Monday, January 19, 2015

Baby Budget Options

We have 5 budget options to look at in regards to welcoming our little goober into our lives. The first budget, listed below, we have already decided does not work well for our family (It’s the budget where SCB becomes a stay at home dad). Since his boss just gave him a HUGE raise and we found at least one daycare we are comfortable with, it doesn't make too much sense for SCB to quit and stay home with our little guy when my maternity leave ends... but we wanted to include a stay at home budget option since some of you have asked about it.  


Option 1: Baby Budget - SCB stays at home & Family gets “platinum” Kaiser Insurance.
Spending: (Money that leaves the bank account each month)

  • Tithe: $392.00 + $20.00 Fast Offering 
  • Mortgage (P&I, Property Taxes): $771.80
  • Home Owners Association: $295.00
  • Groceries & Household Items: $300.00
  • Work cell phone allowance: $60.00
  • Electricity & Internet: $150.00
  • SCB’s Burner Cell or Land Line: $30.00
  • Gasoline: $200.00 (a little less since he’s not driving to work)
  • Date Nights: $80.00
  • Pocket Money: $80.00 ($40 each)
  • Diapers/wipes: $92.00
Savings: (Money for semiannual/annual bills that will eventually leave the bank account)
  • Prescriptions & Dr. Visits: $47.60. 
  • Roxy: $47.60
  • Insurance (2 cars, earthquake & Homeowners): $155.00 
  • Car Repair/Replacement Fund: $100.00
  • Car Registration and Smog Fund: $25.00
Extra Checks: (received twice a year since I am paid bi-weekly but budget 2 paychecks a month)
  • Total Tithe: $392.00 
  • Clothing Replacement: $600.00 a year
  • Vacation: $700.00 (1 trip to visit SCB’s extended family in Utah)
  • Emergency Fund: $308.00
  • Christmas Savings: $600.00
  • Birthday & Holiday Savings: $600.00
Retirement:
  • Just my 8% contribution to my City Pension + $120 a year to a 457 deferred compensation account which adds up to 8.28% of our income.
Now that that one is out of the way,  lets look at our real contenders. We could look at more budget “options” but we eliminated some of them from the running because they didn’t make sense financially for us (some health insurance options only left us with an extra $20 a month for less care, so we tossed those ones out). 

We actually have 2 daycare options and 2 health insurance options to consider, so 4 total budgets. We already know that I will always be on my work plan with Kaiser because if I don’t use my benefits, the money we can cash out is reduced enough that we don't really save any money but forfeit better insurance on my end.

Our first health insurance option is for the entire family to join me on my Kaiser “platinum” insurance plan. The second option would be for the baby and SCB go on his work insurance (a high deductible plan) while I keep Kaiser. Then we need to look at the 2 daycare choices/options we have found (a Montessori school… or paying a friend to “nanny”).
  •  Just a quick mention about the word “nanny” and tax implications. Since we would be the only “family” she is watching along with her own daughter, with the care taking place at her residence and not ours, she does not need to file a license with the state and we are not required to make her a household employee and pay employer taxes. I did the research and we believe in doing things 100% legally or we wouldn’t consider it an option. She is looking to quit her job to stay home with her daughter and make a little income watching our son on the side. We will be meeting today and discussing details to see if it is a good fit logistics wise.

Now that that is out of the way, we are going to list the budget options as they get better for us financially. We know that some decisions can’t be made purely by looking at numbers since peace of mind is a strong factor and worth the money. We actually feel like we have options and that we could live with either budget now that SCB was blessed with such an amazing raise. It actually makes this a much more comfortable discussion to have because we feel like we have options and can make choices instead of just “making it work.” Opinions are welcome in the comments below. I’d love to know what you would do and why!

Option 2: Baby Budget – Family gets Kaiser “platinum” insurance & we pay for 4 days of infant care at a local Montessori school.

