New life as single mom- how to optimize/will I be ok?

[Anonymous]

Newly single mom, two kids under 6yo. 34 years old.

Money:
Salary $135k (net $8k per month)
Retirement $80k (was making only 80k until this year)
House $100-120k equity
College savings $5k
Equity award in company that should be worth at least $100k but hopefully more, two more years til fully vested

Monthly Bills:
$2600 mortgage, taxes, home insurance, utilities
$1650 daycare (7 more months)
$600 groceries + house items
$350 misc kids activities/needs
$150 car insurace + gas
$150 phone/internet
$150 dog food + meds

Debt:
$230k left on mortgage

Bigger looming expenses:
My oven is original from the 1960s, fridge and dishwasher from the 90s
Dryer is also from the 90s
Bathroom needs updated at some point, suspect mold/mildew remediation needed behind the wall

Bigger expenses already handled:
Car paid off this year, less than 10 years old, low miles
New roof, siding, gutters last year
Moved to tankless water heater / new furnace two years ago

I know that I need to focus on retirement first then college second. I don't believe it's realistic I can fully fund college for two kids. Any other specific advice? Should I make extra mortgage payments to pay down faster or is that money better put in retirement if my mortgage rate is 3%? The end in sight for daycare feels hopeful too. Where is it best to build an emergency fund- in a HYSA? Trying to educate myself, have been following this forum for a while.

-Child of two city workers who only taught me that money goes in a savings account and a pension will cover retirement (I don't have a pension).

[Anonymous]

Op here- forgot I also paid off my student loans this year!

[Anonymous]

Definitely do not pay off your mortgage early. Don't worry about college right now.

Make sure you're contributing enough to fully get any employer match for retirement, then work on building an emergency fund/savings account, then further add to retirement.

[Anonymous]

Single mom here and I agree with PP. Retirement and emergency fund should be your focus. Your mortgage rate is so low and there will be other ways to pay for college.

Yes...a HYSA for an emergency fund.

When your daycare payments are done, that will feel like a huge pay raise. Make sure you allocate that to your savings when that happens! Good luck!

[Anonymous]

You've done great work with your student loan, home ownership, and paying off your care.

You should prioritize maxing out retirement contributions, adding to an emergency fund until you get to 6 months of expenses, and saving a token amount into the kids' 529 plans. Once you have an adequate emergency fund, increase 529 contributions.

[Anonymous]

For God's sake, do not pay down that mortgage. You'll never get another deal like that in your life. Inflation is still running almost 3%.

[Anonymous]

shouldn't you be getting child support?

[Anonymous]

Pay minimum on your mortgage. Put any extra in retirement. Put any extra after that in savings. Then consider college savings.

You are doing OK. Your expenses aren't crazy, which is great.

[Anonymous]

Obviously, you don’t do any of the house stuff except figuring out if there is ongoing water issues causing the mold. An “updated bathroom” is a luxury you can’t afford. (Most people do not update bathrooms unless something is broken.)

[Anonymous]

Anonymous wrote:shouldn't you be getting child support?

He's unemployed

[Anonymous]

Anonymous wrote:Obviously, you don’t do any of the house stuff except figuring out if there is ongoing water issues causing the mold. An “updated bathroom” is a luxury you can’t afford. (Most people do not update bathrooms unless something is broken.)

Thats what I meant. There's a hairline crack in the shower stall that I think water was getting through before I noticed. I attempted to seal it with waterproof putty but unsure if that's really working or what it will look like back there if I open it up.

[Anonymous]

The money in retirement will grow slower than the money in your regular investment account and Roth IRA. Money in regular investment account is not taxed until you sell the stock/ETF and even then, it can be nearly 0% plus whatever your state tax is. You are in total control of your money here, but max out Roth first.
The money in retirement accounts, traditional IRA and 401k, will be taxed higher than long term capital gains in investment account.
Traditional IRA and 401k have fees, rules, bad investment choices, penalties, RMD. The match and the tax deduction do not make up the negative aspect of those retirement accounts. The money you lose in the two retirement accounts, will compound forever for someone else.
Do not get sucked in by the match and tax deduction. 529 is just as bad if not worse.
Investing is not a rocket science. You will learn so much and will get much better returns than the bank/administrator. They are not allowed to invest the way that is best for you. You are. They don't know your personal situation. They do bare minimum for everyone while getting max fees.
Learning how to invest should be your focus. This is something you hand down to your kids.
$20k a year into Voo, VTI, and QQQ in Roth and regular account the next 20 years and you are all set.
I retired 5 years after I started to invest. What I learned is more valuable than the money I have now. 401k has never taught anyone anything. perhaps to stay away.
While you wait for the daycare to end, learn all about personal finance from books and even youtube.

