Student loan payoff conundrum

[Anonymous]

Everything else being equal, would you borrow money at 6.8 percent to invest in the stock market?

Obviously not, so in this regard paying down the loan is the preferred option.

Of course, everything else is not equal, but I am not sure that keeping your wife in debt-bondage, albeit self-imposed, is the route to happiness.

[Anonymous]

There is no need to spen $5000 on baby stuff. I didn't even spend $5000 on both of my children. There are ways to cut back. Get cribs/clothes/etc from neighbors who no longer needs them or friends with children that have grown out of them.

Beleive me, it is hard to leave your baby. I see many more of my friends opting to be stay at home moms and when they can't they often get a nanny (a major budget buster.)

[Anonymous]

Anonymous wrote:I'm confused how you owe the IRS in October. The time to pay what you owe was April 15. You can get an extension to file your RETURN, but taxes DUE are due on April 15. You may be looking at underpayment penalties and interest. You sure you know what you're doing?

+1, just because you filed an extension doesn't mean you can keep their money until October.
I'd do option number 3. You do not need to spend $5000 on baby furniture.

[Anonymous]

$5000 is way too much to purchase new baby stuff. Get a used crib on Craigslist or neighborhood listserv or ikea. Same for other furniture. You really need less thn you think, buy used. Kids grow so fast that people end up not using toys, gear and clothes as much as they think before they are on to something else. I say $1000, tops, is what you need for crib, mattress, sheets, breast pump, bottles, car seat, snap and go, dresser/changing table, etc. I got a ton of that stuff free on my neighborhood listserv and just played it forward by giving it away now that my baby isn't a baby any more.
Pay off the student loans but only if you still have an emergency fund. Your next biggest child cost will be childcare. So start factoring that into your budget, good luck

[Anonymous]

Anonymous wrote:OP here. Thanks for the responses. Yes, we will owe some interest for paying late, but it's minor. I don't think we owe a penalty, because it's the first time we had insufficient withholdings, even though we withheld more last year than we had in previous years.

As for incurring tax liabilities by selling stock, we're going to realize those capital gains sooner rather than later, anyway, since we need the invested money for a house down payment. So either we sell now, or we sell in 6 to 12 months.

The conundrum here, as some of you have noted, is really about the psychological benefit of erasing the debt now, rather than waiting 6 more months. And whether we'll be able to save up for the down payment once we do that. (I assume our savings rate will go down slightly once the baby comes; I'd just like to keep it in high gear until then.)

By paying off the loans early using investments, I would like to give my wife whatever small sense of "freedom" she can get so long as she's working in "Big Law," where she feels trapped and unfulfilled--and overworked in a way that would be astonishing to even most driven people.

I am afraid she will honestly contemplate the SAHM choice once the baby comes. That is not an outcome I welcome, frankly. I hope in the coming years to be able to make more of the money in this partnership and allow her to lean back with a less demanding and more fulfilling job--but she has massively more earning potential than I do now, and it's not like living in this city is cheap.

She hasn't even been working in big law for two years!! Yeah, sounds like she has no drive and will be a SAHM mom as soon as you have that child. If I was you I'd at least put off paying the loans with a large chunk of cash. Do you know what you are doing for childcare yet? We spend a ton on our nanny, but luckily it is only for a few years. Not really sure why you two didn't wait another year before having a kid.

[Anonymous]

You don't NEED to buy a house, you WANT to buy a house. Wait until after the baby comes and you have made some decisions re lifestyle changes (work, childcare, etc). Homeownership costs are more than just mortgage principal and interest, there are taxes, insurance, unexpected costs that always arise with a me home (new roof, new HVAC, etc.), regular maintence, potential HOA fees, etc.

Raising a child while working BIGLAW isn't easy, esp for a woman, I know bc I did it. Neither is getting a new law job. I love it when people say oh, I plan on getting a government job for work life balance, but then realize it is super hard to get a fed Job, there are hiring freezes, insanely long hiring process, etc. I think you like the $$$ your wife brings in and that is all well and good but BIGLAW expects associates to work to partner, you can't be an associate forever, they will eventually find a way to get rid of you if you don't make the cut. You cannot count on here high salary for a long period of time if she isn't committed to doing what it takes to make partner. If your wife is already expressing reservations of working BIGLAW before the baby, then you are in trouble, as a couple if you don't address this now.

I wold advise holding off on all serious expenditures, whether it is paying off student loans or buying a house, etc. sounds like you two have enough going on with a new baby, revisit it after baby arrives.

