newbie with a "what would you do" money question...

[ultrafighter]

Hi, everybody!  I just joined this morning, and I must say....  I've become quite the unproductive employee since then!   I'd like to get some feedback from people to see what you would do in our situation because there has already been a WEALTH of knowledge I've come across so far in a ton of other areas.

I am very blessed to work for a company that gives us an annual bonus.  In fact, mine is paying out this Friday.  Normally, there would be no question what to do with it, but...  Let me give you all the background info and then step back to see what you think.

My husband and I haven't actually conceived yet, but we are going to officially start trying in a matter of days.  We have one more debt remaining (yay), and it is $5200.  My bonus, after taxes, will be about $1,020.  We are going the midwife/birth center route. It just so happens that midwives are less expensive, as if I needed another reason, but our health insurance is a high-deductible plan so no matter what we do we will have to pay a lot of money out-of-pocket.   So here's my dilemma: do we put the extra money towards our debt as we have done in previous years, or do we begin saving up for the cost of our midwife and delay paying off the debt even longer than it's scheduled to take?

Another thing to consider is that my husband is in retail and does receive bonuses of varying amounts quarterly.  I think I know what I want to do, but there is wisdom in the counsel of many.  Thanks for your thoughts, everyone!

[bearski55]

I would pay the debt down. It could take you awhile to get pregnant and it doesn't make sense to pay the interest.

[crunchy_mommy]

Originally Posted by bearski55 

I would pay the debt down. It could take you awhile to get pregnant and it doesn't make sense to pay the interest.

I agree. It took DH & I 2 years to get pregnant, I know it can happen much more quickly or take even longer, so it's hard to guess. But a current debt with interest trumps potential future expenses in my book. I think most midwifes offer payment plans so you could do small chunks at a time instead of all at once. Pay down the debt and then put money aside each month for birth/baby expenses.

[LoveOurBabies]

I'm one of those people who gets pregnant on the first try and knowing this I would still choose to pay the debt down. You have at the very least, another 9 months to save for the midwife.

[CookiePie]

Welcome!!!!  I agree with the above posters, put it all toward the debt!  Get it paid off asap & then start a fund for the midwife!  Good luck!

[ollyoxenfree]

Yep, pay the debt down. It is exciting and tempting to plan for a pregnancy though. If you can't resist, then take a small portion of the bonus, maybe 10%, and start a savings account. I'm assuming that you are making regular payments toward the $5200, so it is continually shrinking. As that debt is paid off, you can increase the portion of those quarterly bonuses that you put into your pregnancy fund. But generally, I'd pay down the debt first. 

[TiredX2]

I guess I'll be the dissenting voice.

To me it would depend on a combination of the interest rate you are currently paying AND how long it will take you to save for the midwife.  Given that you have $5200 debt, I assume that $5200 is a lot of money to you.  Well, how quicklly are you paying that off?  How much will the midwife cost and how much can you put away towards that per month. If, for example, the midwife is going to cost $3K and you can put $300/month away towards that, it will take you 10 months to save for the midwife.  I would start saving that *now*.  Then, each month I didn't get pregnant, I would instead send the $300 payment to the debt instead.

Why I say it is a combination is because of the following:

1) if the interest was very low (say, below 3-5%) and I didn't have ample savings (which would include medical savings) I would be willing to pay that interest to have the extra security.

2) if the interest was very high (over 10-15%) I would prioritize paying that off to almost *anything* else

Have you found the midwife you plan on using? You could definately go in for a meet and greet and find out exactly what your financial obligations will be (both how much and when during the course of care).

[3timesamom]

Pay the debt down, our midwife bartered and took payments:) Without that debt you will set the foundation for financial fitness and be well on your way to a less stressfull time after baby:)

[annethcz]

I'm with Tired on this one.  Most midwives I know don't accept credit cards for payment (or at least they didn't when I was having babies a few years ago).  While you do have 9 months to save for the midwife once you do get pregnant, you will most likely need to pay cash for the birth.  So figure out how much you'll need to save for the midwife, and how much you can afford to save for month.  Based on that, I'd use part of the bonus to start a savings account for the midwife, and throw the rest of your bonus at your debt.