Spending: (Money that leaves the bank account each month)
  • Tithe: $608.00 + $20.00 Fast Offering 
  • Mortgage (P&I, Property Taxes): $771.80 
  • Home Owners Association: $295.00 
  • Groceries & Household Items: $300.00 
  • Work cell phone allowance: $60.00 
  • Electricity & Internet: $150.00 
  • SCB’s Burner Cell or Land Line: $30.00 
  • Gasoline: $250.00 
  • Date Nights: $100.00 
  • Pocket Money: $80.00 ($40 each) 
  • Diapers/wipes: $118.00 
  • Daycare: $1,081 (including the annual enrollment fees saved for monthly) 
  • Discretionary money: $100.00
Savings: (Money for semiannual/annual bills that will eventually leave the bank account)
  • Prescriptions & Dr. Visits: $47.60
  •  Roxy: $47.60 
  • Insurance (2 cars, earthquake & Homeowners): $155.00 
  • Car Repair/Replacement Fund: $100.00 
  • Car Registration and Smog Fund: $25.00 
  • Christmas Fund: $50.00 
  • Birthday Savings: $47.00 
Extra Checks: (received twice a year since SCB is paid bi-weekly but we budget 2 paychecks a month) 
  • Total Tithe: $216.00 
  • Emergency Fund: $1,000.00 
  • Roth IRA: $384.00
Extra Checks: (received twice a year since I am paid bi-weekly but budget 2 paychecks a month)
  • Total Tithe: $392.00 
  • Clothing Replacement: $600.00 a year 
  • Vacation: $804.00 (1 trip to visit SCB’s extended family in Utah) 
  • Roth IRA: $1,404.00
Profit Share Check:
  • SCB’s work pays profit sharing once a year. We don’t count on this money coming in to survive and will use it for large purchases, savings, retirement, or mortgage payments.
Retirement:
  • My 8% contribution to my City Pension + $120 a year to a 457 deferred compensation account. 
  • SCB’s 401 k gets 6% of his salary plus a 3% employer match. 
  • We can save some money from our extra paychecks to add to a Roth IRA: $1,788.00 
  • 10.62% to retirement
What we like about this plan:
$1,000 to savings every year, a monthly discretionary amount of $100 to help as a budget buffer, really good health insurance for baby, husband and me, a dependable daycare option (no worries if the “nanny” or her daughter gets sick), 10% of our income is going to retirement and our extra paychecks are going to savings (things like vacation, Retirement, & Emergency Fund savings).

 
Option 3: Baby Budget –Baby & SCB get High Deductible Plan (I keep Kaiser) with 4 days of infant care at a local Montessori school.

Spending: (Money that leaves the bank account each month)
  • Tithe: $636.00 + $20.00 Fast Offering 
  • Mortgage (P&I, Property Taxes): $771.80 
  • Home Owners Association: $295.00 
  • Groceries & Household Items: $300.00 
  • Work cell phone allowance: $60.00 
  • Electricity & Internet: $150.00 
  • SCB’s Burner Cell or Land Line: $30.00 
  • Gasoline: $250.00 
  • Date Nights: $100.00 
  • Pocket Money: $80.00 ($40 each) 
  • Diapers/wipes: $118.00 
  • Daycare: $1,081 (including the annual enrollment fees saved for monthly) 
  • Discretionary money: $100.00 
Savings: (Money for semiannual/annual bills that will eventually leave the bank account) 
  • Prescriptions & Dr. Visits: $100.00 
  • Roxy: $50.00 
  • Insurance (2 cars, earthquake & Homeowners): $155.00 
  • Car Repair/Replacement Fund: $100.00 
  • Car Registration and Smog Fund: $25.00 
  • Christmas Fund: $50.00 
  • Birthday Savings: $50.00 
  • Vacation Savings: $100.00 
  • Clothing: $57.00 
  • Roth IRA: $53.00 
Extra Checks: (received twice a year since SCB is paid bi-weekly but we budget 2 paychecks a month) 
  • Total Tithe: $216.00 
  • Emergency Fund: $1,000.00 
  • Roth IRA: $134.00 
Extra Checks: (received twice a year since I am paid bi-weekly but budget 2 paychecks a month) 
  • Total Tithe: $392.00 
  • Roth IRA: $2,808.00 
Profit Share Check: 
  • SCB’s work pays profit sharing once a year. We don’t count on this money coming in to survive and will use it for large purchases, savings, retirement, or mortgage payments. 
Retirement: 
  • My 8% contribution to my City Pension + $120 a year to a 457 deferred compensation account. 
  • SCB’s 401 k gets 6% of his salary plus a 3% employer match. 
  • We can save some money from our extra paychecks to add to a Roth IRA: $3,578.00 
  • 12.91% to retirement
What we like about this plan:
$1,000 to savings every year, a monthly discretionary amount of $100 to help as a budget buffer, a dependable daycare option (no worries if the “nanny” or her daughter gets sick), a bit more going to retirement (12.91% of income), our vacation fund gets budgeted in on a monthly basis so we could add in some fun day trips since we get $400 more a year, clothing savings works its way in monthly and we see a small amount of money going to our Roth IRA each month with our extra paychecks covering just our emergency fund and retirement.