[Anonymous]

Option 3 - Sell high. I wouldnt chance the value falling.

[Anonymous]

I agree with the others about not needing $5k for baby items. Really, you need a carseat, crib, mattress, baby carrier, pump and some bottles to start. You can easily get this for under $1000 and if you have a shower, you can get most of the items that way.

If you aren't interested in staying in DC, you should speak with your wife about it before buying a house. Why not just keep renting/saving while looking for where else you would like to live? Wouldn't it feel great to move somewhere with a lower COL and pay cash for your house? Your wife can likely be a lawyer anywhere. You haven't said what you do, but my guess is you can do it elsewhere, as well.

I wouldn't cash in the stock to pay off the loans or IRS. I would cut back the student loan payments so you can have the money on hand to pay the IRS and purchase any baby necessities you need. I would probably buy a newer car as opposed to putting more money into the current car that may have reached it's end of life. There was a thread on here not to long ago about what is the point to stop putting money into a car and realize it would be cheaper to buy a newer car. Also, with a baby, you want something safe and reliable.

[Anonymous]

Anonymous wrote:Thanks, 21:03. We talk about it all the time. (I am not more candid on an anonymous Internet forum than I am with my wife.)

Obviously, I will be supportive of whatever professional/personal choices she makes, and I assume she will be of mine.

But life will be financially more manageable if we remain a two-income household, and I strongly prefer that arrangement.

Also, I like that my wife works. My mother worked and it just feels right to me. I've always worked in offices full of women, often for women bosses, and I think workplaces are better in most ways for having lots of women in them, at all levels.

This is funny because my mom worked so I am a SAHM for the time being. My mom missed out on all the things I wanted her there for and she was a teacher so she wasn't putting in Big Law hours. Don't discount your wife wanting to be a SAHM- it's not forever...for most women. Has she considered working part time? And unless you have free childcare, you will be paying a premium for a qualified person to care for your newborn which will take away from your financial goals.

And if you are living like you are in grad school I find it ridiculous to spend $5,000 on gear for a newborn who doesn't know the difference between the $300 stroller and the $1300 one. You shouldn't spend more than $400 for a crib, you don't need a changing table (a dresser with a changing table pad affixed works better since you can use it after a year), a good rocker is worth the money but be sensible with spending on an infant.

[Anonymous]

Anonymous wrote:Again out soul crushing taxes hurt people trying to do the right thing

Owing $10,000 suggests non-payment, not a soul-crushing tax policy.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Again out soul crushing taxes hurt people trying to do the right thing

Owing $10,000 suggests non-payment, not a soul-crushing tax policy.

If you are in reputable degrees you should be tax exempt until student loans ate paid off. Crap like history or liberal arts should be suffering for stupid degree choices.

[Anonymous]

OP, wait on big decisions until the baby is born. You may change how you feel when your baby is born and put in your arms. You may want your DW to stay home with the baby if you can afford it.

[Anonymous]

Don't let her be a SAHM. I make $200k, my wife $100. She went SAHM and the drop in income blows.

[Anonymous]

OP: Your wife is 5 mos pregnant, which means 4 more months of Big Law salary + I assume 18 weeks paid maternity leave at 100% salary. So, you're looking at 8 more months of BigLaw salary, minimum. Keep paying your loans down the first four months. Once baby comes, hoard your cash. Forget the house until your wife has settled into something permanent.

W/r/t cost of a baby, $5,000 IMO is low to spend on your first baby. I'm also a big law associate and we just had our first a year ago. The costs add up. We spent well over 5K and I don't think we went over the top on anything. I'm not comfortable buying anything used for a baby, so that may be why my #s were so different from that of PPs.

Has your wife considered returning P/T when she comes back from maternity leave?

[Anonymous]

Anonymous wrote:OP: Your wife is 5 mos pregnant, which means 4 more months of Big Law salary + I assume 18 weeks paid maternity leave at 100% salary. So, you're looking at 8 more months of BigLaw salary, minimum. Keep paying your loans down the first four months. Once baby comes, hoard your cash. Forget the house until your wife has settled into something permanent.

W/r/t cost of a baby, $5,000 IMO is low to spend on your first baby. I'm also a big law associate and we just had our first a year ago. The costs add up. We spent well over 5K and I don't think we went over the top on anything. I'm not comfortable buying anything used for a baby, so that may be why my #s were so different from that of PPs.

Has your wife considered returning P/T when she comes back from maternity leave?

What the hell did you buy for your kid?