[ultrafighter]

Thanks so much, everyone!  We decided to wait one cycle before we do anything.  If I'm not pregnant after this go-round (this past weekend was ovulation), we'll definitely send it off towards the debt.  It's a student loan, btw, very low interest rate.  We've been paying on it faithfully for eons, throwing extra at it whenever we can.

If I am pregnant, then we'll reevaluate!

I'm finding that the more I read about just how miraculous conception is, how utterly perfectly a whole slew of things has to be lined up, the more "discouraged" I get about conceiving on our first try.  I'm trying to remain realistic and yet hopefully optimistic.  That's what sparked my whole internal debate.  haha  But we have time yet to go slooooow.

Thanks again for y'all's input. 

*edit* We hadn't made a decision.  I had, and it actually ended up not being the one we went with. lol

Edited by ultrafighter - 3/5/13 at 11:34am

[crunchy_mommy]

Ahhh knowing that it's a student loan & low-interest does change my answer. I still think it's wise to pay debts off ASAP but you won't have much interest and it's tax-deductible so not throwing all your money toward the debt isn't a big deal.

Good luck trying to conceive!

[TiredX2]

I'm so glad you've found something you are comfortable with.

Since you haven't had a baby before (I don't think), I just wanted to make sure you knew that most widwives will do a free consultation even before you're pregnant.  You can ask questions and make sure you're a good fit.  When we interviewed for #2 we were really nervous and when we interviewed possibility #3 everything clicked.

Good luck!

[sarah_bella1050]

Do you have an emergency fund yet? If not I would put the bonus in savings.

[Escaping]

I'm assuming you live in the US? I really have no idea how much a midwife or your insurance deductible will cost, but it would depend on what assets you have, the interest rates on the debt and how quickly you can have access to cash if you need it in an emergency.

[ultrafighter]

Thanks so much, everyone!  There has been a decision made!!

We met with a midwife on Friday (still waiting to test right now so this was really preemptive), and she is a perfect fit for us spirtually, in her birthing philosophy, etc.  Her fee is $4000 from start to finish which is ridiculously better than an OB and hospital birth.  Even with our insurance.  We have a high deductible health plan so no matter what/who/when/how we are going to pay a lot out of pocket.  Our last debt is a student loan, and the interest rate is about 2.8%.  We also do have an emergency fund already.  DH wants to go ahead and start saving up for the midwife, so we shall do that.  A pregnancy is only so long.  Sallie Mae is happy with our minimum payments so she's not banging down our doors right now; the student loan can keep trucking along.  If we keep paying the minimums, it'll be paid off in 2019.  Not ideal, but that's assuming absolutely no good fortune comes our way for the next 6 years.

He swears up and down he's got a gut feeling that I'm pregnant.  Honestly, I don't have a gut feeling one way or the other right now so I'm not sure how I feel about lacking that...  Just waiting for AF on Saturday so I can either test with accuracy or breathe a little and try again in a couple of weeks.

[sarafi]

Good luck!

For you guys, the good news is that you have a small amount of debt at a low interest rate. Run the numbers yourself, but I'am guessing that not paying it off is not costing you a lot. Just make sure you want to pay that amount/month in interest--you may have something else to cut for a bit that would not hurt your lifestyle :-)

I think that if I was in your shoes, and had a set amount after insurance to pay for a birth I might divide that by 7 months (to be safe) and save it each month. Then if  Auntie Flo  came, I would ship that payment off to the debt and try again next month.

That way you would have a clear goal, and a "win" in paying off more debt, even with the "loss" on not conceiving that month.

(Disclaimer--I paid $8,000, then $4,000, then $4,000, then $1,200 out of pocket for my babies, so I do understand that they can get expensive.)