Hello,

I'm fairly new here, but found this site after many nights searching for financial advice. As one who is typically asked to give financial advice, I find myself incapable of finding a sound resolution or finding piece with the choices we've made.

2 Main questions - First, are we saving enough? Second, should we move to a small, cheaper home in the interest of saving more?

Here's the situation:
A couple years ago we jumped into large home thinking we were taking advantage of lower housing prices and lower rates. Knowing kids were in the near future, we bought a home that's a great family neighborhood, walking distance to good schools and plenty big for us to grow into it. In theory it sounds good and it is good, but I worry that the high maintenance costs and large mortgage will significantly hamper our future financial freedom.

I'm married, Mid 30's, one young child, planning for a second in 2-3yrs.
Both of us work, descent jobs, both making in mid 80's plus small annual bonus. We have nearly 400k in investments, No credit card debt, no car payments, BUT we have a big mortgage. Took out a 400k loan for our family home, making our monthly payment with taxes just under $3k/mo. Daycare expenses are much greater than we anticipated with monthly costs around $1300/mo for one child. Currently we're saving approx 8% plus company match (5%), but will most likely have to significantly reduce this amount when a second child comes along -- especially with 2 kids in daycare.

Longstory short... Do we push through the next 5-7yrs with minimal savings due to increased daycare expenses or should we sell the house, cut our mortgage payment and live more comfortably? I do love the neighborhood and think its a great family place, but we're certainly the youngest couple by a few years and sometimes feel out of place. I often wish we had just waiting to buy (especially since market has continued to drop) but now that we've made our move, I can't decide if its better to stick it out or take a loss to correct a poor decision?

My first thought was can you sell the house? What's the housing market like in your area? How big is the home & would something smaller work for you?

Other than the jumbo mortgage, sounds like you're in good shape. What's your emergency fund situation look like?

Homes in the area are turning over, but we'd take a big loss. Estimate that we'd lose 60% of equity in the home (after taking in to consideration 6% agent fees).

For emergency fund - We could access our brokerage accounts, which make up approx half of our total investments. Investment in this account are fairly liquid and would provide many months of support. Otherwise, I have about 2-3months of support in a savings account.

Don't get me wrong, our home and neighborhood are great. And great for family. It would be perfect in 10-15years when we have a bigger family. I would have preferred something more modest and appropriate for our current stage in life rather than buying a house we can grow into.... but maybe I'm obsessing.

What is the outlook for your job now or the near future?

Are you both expected to earn more in the next couple of years?

What are the prospects of getting a promotion?

I say sit on the house for now because you'll end up buying something similar to it in a few years.


Look into where you can cut costs, before selling and moving.

I can certainly relate to wanting to downsize to a more affordable home and putting the extra monthly savings into retirement accounts. My wife and I bought a two story 4BR house after we got married. We envisioned having two kids and were very active on eBay at the time, so we wanted an extra BR to use for an office.

We decided to stop with one child in large part because the daycare expense would have forced us to live paycheck to paycheck. Although I would be fine with downsizing to a smaller 3BR, my spouse has no interest in moving. To her, it is HOME.

So my question is, how does your spouse feel about it? If your spouse LOVES the house, come to terms that you are going to be there for the long haul.

Personally, I would stick with what you got. You never win when you move. Trust me, I've moved many times and have lived in 20% of the states this great country has. I have never come out on top when I had to move, even with luxe corporate moves. Well, I sort of have, but I spend a TON of money in the process (that's another story).

You've got decent $ reserves, things are just tight right now. It is affordable for both of you, as long as both of you keep your jobs, but it at the top of affordability. If it truly is where you would want to be in 5-10 years, you won't win by moving a couple time in between.

Sit back, cut the fat out of the budget and let the impending wave of inflation help this seem more miniscule.

I appreciate the comments - It's good piece of mind. I think we'll stick it out, as our jobs are fairly stable (if any job is stable in this market) and reevaluate when a second child comes along.

It's certainly a place we can see ourselves staying for a long time, so we will continue to cut the fat and stick it out. I've even thought about refinancing which would cut a couple hundred out of the monthly ticket.

In response to DaveInPgh - Your question made me laugh, because it was my wife who originally fell in love with the house Long haul here we come.

We pay $225 per month for two kids, one with "special needs" (two trained teachers on four kids). And that is maximum. A single parent or households with less income would pay even less.

Municipal pay alot of it, financed by taxes. A system with $1.300 a month per child seems geared up for house wifes. Kind of 1950:ish?

$1,300 divided by 20 days (assuming 4 weeks and 5 days in daycare) is only $65 a day. That's actually not bad from what I hear. That is wonderful that you recieve aid and are able to have help with your little ones. I don't intend on being incencitive but not everyone qualifies for government financial aid. Especially since in this case the OP and his spouse make $160k per year combined.


To SMyers8282:

Do both you and your wife work in the same industry? Do you work for the same company? What would happen if one (or both) of you were to lose your jobs? (Not wishing this upon you but it is food for thought.)



8% of 160k is roughly $1,066 a month or $12,800 a year you contribute in savings.



$36,000 ($3000 a month) of your income goes towards house payments.

Considering house insurance, life insurance?, & car insurance for two vehicles that is probably another $10,000 of fixed expenses on the budget.

+$12,800 Savings (8% of 160k)
+$32,000 Taxes (Assuming a high of 20%)
+$15,600 Child Car (1300 * 12)
+$36,000 Home Mortgage (3000 * 12)
+$10,000 Insurance

-----------
$106,400 Total Yearly Fixed Expenses

This leaves $53,600 for Variable Expenses. That is roughly $4,467.00 monthly. What can you tackle on the Variable Expenses and reduce or cut out?

Take a look at ways to save money on this thread.

A few questions/observations:

When was the last time you got a quote on insurance? Have you considered getting a quote for your home, life (term I assume?), and car insurances? This could reduce costs.

What about closing off a few of the rooms to reduce costs re: electricity & heat/cool? How well insulated is the house?

Or perhaps renting out a room to a friend/relative? I know not the ideal situation but this would bring in extra $$ from rent each month. Just trying to think outside the box here.

Who does your landscaping? If you do this yourself you can save a significant amount of money.

From experience with family there seemse to be certain large purchases you might want to start saving towards: A New Roof (Every 20 years or so) and A New Central AC Unit (10-20 years). My grandparents recently had to replace their Central AC Unit. Cost about 18k. My in-laws are in the process of replacing their roof soon. Might be a good idea to start saving towards this.

Hope this helps. If not please diregard.

FWIW, I don't think Northern Light is from the US.

Are you underwater? If so you might be able to negotiate something with the bank holding your mortgage. If not, then if I were you I would refinance to save those couple hundred.

I expect that kids get a little cheaper once they get into school (mine is also in daycare right now). Then you get a ~13 year break, financially, until they get into college. In the meantime, contributing 8% + 5% match, and letting your existing $400k ride, will get you pretty far.

That's what my wife and I planned on doing. I figured that if we saved up enough before starting a family, even if we totally stopped contributing, the existing balances would grow over time. The reality so far has been that we still manage to put some money into savings, so we're doing better than our plan.