Retirment and college funds on tight budget

[Morgana]

We are trying to rearrange our finances so that I can be a SAHM or at least cut my hours drastically. I'd like to be able to live off of DH's income before I approach my boss about less hours just in case something goes bad and I'm out of a job completely. We're so close to making this happen. Right now, we both contribute 15% to retirement. Without my income our retirement contribution decreases substantially. DH and I make about the same amount of money. So, I think it's important for him to continue with 15% or even more if possible. We're also contributing $2000/yr to DD's college fund which comes out of my paycheck now. We can live off of DH's income by stopping contributions to the college and decreasing the ones to retirement funds. I'm working on cutting our grocery budget but it's been difficult to do that with our crazy schedules. Once I quit we'll have more time to bargain hunt and cook from scratch. Other than that we've cut everything else drastically.

So, I'm wondering...for those of you on a tight budget, do you make college and retirement funds a priority? How much do you contribute? My mom thinks it's nuts for us to contribute so much to retirement and college. I'd feel so bad if we cut back in those areas just so I can SAH. I feel selfish even though I know it'll be better for DD in the long run if I SAH now. I'm really torn on this.

[Magelet]

we don't put anything towards retirement or college. that said, we're 20 and 23, don't have kids yet, and barely had the money to put towards rent. we're moving into a rent free sit for a while cause we can't really afford the rent. soo.... not exactly a great model. As soon as we have any extra money, we'll start saving something for retirement, even if it starts out as 10 bucks a month each. Because honestly, even if we don't plan to ever retire, there is a good chance we'll end up unable to work for a period of our lives. If not, we'll take the money and go do fun stuff like travel when we're old.

[Tjej]

How old is your DD? How much do you already have saved? Do you think it is okay if you pay for 75% of her college instead of 100%?

Are you paying down a mortgage or paying rent? How many years left do you have on your mortgage?

We live relatively frugally and contribute about $1500-2000 a year for college (but we have 2 kids now) and probably about 15% for retirement (DH is the only one working).

I think setting aside for college and retirement are good ideas, BUT I also think that if a person is paying high interest on debts (or even moderate interest on debts) it is smarter to pay those off first. BUT I also should say I think this ONLY IF you are able to pay the debt off, not incur more debt, and then give MORE to retirement and college savings later.

For us, we are paying down our mortgage like there is no tomorrow and expect to be done in a couple of years. That will free up a lot of money each year for college savings and for retirement savings.

HTH

Tjej

[Morgana]

Originally Posted by Tjej

How old is your DD? How much do you already have saved? Do you think it is okay if you pay for 75% of her college instead of 100%?

Are you paying down a mortgage or paying rent? How many years left do you have on your mortgage?

Tjej

DD is only 15mos now so there's lots of time to play catch up later on. We do plan on having one more baby. We're okay with only paying partial for college. Our parents didn't help us out with college expenses so we had to work full time to pay for it ourselves with the help of some loans. We thought that was a great learning experience so we'd like our DD to do the same but we'd also like to be prepared to help her out when needed to avoid loans.

We are debt free except for our house. We aren't paying any extra on it though. We have 35yr left on the loan. We have two big expenses before we have another baby. We need new flooring. The carpet is especially destroyed in the room that would become the new baby's room. We also need a new "to us" car. We both have 2 door cars and that just won't work with two car seats. We'd like to pay cash for those so that's where my paycheck is going to now. So, we're in good shape financially right now but it's really tight on just DH's income. With out the college fund we have $32/mo to spare. With time (and learning some new skills) I think I can cut out $200/mo from our grocery budget.

[Tjej]

Sorry this is such a book!

35 years is a really long time on a mortgage. I personally would work at paying that down more than kids college money and possibly even retirement. Just think about how much you pay each year in interest. It's pretty staggering, even with a good rate. The more you pay down earlier, the less you'll be paying in interest over the years. With 35 years left you'll still have over 15 years left when your kids are going to college? Then you'd have both college AND a mortage to worry about. That doesn't sound pleasant to me.

For the flooring - We've been redoing our house and the easiest to install yourself and nicest (IMO) we've put in so far is resilient flooring. It's strips of laminate that stick together. Easy install, doesn't need a lot of tools, looks good and wears nicely. Warmer than the click laminate, and doesn't scratch up either. We got it at Home Depot. Not that you asked for flooring types, but just thinking to save you money...

For the cars - We have one car that the kids generally ride in - the second car just has one carseat for if one of us is going somewhere with one of the kids. So I'm just saying you might get by with only one car that works for both kids. It isn't hard on us at all. We call the cars "mama's car" and "daddy's car", but really they are "2 kids/whole family car" and "only one kid needs to come or no kids car".

You'll probably find it much easier to save on groceries when you are not working. The times I've been out of the house full time for a week or two I realize what regular working families deal with all the time. Taking longer at the grocery store and really considering prices and meal planning have us eating on much less per month than our double income friends. I just have more time and energy to put into figuring it out and making it work.

It sounds like you are in a good position to make it work. When you are at home with the kids you save money in other ways too - you don't need the work wardrobe. You don't do the occassional work lunchtime out with coworkers. Your entertainment needs can be met by free local stuff you have time to read about in the local paper instead of Gymboree classes. Preschool isn't a necessary expense, you can do much of the same yourself for thousands less a year. The list goes on.

When you get into a saving mindset, it just becomes a part of how you make decisions and you don't even notice it unless someone/something draws your attention to it. Your college and retirement savings will fall into place and you'll likely find you are able to get back to similar levels in a little while (year or two) once you adjust how you spend your money.

One thing that has made a big difference in how I see money/choose to spend it is considering people in the third world. I think about how much they get by on, and I realize that even when I am being super cheap and thrifty I have so much more excess than they make it on. Sort of a useful guilt trip, I guess?

Tjej

[Morgana]

Oops! I meant 25 years left on our mortgage not 35. But 25 is still a long time too. We've been in the house for 5 years and haven't paid much extra. In those years, we've paid off our other debt, got married and had a baby. We've also had to do a few big projects like a new roof, painting the house and rebuilding our front porch. So, we haven't had much extra to put on the mortgage but we've paid cash for everything else along the way. I think once we get settled into our new income level then we'll find extra money to throw at it. Ideally, I'd like to continue working part time - or in my industry it's "on-call". On-calls sometimes only work 1-2 days a month but it's usually more. That little extra will help.

As for cars, yep we plan on only having one "family" car that can fit both kids. Right now, we both have coupes so I don't think it's even possible to work that out with two car seats.

Thanks for the tip on the flooring. We do want to go with some kind of faux hard wood. We'll have to check that out. We'll have enough saved for the flooring and car by the end of the year if I continue working full time. But we won't need to purchase those for at least another year.

And thanks for the other tips and encouragement. It sounds like we'll be okay in the long run even if it's tight while we figure out a new lifestyle.