Handling financial stress

Hello BPN, I have been having a lot of worry and stress about our financial situation. We were a 2 income home (in our early 40s) and now recently went to a 1 income when DH got laid off. Most days the stress is manageable but some days I find myself going out of my mind with worry. We have a mortgage and tax that we can handle on my salary but other things have had to be cut (e.g., eating out, small shopping, retirement savings, college savings for children). I am finding myself fixating on retirement savings and paying for kids schooling (at the expense of enjoying the small things in life) -- will we every retire, how will we live, how will we ever pay for the kids' college etc. I am just starting to feel like a bad an irresponsible parent and person for not being able to do these things, epsecially when I have friends who pay for their kids to go to private school so that they can have a head start in life. I am unable to reason with myself and find myself awake at night a lot. Help! Slap some sense into me, please

Stressing about finances on a decent salary

Hi Fellow BPNers, The last few months I have been very worried about our finances. We have 2 young children and a $400k+ mortgage and I feel I am obsessing disproportionately abt our financial situation. My husband and I earn decently -- 160k -- between the two of us but still we seem to have no savings. We put away a some money in our 401k every month and only abt $150 a month for our kids' education. A bulk of our money seems to go in mortgage, home maint. taxes and childcare. We don't eat out much (5 x a month) and hardly ever buy new things.

I don't quite understand what we are doing wrong that we can't save more money. Some days I get so stressed after I look at online calculators telling you what you need for retirement and to pay for 2 kids' education. I feel we'll never have enough for either of those 2 priorities and that we will have to work forever. I also have other interests that I feel we won't be able to achieve like traveling the world, etc.

I was never one to worry about money. In grad school I lived on 15k a year and had no debt. I was happy and carefree. I don't know what's come over me but I've become very worried about money after the kids were born. My husband feels I am worrying about nothing. Not having savings, etc. does not bother him. But he comes from a family where his siblings have declared bankruptcy and live off their credit cards, Compared to them, we look super responsible.

Am I worrying unnecessarily? I guess I can't sort out if it's a real problem or one I am creating. Should we try to save more and how? I'd love to get ideas from other folks who've taken a stricter approach to their budget. Is it irresponsible for us to not have proper savings for our kids college? I feel ashamed to worry like this when I know we make good money and have so much. frettingabtfinances

You don't *need* to pay for your kids' college; there are community colleges, loans, scholarships. If you do, that is wonderful--but you don't have to. There are so many people who have nothing right now. I would count my blessings.

If you still find yourself worrying, maybe seek help for anxiety (I'm sure you have health insurance, another thing so many people *do not* have). poor mom

No, it's not irresponsible of you to not save enough to pay for your kids' college educations. It's a wonderful gift if you can do it (and $150/mo is a lot more than I'm able to save for my kids right now!), but not at the expense of giving them a secure home, the best care and the widest range of experiences you can give them NOW. When they reach college age they can apply for financial aid, get student loans, work to pay their own way, etc.

But it is irresponsible not to fund your own retirement if you possibly can. Are you maxing out your 401(k) contributions? Do you have other long-term investments? What about making extra payments on that mortgage so that you won't be burdened with high housing payments when you're retired?

If you're not saving anything beyond your current needs, then sure, take a hard look at your expenses, see what you can cut out or cut down on and create a budget. Maybe see a financial planner who can help you figure out realistic savings goals and how to achieve them. But it doesn't sound to me as if you're in dire straits or anything; try to relax. Your kids won't hate you if you decide to travel the world instead of paying for four years at an Ivy League. Middle Income Mom

We are almost in the exact same position as you in terms of what we make and our mortgage. We have 3 kids rather than 2, but the oldest is in public first grade this year. Once he got out of preschool, his childcare costs went from $18,000/year to $4,000/year (mostly in the summer) plus another couple of thousand for classes. And this is after- tax money.

We decided to take one year off from contributing to our 403 (b)s. Then I will be back at work full time and the middle child will be in Kindergarten (though we may do private for that one year since our school district has half-day Kindergarten *and* fairly large K classes), so we will get both a boost from my increased salary and from not having to pay for preschool. When our youngest is out of preschool, we are planning on putting into college accounts what we were paying for preschool plus a little more.

Now we have no college savings (other than a $50 savings bond someone gave our oldest as a baby gift , we aren't contributing to our retirement accounts, and we are draining a little of our savings each month to stay afloat. But in 3 more years we plan to be putting $2500/month into college accounts plus maxing out our 403(b) s plus building up our savings again plus having a little extra every month. It sounds unbelievable, but we are just spending A LOT of money for preschool and daycare AND I've gone down to part time to help manage the load at home while our kids are so young. In 3 more years, we'll have about $40K/year more (taxable) from my salary plus $35K/year more (already taxed) from decreased childcare costs.

My guess is if you run the numbers, you will see that your trajectory looks similar. Don't let the ''now'' freak you out.

Also, I heard that you are supposed to contribute to retirement first and then do college funds. Not sure why, but that's what we're doing. Anon

I would encourage you to track your spending and divide it into discretionary and non-discretionary. Save as much as you can, but you also need to set aside money for fun stuff and current life experiences. It may very well help to seek out a financial planner who can act as an objective 3rd party to mediate between the two of you, but your husband has to buy into that otherwise it will be a waste of time and money. Best of luck, John

The way to deal with the stress is to get informed. You need to sit down and figure out *exactly* how much of your pay you spend on the essentials (mortg., ins, prop taxes, utilities, childcare, etc), and how much is discretionary (dinners out, lunch expenses at work, ipads, kindles, flat screens, CD collections, and other ''hobbies'' -- which regrettably, some people call ''needs''). Work up a spreadsheet and do a monthly breakdown of expenses, and also a yearly one (for things like prop taxes that are payable twice a year, or summer camp).