[Anonymous]

Anonymous wrote:The money in retirement will grow slower than the money in your regular investment account and Roth IRA. Money in regular investment account is not taxed until you sell the stock/ETF and even then, it can be nearly 0% plus whatever your state tax is. You are in total control of your money here, but max out Roth first.
The money in retirement accounts, traditional IRA and 401k, will be taxed higher than long term capital gains in investment account.
Traditional IRA and 401k have fees, rules, bad investment choices, penalties, RMD. The match and the tax deduction do not make up the negative aspect of those retirement accounts. The money you lose in the two retirement accounts, will compound forever for someone else.
Do not get sucked in by the match and tax deduction. 529 is just as bad if not worse.
Investing is not a rocket science. You will learn so much and will get much better returns than the bank/administrator. They are not allowed to invest the way that is best for you. You are. They don't know your personal situation. They do bare minimum for everyone while getting max fees.
Learning how to invest should be your focus. This is something you hand down to your kids.
$20k a year into Voo, VTI, and QQQ in Roth and regular account the next 20 years and you are all set.
I retired 5 years after I started to invest. What I learned is more valuable than the money I have now. 401k has never taught anyone anything. perhaps to stay away.
While you wait for the daycare to end, learn all about personal finance from books and even youtube.

OP, ignore this PP. The employer match is a 100% ROI that you won't get anywhere else. Don't pass that up. The tax benefits of a 401(k) or Roth are also enough to outweigh any higher fees than you might get buying Vanguard ETFs in a taxable brokerage.

[Anonymous]

Anonymous wrote:Newly single mom, two kids under 6yo. 34 years old.

Money:
Salary $135k (net $8k per month)
Retirement $80k (was making only 80k until this year)
House $100-120k equity
College savings $5k
Equity award in company that should be worth at least $100k but hopefully more, two more years til fully vested

Monthly Bills:
$2600 mortgage, taxes, home insurance, utilities
$1650 daycare (7 more months)
$600 groceries + house items
$350 misc kids activities/needs
$150 car insurace + gas
$150 phone/internet
$150 dog food + meds

Debt:
$230k left on mortgage

Bigger looming expenses:
My oven is original from the 1960s, fridge and dishwasher from the 90s
Dryer is also from the 90s
Bathroom needs updated at some point, suspect mold/mildew remediation needed behind the wall

Bigger expenses already handled:
Car paid off this year, less than 10 years old, low miles
New roof, siding, gutters last year
Moved to tankless water heater / new furnace two years ago

I know that I need to focus on retirement first then college second. I don't believe it's realistic I can fully fund college for two kids. Any other specific advice? Should I make extra mortgage payments to pay down faster or is that money better put in retirement if my mortgage rate is 3%? The end in sight for daycare feels hopeful too. Where is it best to build an emergency fund- in a HYSA? Trying to educate myself, have been following this forum for a while.

-Child of two city workers who only taught me that money goes in a savings account and a pension will cover retirement (I don't have a pension).

You are doing great!

You should start funding an emergency fund before you increase your 401K contributions. If you have to put an emergency expense on a credit card the interest rate will be astronomical. For a HYSA, I like Marcus by Goldman Sachs. It’s free to start, no minimum, no limit on transfers to savings. It’s all online, but customer service has been good.

After you have 2-3 months of expenses in an emergency fund, increase your 401K contributions to get the max employer match.

I would not worry about your kids college until the emergency fund and your 401K are higher.

I would also look into pet insurance (see if your work has it as a benefit and recommend it to the benefits team if they don’t). We have nationwide wellness and illness coverage, but you can just do illness. Lemonade might have something too, but I can’t speak to the product.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Newly single mom, two kids under 6yo. 34 years old.

Money:
Salary $135k (net $8k per month)
Retirement $80k (was making only 80k until this year)
House $100-120k equity
College savings $5k
Equity award in company that should be worth at least $100k but hopefully more, two more years til fully vested

Monthly Bills:
$2600 mortgage, taxes, home insurance, utilities
$1650 daycare (7 more months)
$600 groceries + house items
$350 misc kids activities/needs
$150 car insurace + gas
$150 phone/internet
$150 dog food + meds

Debt:
$230k left on mortgage

Bigger looming expenses:
My oven is original from the 1960s, fridge and dishwasher from the 90s
Dryer is also from the 90s
Bathroom needs updated at some point, suspect mold/mildew remediation needed behind the wall

Bigger expenses already handled:
Car paid off this year, less than 10 years old, low miles
New roof, siding, gutters last year
Moved to tankless water heater / new furnace two years ago

I know that I need to focus on retirement first then college second. I don't believe it's realistic I can fully fund college for two kids. Any other specific advice? Should I make extra mortgage payments to pay down faster or is that money better put in retirement if my mortgage rate is 3%? The end in sight for daycare feels hopeful too. Where is it best to build an emergency fund- in a HYSA? Trying to educate myself, have been following this forum for a while.

-Child of two city workers who only taught me that money goes in a savings account and a pension will cover retirement (I don't have a pension).

You are doing great!

You should start funding an emergency fund before you increase your 401K contributions. If you have to put an emergency expense on a credit card the interest rate will be astronomical. For a HYSA, I like Marcus by Goldman Sachs. It’s free to start, no minimum, no limit on transfers to savings. It’s all online, but customer service has been good.

After you have 2-3 months of expenses in an emergency fund, increase your 401K contributions to get the max employer match.

I would not worry about your kids college until the emergency fund and your 401K are higher.

I would also look into pet insurance (see if your work has it as a benefit and recommend it to the benefits team if they don’t). We have nationwide wellness and illness coverage, but you can just do illness. Lemonade might have something too, but I can’t speak to the product.

*Marcus has unlimited transfers - checking or savings