“Rich” but Broke - What can we cut?

[Anonymous]

Get an Au pair

[Anonymous]

Anonymous wrote:You bought cars that you can’t afford so now you have debt on those.
Childcare is also a huge expense, you might be able to cut there but do you want to?
You are living in Chevy Chase, now you have to keep up with that standard of living.

+1

Also OP, you spent too much on your house. That's a big mortgage.

Why do you have car loans given your income?

[Anonymous]

Someone beat me to it but if you have the space to host an Au Pair, it could save you a decent amount of money. Otherwise you are just going to have to buckle down until one or both kids are in public school.

[Anonymous]

One more idea: rent out your house in Chevy Chase for a few years and rent a place in DC so you can take advantage of free pre-k. Once your kids are both in elementary school, move back to your house in Chevy Chase.

[Anonymous]

You're not doing anything wrong. You're wealthy, and you're spending your money intentionally to support your values and to support the (very nice!) lifestyle you want.

$15k monthly take-home with that HHI tells me you're saving a lot for retirement, so that's great. Make sure you're adequately insured. Do you have an emergency fund? You should have at least $45k (three months expenses) in cash (or something like cash) for emergencies. Assuming you've got a healthy emergency fund, it sounds like everything is fine, and in a few years, you'll have thousands of extra dollars a month to play with, and you can eat out more and travel or whatever you want.

Saving for retirement, spending all the rest of your money each month, and having things you wish you could buy but can't right now doesn't mean you're broke. That's UNIVERSAL. Warren Buffett has to make choices. Money is always finite.

I guess my questions is: what is the problem? This all sounds great.

[Anonymous]

The nanny. You’re spending a third of your take home on childcare. Consider an au pair or daycare.

Cars are expensive but can you trade one in for something less flashy with a lower monthly payment?

[Anonymous]

Take from long term investments if you are short $1k a month until the cars are paid off. You didn't put everything into the house, did you?
When the cars are paid, don't go shopping for new ones. The childcare will also be gone soon and you should be able to catch up in no time.
The moving to DC is a good idea, but I would have rented the house out before kids already so I didn't have to move with them. Little kids don't care much about living in house vs apartment.
I am 'poor' but rich and it always amazes me how high income people are so eager to start buy things. Had you just lived on one income for a year before kids and put the other income into market (where? throw a dart), you be so far ahead. I see the low interest rate, so it was also a good time for market and even before that.

[Anonymous]

Assuming your jobs are stable and you aren't planning on more kids, just deal with the lean years and you'll be sitting pretty soon enough. If one or both parents want to downsize their job and/or you want more kids, the advice is different.

[Anonymous]

Anonymous wrote:I don’t understand what we are doing wrong. What can we change/cut out?

Family of 4: 2 kids under 3
Gross income: 350K (net after taxes is approx $15K/month)
House Mortgage, Home Insurance, and Property Taxes: $5300/month (900K at 2.6% interest, Chevy Chase, MD). House has appreciated 500K since we bought it. Really good public schools so not inclined to move.
Childcare: $5000/month
Car payments and insurance: $1000/month for 2 cars

Between these fixed expenses, mobile phone bills, utilities, kids’ activities, diapers and other necessities for kids, groceries, healthcare expenses, house maintenance, etc. we are living paycheck to paycheck. We don’t buy anything we don’t immediately need. Dining out consists of fast food eaten at home, at most 1/week. Free activities on weekends with kids. What are we doing wrong?

You can afford a private accountant or a financial advisor. DO NOT get financial advice off the internet.

[Anonymous]

Funding your retirement is savings. Paying down a mortgage is savings. You are NOT "living paycheck to paycheck "

[Anonymous]

OP here: retirement savings are just what employer matches (8% me, 4% husband). Health insurance is a huge cut, plus I work for fed and have 4.4% of my pay cut for govt pension. Both kids are in FT daycare; we don’t have space for an au pair. Cars were purchased before we got married 6 years ago / had kids + insurance is very expensive.

Helpful to know it’s just a season in life…

[Anonymous]

Send them to 5 day a week preschool. You can go to a well-regarded program that is 9-2:30 for around 1K a month/kid and then supplement with an afternoon sitter for a couple hours. That will save you easily 2K a month and then you won't need to pay for additional activities for your kid because they are getting plenty of enrichment at school. Nannies are a luxury and totally unnecessary.

Example: http://allsaintschurchpreschool.net/programs/

[Anonymous]

Anonymous wrote:OP here: retirement savings are just what employer matches (8% me, 4% husband). Health insurance is a huge cut, plus I work for fed and have 4.4% of my pay cut for govt pension. Both kids are in FT daycare; we don’t have space for an au pair. Cars were purchased before we got married 6 years ago / had kids + insurance is very expensive.

Helpful to know it’s just a season in life…

WHOA. You are paying $500/month PER CAR on loans that were taken out over SIX YEARS AGO??? Okay, I take it back you way overspent on the cars.

[Anonymous]

How old are you? How in demand and/or stable are your jobs? How much do you expect your comp to rise?

You bought too much house too quickly. Should have stuck it out somewhere cheap until 1st kid in public K. The nanny is also an indulgence, get your kids into a daycare.

Other than that, you have to grind it out for just a few more years.

[Anonymous]

A little less than $400 per car plus insurance on both. Probably right though, we overspent on cars…