 
Emotional considerations:
By trading less health insurance coverage for Eli and SCB, we end up with an extra $2,190.00 a year, not factoring in the additional $600 more a year we have added to our monthly budget to cover the higher cost of doctors’ appointments and out of pocket medical fees. Eli will have a minimum of 5 doctor’s appointments in 2015 if he is healthy and if his visits are similarly priced to what SCB’s have been in the past with his insurance, those will cost us the $600 extra we are already budgeting in. The question becomes is saving $2 grand “worth” the gamble that everything goes okay?  

 
Option 4: Baby Budget – Family gets Kaiser insurance with a “Nanny” 4 days a week. 
Spending: (Money that leaves the bank account each month)
  • Tithe: $608.00 + $20.00 Fast Offering 
  • Mortgage (P&I, Property Taxes): $771.80 
  • Home Owners Association: $295.00 
  • Groceries & Household Items: $300.00 
  • Work cell phone allowance: $60.00 
  • Electricity & Internet: $150.00 
  • SCB’s Burner Cell or Land Line: $30.00 
  • Gasoline: $250.00 
  • Date Nights: $100.00 
  • Pocket Money: $80.00 ($40 each) 
  • Diapers/wipes: $118.00 
  • Daycare: $880 
  • Discretionary money: $100.00 
Savings: (Money for semiannual/annual bills that will eventually leave the bank account) 
  • Prescriptions & Dr. Visits: $47.60 
  • Roxy: $47.60 
  • Insurance (2 cars, earthquake & Homeowners): $155.00 
  • Car Repair/Replacement Fund: $100.00 
  • Car Registration and Smog Fund: $25.00 
  • Christmas Fund: $50.00 
  • Birthday Savings: $50.00 
  • Vacation Savings: $100.00 
  • Roth IRA: $51.00 
  • Clothes: $57.00
Extra Checks: (received twice a year since SCB is paid bi-weekly but we budget 2 paychecks a month) 
  • Total Tithe: $216.00 
  • Emergency Fund: $1,000.00 
  • Roth IRA: $384.00 
Extra Checks: (received twice a year since I am paid bi-weekly but budget 2 paychecks a month) 
  • Total Tithe: $392.00 
  • Roth IRA: $2,808.00 
Profit Share Check: 
  • SCB’s work pays profit sharing once a year. We don’t count on this money coming in to survive and will use it for large purchases, savings, retirement, or mortgage payments. 
Retirement: 
  • My 8% contribution to my City Pension + $120 a year to a 457 deferred compensation account. 
  • SCB’s 401 k gets 6% of his salary plus a 3% employer match. 
  • We can save some money from our extra paychecks to add to a Roth IRA: $3,804.00 
  • 13.20% to retirement

What we like about this plan:
We get all the perks of option 2 health insurance wise with emergency fund savings, vacations, etc. AND we get more going to retirement (13.20% of income).

