“Rich” but Broke - What can we cut?

[Anonymous]

I moved a special needs kid to private school which is $42k per year. I had to cut down on my 401k. I still contribute enough to get the company match. With my next raise l will start increasing the 401k again.

[Anonymous]

Anonymous wrote:You mortgage is very high for your income.

+1 OP, the daycare years will be behind you soon, and you will get some breathing room. But since you are currently not maxing *either* retirement plan, and you likely have not started saving aggressively for college, most of that money should be immediately redirected to those goals. You still need to be tracking spending to figure out where the rest is going (and making sure you're not overwitholding since you're only bringing home 50% and not maxing out), and make some adjustments in the parts of the spending that don't affect your quality of life. I'm thinking especially about kids' activities for preschoolers - that's unnecessary and probably just what you do because when you look around your neighborhood that's what you see rich SAHM's doing. You can't be on autopilot like that with your incomes and PITI. You have to be vigilant about keeping other costs down to justify the house.

[Anonymous]

Anonymous wrote:You mortgage is very high for your income.

It’s really not. They gross close to $30k a month. Their mortgage is less than 20% of their gross income. Their monthly net income seems low. I’m guessing their monthly health insurance cost must be quite high, and they get a significant tax refund.

[Anonymous]

I have very similar stats OP (slightly lower income, no car debt) and DCUM tore me up for having too much house. I dunno, at 2.75% in a good school zone, I don't think moving is the answer. We are fine if nothing goes wrong, but we don't have the cushion I would like and also aren't saving much beyond retirement.

[Anonymous]

Anonymous wrote:I have very similar stats OP (slightly lower income, no car debt) and DCUM tore me up for having too much house. I dunno, at 2.75% in a good school zone, I don't think moving is the answer. We are fine if nothing goes wrong, but we don't have the cushion I would like and also aren't saving much beyond retirement.

I think OP has a lot of mortgage but I also don't think she should move, because she can't beat the rate. But the belt has to be tightened somewhere. They're close enough to the end of the car notes to just ride it out, but their next vehicle needs to be a Toyota, seriously. Can't have the best of everything on a fed salary, it just doesn't compute.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We make more than you but drive a 10 year old Honda we bought for cash. Who spends $1k/month on cars? Do you have 4 drivers in your family and need 4 cars?

They have two cars. OP's already said that the cars are too expensive but they are almost paid off now. Cars are really expensive - if you haven't bought a car for a decade, you might not realize HOW expensive. We're looking at having to replace our 11 year old Kia Soul and WOW are we having some sticker shock.

OP hasn’t bought a car in almost 7 years either! She is just still paying.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You mortgage is very high for your income.

It’s really not. They gross close to $30k a month. Their mortgage is less than 20% of their gross income. Their monthly net income seems low. I’m guessing their monthly health insurance cost must be quite high, and they get a significant tax refund.

It's the opposite, their net income is very high at that gross, probably because they are not maxing out their traditional 401k. The morgage payment will continue to go up with the tax increases. My kids are older, and the expenses do not go down significantly after daycare. Summer camps are expensive, after school for 3 kids will be over $1500/month, and wait until high school. Go on wyzant and check the tutoring rates for AP classes. G*d forbid one of the kids will need therapy or speech. The insurance coverage is ridiculous and the therapies are $$$$. Mine have adhd and the testing only was 4k.

[Anonymous]

Anonymous wrote:

Anonymous wrote:These rich but poor threads are getting so old.

This is very common. A lot of 'rich' people are one disaster away from losing a lot. Not everyone with a high income is good with money, like not every low income person is bad with money. If these threads are getting old, show yourself out.

Is your name Jeff? No? Then be quiet.

DP

[Anonymous]

I think you made some good choices or got lucky, for example good job with the house! That rate and good schools can’t be beat.

It’s a matter of couple of years and then money will free up. Can one of you do some extra remote work on the side?

[Anonymous]

Your house is too expensive but, you can't change that now.
You have to endure it until the kids are in public school.

Don't have another! And may have to sacrifice retirment savings for a while.

[Anonymous]

Anonymous wrote:

Anonymous wrote: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/

These mythical, well qualified, part-time sitters are very difficult to find. When you find them, they command a higher hourly rate. Proceed with caution.

Also this plan would only work for the school year, which would also include spring break, etc. Don’t do this - you’ll end up spending more.
Also don’t move. People underestimate the costs associated with that even for renting. Moving fees, realtor fees, then you’d be a landlord and have to fix things immediately vs some deferred or optional maintenance or fixing things at your pace. The only house thing that could make sense is if you have a basement that can be separated from the house w/ an outside entrance. You could rent that out until the kids are out of daycare. Also, once your oldest is in K, switch the youngest to a nanny share for the last year and if she can pick up your oldest from school that will be cheaper than aftercare

[Anonymous]

Anonymous wrote:Cars were admittedly expensive. Husband (then fiancé) had been in a bad accident some years prior and didn’t let us buy anything but a large SUV. We drive gently used Acura MDXs that came out to about $46K with taxes (very little down b/c students, hence the 84 month loan). The large cars ended up being the right car with 2 kids/car seats/stroller etc. Biking to work isn’t practical with 2 kids in daycare and coordinating pickup/drop off. Doesn’t make sense to sell car now, almost paid off. We drive to metro and use govt transit subsidy to get to work.

Yes we have some savings from my time in big law. Enough for a rainy day. Most was used to pay off school debt (approx 500K combined by the time we graduated).

We will be mindful of not keeping up with Jones’. Very aware of expensive house (bought when I was in big law) and cars. 2 young kids in this pandemic while I was in big law was not sustainable for me personally, so I took a giant paycut to work fed. Maybe the answer is also to go back to private…

Lots to think about. Thanks for the reality checks and helpful advice.

You simply don't get you have a spending issue and are trying to justify it. It sounds like the solution is to go back to big law. Never even heard of an 84 month loan.

You are keeping up with the Jones and probably outspending them.

[Anonymous]

Your mortgage is super high, but you already know that. We have the same hhi and ours is $3700 PITI. I would try to find less expensive daycare and hang onto your cars.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You mortgage is very high for your income.

It’s really not. They gross close to $30k a month. Their mortgage is less than 20% of their gross income. Their monthly net income seems low. I’m guessing their monthly health insurance cost must be quite high, and they get a significant tax refund.

One of them is a Fed so it’s unlikely they’re paying outrageous prices for health insurance.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You mortgage is very high for your income.

It’s really not. They gross close to $30k a month. Their mortgage is less than 20% of their gross income. Their monthly net income seems low. I’m guessing their monthly health insurance cost must be quite high, and they get a significant tax refund.

One of them is a Fed so it’s unlikely they’re paying outrageous prices for health insurance.

Piggybacking on this - OP, you say your health insurance costs are high. Make sure you are using fed health insurance - it's good and way lower cost than lots of private sector options. Also, lordy, cancel kid activities - your two children under 3 do not need ANY additional activities.

Bottom line is that you have two options: 1) Increase your income. This will help, but they way you set up your initial choices, you are likely always going to spend at your income level and, as a result, feel broke. 2) Re-adjust how you think about spending/lifestyle. This will be hard because your biglaw classmates and your neighbors and your kids future schoolmates are allllll going to be spending money like crazy. If you're not in a position to do that, you need to re-set to a more frugal mindset and make choices that reflect your priorities.

Also, childcare costs really do decrease - but you need to decide if your family is going to do rec center daycamp and neighborhood soccer or fancy $600 camp on the campus of a private school and weekly music lessons/tutoring/horseback riding.