Saving?!

caebah · November 2013

So I am a teacher, let's face facts I have a very low salary, about $34K, husband does something different but makes about the same. I am realizing I would love to be a stay at home mom when the times comes or even just work at a private school teaching where the demands aren't as stressful but it would be about a $10K decrease. This may be too personal but are any couples out here living on an income about $40K-$50K a year? We talked about ways to save, obviously getting better about groceries, but I need to learn the ropes...I mentioned giving up cable and just getting Hulu or netflix, but he really does like to watch every sport so that is out of the question....I guess I am freaking out once we have kids money will be super tight...maybe I just needed a vent..thanks for listening!

Ducktale · November 2013

This depends 100% on where you live, the cost of living varies enormously. It's good to plan ahead though. Biggest indicator on whether this would be possible would be to live off Hs income and put yours into savings/debt. If it turns out you need to fall back and use some of your income, then it may not work for you. A few years ago we crunched the numbers and we would have been able to afford me SAHM but not with enough cushion/leftover for us to be comfortable. So we made it our goal to pay off student loans ASAP, which reduced our monthly expenses by $500, so its manageable for us. If you are short a few hundred, you may be able to cut corners and make it work, if you and H are disciplined enough to be strict about your budget. If you're short by more, then it probably won't work, unless you make big changes (pay off large debt, get a huge raise) Keep in mind you will still need to contribute to retirement, pay for life insurance, etc. I also think the tighter your monthly budget would end up being, the more you'd need in savings to absorb unexpected/emergency expenses that WILL happen, so another reason to plan ahead. If you want more specific feedback, post your budget, this board is really good about providing feedback.

vlagrl29 · November 2013

we totally live on the salary you mentioned but we are in the midwest where the living cost is pretty dang affordable. I do work part time but I stay at home with DD, so I consider myself a SAHM. Besides the cost of living where you are at you should make plans now of paying off bills so when the time comes that's less money that you have to worry about. Cut costs where you can and coupon. I don't buy anything without a coupon or a sale rack

vlagrl29 · November 2013

I also wouldn't SAH if that meant we wouldn't be able to contribute to retirement or have a vacation once a year. Those things are very important to me.

Wulfgar · November 2013

It sounds like you are both entry level at your jobs. Most teachers in my area make in the 50 to 75k on average. You are at the entry level end of the teacher salary. A lot of it depends on current debts, to be a stay at home mom you and your husband will have to basically live without debt. My friends were living on one income of roughly 50 to 60k ( he couldn't get a job based on his degree). She is now making a lot more then this and he is still a stay at home dad.

I am not sure when you want to have your child, but if you want to live on one income only then you will want to pay off all debt and start living on just his income.

That being said, my brother is a teacher and he keeps telling me that he gets roughly 16 weeks a year off with summers off. With you being a teacher, you will have the same schedule as your child(ren) so it will save you on child care expenses.

hoffse · November 2013

This is long, but mine are always long lol.

OP, I personally think that affording a particular lifestyle has more to do with your spending tendencies than your income. Sure, income plays a large role, but people with higher incomes tend to spend proportionally more than people with lower incomes. Did you know that lawyers have the highest rate of student loan default among all the professions? My firm's women's group once brought in a financial consultant to talk to all the women about money. She began by asking us to raise our hands if we had credit card debt. Out of about 20 women there, I was the only one who didn't raise my hand. And I was a first year associate at the time, making about a third of what the partners made, with at least twice as much law school debt because I went private and they went public.

So I think it has a lot less to do with income and lot more to do with spending.

Take a hard look at your expenses - and be honest. To avoid getting overwhelmed, organize them into large categories: totally fixed expenses, totally discretionary expenses, and in between expenses. By in between I mean things that you pay for each month but that could reasonably be altered to reduce their cost - usually things like cell phone bills, cable, even medications (generics vs. name brands).

Include retirement in your fixed expenses - it's too important to consider discretionary. And like ducktale said, make sure to include retirement for YOU in addition to your H. Yes, as a SAHM you qualify for certain retirement options.

Then take into account the cost of other things with a child. Diapers, wipes, clothes, perhaps formula - those are the obvious things. Then you have less obvious things like life insurance premiums. The younger they are, the more coverage you need. Also health insurance premiums - this might go up (a lot) if you and your H currently have individual plans. Also things like whether you want to save for their college from birth, etc.

Add it all up and see if you can afford your fixed expenses, some discretionary expenses (nobody would expect you to give up shopping altogether), and a somewhat reduced version of your in between expenses. Then top off with the added costs of a child. If you can do that on your husband's salary, then I say go for it.

hoffse · November 2013

And because I always have a follow-up, here is my follow-up:

Consider two other points:

1) As a public school teacher, your benefits are likely to be ridiculous compared to the private sector. I know this because my parents both worked for the state - and my mother for a school system. When H and I have a baby, our health insurance premiums will be quadruple what my parents currently pay on a family plan.... and we are in our mid-20's. My parents are approaching 60. If your H is in the private sector, don't discount the value of your benefits.

2) The cost of daycare - for some people, it's so expensive that daycare makes little financial sense compared to what they bring home each month. Research this and see what daycares cost in your area. They vary enormously all around the country so you need to look at your area specifically.

EDIT: One final point - being a teacher doesn't prohibit you from being wealthy. My parents were similar to you and your H - my dad is a college professor at a state school and my mom worked as a tech specialist for a school system before she retired. She actually made less than the teachers because she never had a teaching certificate. They worked hard, saved money, and always lived well below their means. They currently spend about 30% of their take-home pay... and yes, they still have a mortgage and they even joined a country club and have monthly dues.