 
Emotional considerations:
We change daycare options with this budget and pay considerably less a month for infant care… but it does open up some additional things to consider. By having just one person watch him, he will get more individualized care and will get to be raised in a like-minded home… but it opens up the possibilities for some frustrations along the way.
  • What if her daughter is ill (currently 10 months old)? Or what if she is under the weather for the day? Would I need to take a sick day for their illnesses to make sure my son doesn’t get sick… and would we pay her for that day ($55 a day)? What would we do about vacations? How much notice would they give me if they are planning a trip out of town and where would we place Eli during that time? Would we still pay them if we have a scheduled vacation? Or do we decide to coordinate time off together and pass up “last minute opportunities?”

Option 5: Baby Budget – I keep the Kaiser “platinum” insurance, Baby/SCB get High Deductible Plan, with “Nanny” 4 days a week. 
Spending: (Money that leaves the bank account each month)
  • Tithe: $636.00 + $20.00 Fast Offering 
  • Mortgage (P&I, Property Taxes): $771.80 
  • Home Owners Association: $295.00 
  • Groceries & Household Items: $300.00 
  • Work cell phone allowance: $60.00 
  • Electricity & Internet: $150.00 
  • SCB’s Burner Cell or Land Line: $30.00 
  • Gasoline: $250.00 
  • Date Nights: $100.00 
  • Pocket Money: $80.00 ($40 each) 
  • Diapers/wipes: $118.00 
  • Daycare: $880 
  • Discretionary money: $100.00 
Savings: (Money for semiannual/annual bills that will eventually leave the bank account) 
  • Prescriptions & Dr. Visits: $100.00 
  • Roxy: $50.00 
  • Insurance (2 cars, earthquake & Homeowners): $155.00 
  • Car Repair/Replacement Fund: $100.00 
  • Car Registration and Smog Fund: $25.00 
  • Christmas Fund: $50.00 
  • Birthday Savings: $50.00 
  • Vacation Savings: $100.00 
  • Roth IRA: $254.00 
  • Clothes: $57.00
Extra Checks: (received twice a year since SCB is paid bi-weekly but we budget 2 paychecks a month)
  • Total Tithe: $216.00
  • Emergency Fund: $1,000.00 
  • Roth IRA: $134.00
Extra Checks: (received twice a year since I am paid bi-weekly but budget 2 paychecks a month)
  • Total Tithe: $392.00 
  • Roth IRA: $2,808.00
Profit Share Check:
  • SCB’s work pays profit sharing once a year. We don’t count on this money coming in to survive and will use it for large purchases, savings, retirement, or mortgage payments.
Retirement:
  • My 8% contribution to my City Pension + $120 a year to a 457 deferred compensation account. 
  • SCB’s 401 k gets 6% of his salary plus a 3% employer match. 
  • We can save some money from our extra paychecks to add to a Roth IRA: $5,990.00 
  • 15.99 % to retirement
What we like about this plan:
We put a full 15% away for retirement and have the most income at our disposal. 

 
Emotional considerations:
Again, we pay considerably less a month for infant care… but we have those nanny questions to consider…. And the health insurance considerations too.

Over all Choice:

If we look at our most expensive budget, the Kaiser insurance with the Montessori daycare and compare it to the three others options, we can potentially save $2,270 a year if we just switch insurance.... if we just switch daycare and keep the insurance, we save slightly more at $2,496 a year... if we switch both daycare and insurance, we could save $4,682.00

Our insurance decision will be based upon some interviews with some doctors and delivery. If he goes anywhere near the nic-u, we are putting him on Kaiser without question... but $2,200 a year is enough money to question how many visits our little guy might have with the doctor (since we are factoring more money in on a monthly basis that's not included in the savings)... 

Since I'm meeting with the potential nanny today, we hope to have that decision made by mid February so we can either pay to hold his space at Montessori, or move forward with nanny land.  

But what would you do?

