July 23, 2024
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‘The mind-blowing cost of daycare necessitated it’: We’re balancing saving for the future with enjoying life now but struggling with our budget. How can we manage better?

Hi Money Minder

Hey Money Minder,

So, I’ve been lurking here for a while and decided to use a throwaway name for obvious reasons.

Quick info: I’m a 41-year-old man and my wife is 36. Both of us are working. We have a 3-month-old baby who just started daycare, and I could really use some advice on our budget. I’ve got this saver/scarcity mindset and am always panicking about not saving enough for the future. It’s a tough balance with wanting to enjoy life now. My wife doesn’t stress about it as much, but she’s not a big spender either. Any thoughts, tips, or questions would be awesome!

Some key points:

I’ve included my yearly bonus as monthly income just for budgeting. In reality, our bonus has been much higher in recent years, but I kept it at the lowest reasonable number. I’ve never counted it before, but the insane cost of daycare forced my hand. I set aside enough from this year’s bonus to cover the next 12 months of daycare, and with the dependent care flexible spending account—fsa—the costs should drop by around $200 per month after our baby turns one.

All our credit card annual fees are covered by various travel credits. We live about 2000 miles away from our families, so we fly home 2-3 times a year. We use all the travel credits, but I’m not sure there’s a better way to show that in our budget.

We’ve got a $45,000 emergency fund in a high-yield savings account—hysa—and another $16,500 in the same account for daycare. We’re not drawing from our health savings account—hsa—right now and have been saving receipts for the past six years. We’re using it as an investment/retirement tool, but it’s there if needed.

EDIT: The image didn’t upload, so here’s a link to it.

Thanks a ton,

Budget Worrywart

Response from THE MONEY MINDER:

Sure, here it is in bold:

Hello There

Hi there,

First off, congratulations on the new addition to your family! Balancing a budget with a new baby can indeed be challenging, but it sounds like you’re already making thoughtful and significant efforts to manage your finances effectively.

Given your saver mindset coupled with necessary immediate expenses like daycare, I commend you on setting up an emergency fund and budgeting your annual bonus conservatively. Utilizing your bonus to cover daycare is a prudent move, allowing you to mitigate the substantial monthly costs. The expectation of a slight reduction in daycare costs after your baby turns one is an encouraging future consideration.

Considering your detailed approach to your credit card usage and the offsetting travel credits, it seems like you have a robust understanding of how to maximize these benefits. Since both of your families live far, maintaining a budget that accounts for these travel expenses makes total sense. It’s good to see you’re thoughtful about this instead of letting it become an unexpected hit to your cash flow.

Your decision to use an HSA as a retirement vehicle is a strategic choice and speaks well of your long-term financial planning. Keeping receipts and treating the HSA as a lever to pull if necessary adds an additional layer of financial security.

To fine-tune your budgeting strategy, you might want to consider a few areas. First, ensure your emergency fund is continually replenished as needed. Secondly, regularly revisiting your budget to adjust for any unexpected expenses or changes in income will help maintain a balanced approach. Lastly, given your saver mindset, it might be beneficial to set clear goals for both immediate spending and long-term saving. This way, you can enjoy the present without compromising your future security.

Your approach seems realistic and careful, which is often the best strategy when navigating significant life changes. Keep monitoring and adjusting as needed, and you should be able to balance both saving for the future and enjoying the present.

Wishing you the best of luck on your journey.


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