My parents built a house when I was 3 and then completely, 100% ran out of money after the sheet rock went up. They fired their builder and finished it themselves on a small extra loan from the bank that only paid for supplies. In other words, they were completely broke. 15 years later they had saved enough to send me to a private college that at the time cost $45,000/year in tuition alone (room and board was extra). During my second year of college they bought 2 brand new SUVs cash at the same time, on the same day. During my third year of college, they did a small-ish kitchen remodel - new counter tops, new floors, new back splash, refinished cabinets. And when I graduated from college? They had saved and invested so much of their income that they actually had more money on my college graduation day than they had the day I started.

The best part of this story is that I graduated in 2009. So by my graduation day the market had crashed and they had actually lost about a quarter of their investments. But the numbers still held true. By the way - they have never, in more than 30 years of work, made a 6-figure income combined.

It's all about evaluating your expenses and putting your savings to work. It's not just about income - it's about your income in relation to your spending.

maple2 · November 2013

You have gotten a lot of good advice so far, and ultimately your options will be determined by your individual situation. DH and I had a child while we were both grad students and making less than you currently do in a MCOL area. This was feasible for us b/c we were students with flexible schedules that made it possible to only use daycare part time. We also knew that it was a temporary situation (2-3 years) since better jobs would be coming after grad school. It might have been more stressful without a definite endpoint since living super frugally can be a challenge, so I'm not sure how I would feel in your situation.

Sisugal · November 2013

Ditto - pay off debt is a priority
Build a good emergency account
As teachers you can work during the summers - or tutor thru the year as well (these to assist the two above)
Track your expenses - every dime and then evaluate where your money is going -- does the amount in each category seem to fit your future goal? Can it be reduced? Cut?
Look at cars - you do NOT want a new car - you want a new-to-you car that is inexpensive to own and operate (cost to purchase, fuel efficient and insure)
Housing - keep your housing costs no more than 25-28% of your TAKEHOME pay - if you rent (rent & utilities) and if you are homeowner (mortgage+PMI+taxes+insurance+utilities+HOA)
Limit commuting costs
Personal care - no hair color, highlights, nails, salon treatments
Clothing - plan your wardrobe - (what do you really need - then plan a color scheme and make everything mix and match, but on sale, clearance or consignment )
Babies - you do not need most of what is on the registry lists. Consider cloth diapering (greater upfront costs for diapers, but is cheaper long term, and you can make cloth wipes, kids clothing and items are availble for low cost if you buy used.
Take advantage of free and low cost activities & entertainment , plan inexpensive vacations,
Meal plan, take lunches to work, and limit eating out.
Etc - there are many ways to live on less. Take time to examine your life and priorities and what you are willing to do to make that happen.

Sisugal · November 2013

Ditto - pay off debt is a priority
Build a good emergency account
As teachers you can work during the summers - or tutor thru the year as well (these to assist the two above)
Track your expenses - every dime and then evaluate where your money is going -- does the amount in each category seem to fit your future goal? Can it be reduced? Cut?
Look at cars - you do NOT want a new car - you want a new-to-you car that is inexpensive to own and operate (cost to purchase, fuel efficient and insure)
Housing - keep your housing costs no more than 25-28% of your TAKEHOME pay - if you rent (rent & utilities) and if you are homeowner (mortgage+PMI+taxes+insurance+utilities+HOA)
Limit commuting costs
Personal care - no hair color, highlights, nails, salon treatments
Clothing - plan your wardrobe - (what do you really need - then plan a color scheme and make everything mix and match, but on sale, clearance or consignment )
Babies - you do not need most of what is on the registry lists. Consider cloth diapering (greater upfront costs for diapers, but is cheaper long term, and you can make cloth wipes, kids clothing and items are availble for low cost if you buy used.
Take advantage of free and low cost activities & entertainment , plan inexpensive vacations,
Meal plan, take lunches to work, and limit eating out.
Etc - there are many ways to live on less. Take time to examine your life and priorities and what you are willing to do to make that happen.

jessica490 · November 2013

Well just for comparison purposes, my first real job was $38,000 in HCOL and I bought a small condo with no debt. At first it seemed overwhelming and I did need financial help occasionally from family members ($100-$300 here or there) but when H moved in we were able to buy our own place together. We now both make about $86,000 combined owning a townhouse condo, with no debt or student loans, only a mortgage and 1 car payment. We live within our means and have a great DP for a house and a good e-fund. We don't plan on ever having kids, but if we did today, I feel like we would definitly struggle. We don't live bare bones but we don't keep up with the Joneses either. I don't know how a lot of our friends have 1-2 kids at our age (30). They may make for than us but I know a few of them have major debt just because their spending is out of control. The only thing I can reccomend is to sign up for a budget site (mint.com) and track what you are spending and that may help. Start seeing how much money you have left over each month and start a baby fund. If you have trouble saving up a lot of money, then you are probably not financially ready for a kid yet. Good Luck.

caebah · November 2013

Thanks guys! We are definitely good at saving if needed, and know we can, we do like the occasional date and movie. But H just told me even this week he is making way less than he will be because him and his friend started their own company, so they are just starting out. I'm not really worried about us, just would like to be a SAHM. If I need to continue to teach then I'm perfectly fine with that, I will have and do have awesome health insurance and my schedule will work with my future children.

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