11 comments:

  1. If you put him in regular daycare, you are practically guaranteeing yourself a ton of sick visits to the pediatrician. Not that this is a bad thing or should sway you against daycare-it's just one of those inevitable parts of childhood. Kids get sick when they start preschool/school/etc. So, if you opt for traditional daycare, I personally would go for the better insurance, at least for the first year. Also, you need to factor in tax implications for the various daycare options. I don't know that the nanny expense is deductible if she isn't reporting it as income.

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    Replies
    1. That's on our list to talk about today... (tax write offs). Since we would pay her over $600 a year, we should issue a 1099 for the care and with that and writing checks we should be able to still use paying an individual for car on our taxes.

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  2. You brought up a good point of what to do if the nanny or her daughter is sick but what do you do if you choose Montessori and your child is sick? You can't take your son there then while he's sick. Also, your son will probably have higher chances of catching illnesses at a daycare then at someone's home.

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    Replies
    1. If Eli is sick, we already know we have to keep him at home and take a sick day for work for the daycare.... so I'm going into our conversation today assuming the same situation will apply with the nanny (if he's sick I can't bring him...) but the question becomes even more if I have to add in her daughter getting sick or her getting sick to the factors.

      Since I have more vacation time (even after maternity leave) than SCB will, I will probably be the one calling in sick to care for the baby... but we may try to alternate who stays home if there is something big going on at one of our jobs.

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  3. If you go with the high deductible plan, look into whether it qualifies for an HSA. Could provide some tax savings to help offset the cost of meeting the deductible, depending on your tax bracket. Generally individuals don't issue 1099's unless they are self-employed. You wouldn't issue a 1099 to a plumber you paid more than $600 for work performed on your home. If you pay a nanny more than $1,900, you have a household employee. You would need to withhold social security and medicare tax, prepare W-2's and pay both the employee and employer portion of social security tax on Schedule H with your 1040.

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    Replies
    1. I should probably look into an HSA since I can do one of those through my work...

      I'm not sure if this is in all states, but in California if the care takes place in the other persons home where they get to make independent choices and they are watching their own children as well, we do not have to make them a household employee... (if it was in my home, we would). We also don't have to give her a 1099 at the end of the year either (I just learned that) because she will be giving us a monthly invoice documenting the payments we have made for tax purposes.

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    2. Sorry, didn't read the post completely. Correct about not a household employee if work is not being performed at your home. Nanny should provide year-end summary for all payments received; you'll need it, plus their identifying number, to take child care credit. Have the nanny complete Form W-10 if their identifying information isn't on the monthly invoice.

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    3. Yup, that's the plan :) If she doesn't fill out a w-10 we won't be denied our tax credit because we can put her name, address, etc on the form and the IRS says that's good enough if she doesn't get an ID number for some reason, especially with proof of payment and the monthly records.

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  4. If the nanny or her daughter is sick, you will need to call in sick or have a back up. I would only recommend a home daycare if you have a back up option. It was very stressful for me the first two years of my daughters life by having her in a home daycare. We pay more for a center but I think its worth it.

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    Replies
    1. We think we have a back up plan in place, which is why we are considering it. I have another friend from church who will be quitting her job after she has her baby (due right around the time I go back to work), and I know they would appreciate a little extra income from watching our baby boy if we needed them to.

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  5. We had a home run daycare for our kids and it worked perfectly. If they got sick, one of us would stay home with them. You'd have to do that whether they were in your friend's home or at Montesorri so no difference there.
    I remember my mom telling me to just let the kids play outside in the dirt or whatever and not be so considered with cleaning them off every ten minutes. She said the more they are exposed to germs when young, the stronger their immune systems. She was a nurse so I believed her--especially since I never had any of those nasty childhood diseases, chicken pox included. I followed her advice and my kids were hardly ever sick. The occasional stomach bug but it would pass quickly.
    I'm not saying let your kids walk around filthy, but just let them be normal kids. We did have them wash up before eating though. LOL!

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