.00         $00   


The new balance on student loans is ~$71,000.00.  After 46 months of minimum mortgage payments, the mortgage is probably around $155K.  That is still $226K in debt, but we need to focus on the student loans. Without listing all the steps, but continuing the pattern I described above, we will be done with student loans in 44 more months.  7.5 years to knock out $140K + $6K + reduce mortgage by $35K is pretty awesome.  That's over $180K reduction in debt in exactly 90 months.  In this time, according to my numbers, you increased your take home pay and decreased expenses by a combined $1050 per month.  That is a pretty reasonable amount if you ask me, and if your husband's business takes off, it will probably increase by way more than that, thus knocking things out even more quickly.   

Things will probably change because now you probably have a 12 year old and a 5 year old that come with their various expenses.  I just wanted to portray with real numbers how the debt is manageable. 

For the rest of my plan, see Runa's thread here.
http://thesurvivalpodcast.com/forum/index.php?topic=36638.0

I hope I didn't offend you or make assumptions that are too far off.  I also just realized I did that whole budget without accounting for gasoline for your vehicles as well.  Oh well.  I've already typed all this, so I'm still posting it.

***DISCLAIMER***
I'm not an accountant, financial professional, or anything like that.  I just want to help.