Private College Student Loan

income 95K - why do things feel tight?

Hi, my spouse and I together make about 95K, which is not that high, but I feel is decent. We together save about 16-17% of our gross in 401K. Our housing cost (mortgage plus escrow combined) is about 15% of our gross. We spend about 600/month (7-8% of gross) on our son's day care. We don't have education loans or car payments. We don't have credit card loans either. We only eat out about once a month. However, for some reason, our budget feels tight. We only have one son and our child care cost feels like a lot. I don't know how others with 2-3 kids in day care do it, especially those in day care centers that cost up to 1200/month. We are starting to look into saving for our child's college, and their K-12 education options (including private schools), and it just doesn't feel feasible. I just want to ask, is this normal for people in this income range? Are things so tight that you feel like you can't have a second child or can't put your only child in private school? Is this why many people have credit card debts or can't save enough for retirement (others are in the same situation but they just finance it though using credit cards or not saving for retirement)? Can't ask this to my co-workers or friends, so thought I'd ask in this anonymous forum. Thank you!

Public Comments

1. Kids cost. They get even more expensive as they get older. If you aren't packing away for college yet in a 529 for each...start now. Lay out a plan for each kid. Tell them they will get, assuming they behave and don't get involved with drugs, enough money to attend two years of junior college and live at home, and then two years of state school living in the dorm. That is the amount. (about 55k depending on your state) Burn it all in the first year, it is gone, hope that was good for you. Get off your duff and get a scholarship, finish your degree in 3 years, what ever is left you get to spend on a car or a house or what ever you want...at that point it is all yours. Might work and might get them through a degree without breaking your ability to eat after age 70.
2. Well there are everyday things you can do to cut your budget. Perhaps your wife could work from home and get rid of that daycare bill or while she's working at home maybe babysit both her child and someone else's child too to earn extra money. You both could have split jobs like she could work during the day and you work during the night. You could get rid of what's costing you extra money like don't use the dishwasher, get rid of the cellphone and tv cable service. You could determine not to buy any new new clothes for a year. She could buy hand-me-downs for the child or exchange clothes with neighbors (flea markets or home clothes sales). Meals at home could be streamlined (some women think every meal needs a dozen ingredients and that's just not the case). You could grocery shop only once a month (if you go more you will buy more). When going places do it on a Saturday and do everything you need to do on that day in the one trip. Hopefully you don't have a dry cleaning bill as that eats up money real quick. Instead wash good clothes in Woolite and hang them on a rod over the tub in the bathroom. You really don't need a lot of expensive cleaning supplies (that eats up your money real quick too). Windex gets you thru everything (I know, I once had a business cleaning homes). If your electric bills are high then insulate around your windows and buy insulated draperies. Years ago when in non-public schools the kids wore uniforms and that saved money.
3. Based on your numbers, you should have a decent cushion every month. 95,000 income, less 16% in 401k, less assumed 25% in taxes, less 14,000 housing cost leaves 46,000 a year net. That's 3800 a month net income, after taxes and housing cost. Day care of 600/month leaves about 3200/month. That's a lot of money. Assuming you have listed all your major expenses, then it's unlikely your smaller monthly expenses can consume 3200 a month, given you have no outstanding loans or credit card debt. You're doing a great job saving in your 401k, much better than most people. That amount of saving should put you in good shape for retirement. Do you really know where the remaining 3200/month is being spent? You should track your expenses carefully for 3 months and see if you might be able to tighten up somewhere. My gut feeling is you have enough income so you should not feel like you have a tight budget.
4. Send the kid to public school and stop worrying.