If it all goes to the essentials, then, you are in good company with many households who are trying to deal with the outrageous cost of everything these days, childcare being one them. It's not clear if you have that level of insight into your expenses. If you were simply estimating, get ready for a big surprise with the ''undocumented'' ones. A common one is the tendency to grossly underestimate how many times people go out to dinner and how much they actually spend. The same holds largely true of many ''lifestyle'' expenses.

Childcare is usually very costly to a working couple, so maybe it costs you as much as the mortgage, or even more. That said, this income level even after taxes still leaves you with a whole lot of net. It's hard to imagine where it all goes. Home remodeling, etc tend to eat up a lot. Even then, it's hard to find how the numbers add up to that much.

How do I know this? We are very much in your situation in terms of exposure, expenses, home mortgage, etc. Except for one thing: we have been unemployed for two years, despite our advanced education, professional experience, etc. We used to make that kind of money, but we never stressed that it is not enough to put some of it away. We were really grateful to the universe and helped friends and relatives as we could. Things are much more uncertain now for us, since we have very little income. But we still manage, somehow. And we are not alone, we have other friends who are also mid- and late-30's with kids who are in similar if not tougher straights. My point is that what you consider a stressful financial situation is the lap of luxury for someone with no job, no health insurance, a sick spouse and two kids.

I think you need to learn to appreciate what you have, and to also find out how much, MUCH tougher other people have it. If you can't save with that kind of income, what will do it? 180K? 200K? 500K?

We would be happy and truly comfortable running a similar household on just 60K. how do others manage to live on much less?

Staying on top of bill and statements

I'm a terrible filer and tracker of my finances. I always pay all my bills in full and never spend more than I have, but my issue is probably rooted in being poor as a kid, and anxious feelings around money that make me want to avoid the topic. What happens is that I let statements and things pile up because all my bills are automated, and then I have a huge and daunting task of dealing with and filing this stuff once it becomes a mountain. So is it wise to have all my bills converted from mailed statements to emails, or will this even further cause me to create a financial mess. Do any money phobes out there use Mint or some other finance tracking service to help them stay organized? What's the minimum I need to do on a regular basis to be responsibly on top of things? Thanks for helping my $ anxieties!

Getting financially ready for a baby

I read that people should have some basic financial things squared away to prepare for a baby. Things include buying life insurance (maybe supplemental disability insurance as well), setting up a will and trust, updating the budget, and start saving for college (like opening a 529 account). Did everyone else get all this done before the baby arrived? Is there a one stop shop to cover all my basis easily? I looked into financial advisers but they either cost $4K+, want to manage my portfolios for a 1.5% fee, or are trying to sell me stuff. Thanks for your suggestions! Connie

Anyway, before birth, I went through my finances and updated my budget, and saved up money for a year for pregnancy and first year expenses. I went over my plans w/ my partner because the only thing I was afraid of was dying at childbirth and then needing someone else to do my financial planning for me.

One thing I learned was that I didn't save enough for childcare. I also thought about a will. But didn't do the will till after my daughter was born.

For supplemental disability, usually companies give you one chance a year to enroll. So if you're planning to get pregnant, research beforehand your options and enroll. I think it's too late to enroll and get disability after you give birth.

Usually companies will also give you a chance to enroll in life insurance, health plans, accidental death insurance, flexible spending, etc etc, within 30 days after you give birth. Just make sure you research your options before hand. Because you won't have time after when you have to make your choices!

Similarly, you can't open up a 529 or coverdell account till the baby is born because you're opening a custodial account and I had to give them my daughter's SSN. I'm not a financial advisor so I don't know if there's a way around it.

Lastly, be sure you have your healthcare directive set up before you give birth. That was the one thing I made sure I did before hand as I'm a worrier and one never knows what may happen at birth. Maybe not as important if you're married but I wasn't. anon

-Max out my husband's 401(k) every year with me as primary beneficiary (if I die at the same time, then the money goes to a trust)

-Max out Roth IRA's for both my husband and me (I do not have any retirement plan through my jobs)

-Max out term life insurance for my husband through his employers (we have about $1.5 million in term insurance). I cannot get life insurance. It is not offered through my employers - I work part-time. And, my blood pressure elevated during my pregnancy and has never come back to 'normal' levels since giving birth (without medication), so I am not eligible for most life insurance through alternative means. If we had a 'do-over' I would have gotten a $250,000 to $500,000 policy to cover childcare (I am a mostly SAHM) until the children were in elementary school full-time.

-We buy all sorts of weird types of insurance to cover the 'what-ifs' of my husband's profession - loss of license, short-term disability, long-term disability, supplemental insurance to cover the loss of one type of term-life due to a very narrow part of work in my husband's second job.

-529 plan - we contribute $150/month plus all financial gifts to my children's plans. We use Iowa's 529 for one child and Utah's 529 for the other child. Both are great and the money can be used for either child.

-other financial: We contribute a couple of hundred dollars a month to various mutual funds.

-will's...our assets on my husband's death would fall prey to the 'death tax' (it comes back next year...unless congress changes it), so we are considering doing a trust of some sort...right now we have wills that specify what happens to our assets and who get the kids. We have spoken to who we want to have the kids and who will administer their trusts.

Budgets? We don't really have one. We always planned on living off of one income. My income is gravy. We do stick to paying off our credit cards off every month and 'paying ourselves first.' Periodically, we will shut off 529 contributions if we have a crazy month (September and January, it seems...) -anon