Thursday, March 14, 2013

My Baby Planning

**As a disclaimer we are currently not expecting a child and are still in the planning and gaining emotional strength stage J**

So I know I’ve kind of tabled the whole baby discussion as of late so I figured to pick it up again here today. I believe when I last left off my wife and I had begun to openly discuss our fears, doubts and apprehensions about parenthood. Now while a good amount of anxiety exists from my side about the radical change in lifestyle we will make, I’m feeling a lot more confident and competent of my own abilities. From learning and taking the initiative to open myself up more to my wife and those around me, I really feel like I’ve been making great progress putting some healing on the baggage that I have carried around with me in my life.

In turn I’m growing in confidence (my therapist would appreciate this) that the person I am today is more than capable to take on the changes and challenges that come with parenthood. After all, the person I want to become doesn’t exist and is not real and all I have is the character I look at in the mirror every day. And that guy has put a ton of work into forming the life that he wants to live.

 On the planning side there’s been tons of discussion between my wife and I and I think we’re a lot closer than we previously have been on crafting our exact household financial changes once we have kids. I know that I’ve heard it said by family members, friends with kids and in various parenting articles that it is impossible to financially be ready for kids. Well I’ve also read and heard that it’s impossible for the little man to get ahead and build wealth, so you can understand that I’m kind of looking forward to seeing if our household finances can withstand the “storm” that is children.

Up to this point we have done some intense financial housekeeping, the two biggest feats having become debt free and establishing our emergency fund. Our essential cost of living bills (rent, utilities, groceries)  can be covered with either one of our incomes. So for the change of expecting a kid here’s a quick rundown of our game plan.

From the moment we find out until the time our kid is delivered we plan to throw every cent of disposable income we can into our emergency fund. As doctor visits add up and bills reach our doorstep we’ll simply move the payment amount from our emergency fund into our health savings account and pay the bill from the HSA. There’s a one-two punch with this approach. 1 – We will have cash ready in hand to pay expected medical bills and 2 – the deposits into our HSA will be tax deductible (which for 2013 is $3,250 for an individual and $6,450 for a family).  From there we will also likely add some line items to our monthly budget that relate to our expected new arrival before they arrive to cover things like the kids’ clothing, furnishings, an expanded grocery budget and accessories like strollers and bottles.

Once the kid arrives and everyone is home safe, sound and healthy, my wife and I plan to take what should be a bloated emergency fund, down to an agreed upon amount and send the excess money to another category such as travel, an ESA account, etc. We also plan to make a shift on our savings goal. Up to this point we have been saving our disposable income for the cash purchase of a home and have been saving 6% of our gross income amounts for retirement. When our first child arrives we will ramp up our retirement savings to 15% of our gross income, contribute $166.67 monthly to our kid’s ESA (current annual maximum contribution is $2k) and as I said earlier ramp up some of our existing monthly expenses such as clothing, groceries and maybe even entertainment to accommodate the extra person J.
From there we will still throw every cent of disposable income for our goal of paying cash for our first home together, just not at the frantic pace that we have been doing so lately. In addition we are also considering being open to the option of having one parent stay at home with our kid the first few years of life and truly becoming a single family household.

That last statement could generate a blog series all by itself, but I’ll try to sum up with this. Our goal of paying cash for a house is a marathon. We know that we won’t get there in lightning quick fashion like we did paying off all of our debt. But the work that we have done up to this point has been about opening up our options. From “retiring” early to prioritizing giving to traveling to our hearts’ content, we put ourselves in prime financial shape to open up our options and be able to make some choices in life that we couldn’t have otherwise. One of those choices is whether or not we want one of us to stay at home full time with our child. And having that choice in itself is worth more to me than being able to write a check for a house.

1 comment:

  1. I think that it's great that you're thinking this out ahead of time. We were still in financial dreamland when we had our two kids, so we didn't have the ability to rethink anything after the fact. With that being said, having kids is wonderful and worth every penny!