Prioritizing saving/spenidng

[niccig]

I'm going to be working in August for a school district and I already know my salary. We're used to living on DH's salary alone, and the plan has always been to use my salary for savings + house projects + trips to see my family overseas. DH and I are discussing how much to save and for what. We've agreed to double retirement savings and college savings, and that's without the pension I'll get (the amount of that will depend on how long I work in schools, and at this point I don't know how long, so we're not counting that at the moment). This will put us over the target number our financial adviser wants us to be saving for retirement and college.

The question, is what do we do with the rest of my salary. I *really* want to save to eventually redo the kitchen. However, DH's work will probably get less secure as he gets older and/or we may put DS in private school for MS/HS (not sure on this), so potential for less available money in 3-5+ years; so we're thinking while we don't have tuition/DH has a good contract, we should be putting more into available retirement accounts. Extra now will counteract less later. BUT, it means longer to save for the bigger projects we've been wanting to do for 10+ years. And if DH's work does get less, then we'll have less $$ to do the projects in 3-5 years anyways.

And an additional factor to consider, is that when I get my full license in 12 months, I could work per diem some weekends or pick up some work over the summer, though I'll probably do less summer work until DS is older. So my income has a chance to go up through side jobs.

We're trying to be smart about this for once - previously we haven't made best decisions where money is concerned. Retirement is still looking OK as DH did start early, but as I explained, there is potential for his income to decrease in about 5-8 years.

I'm thinking maybe we split the difference. We figure out everything that will come from my salary, see what is left over then split between more retirement and house projects.

[jgenie]

When we got married we lived off DH's salary. We banked every penny I brought home. I maxed out my retirement accounts because I would eventually stay home. The remainder went in general savings. My salary doesn't compare to DH's but 8 years of saving my salary was a significant amount. I love looking at that account.

[KrisM]

We max out our retirement options and then save after that for house projects. I would like more to go to house things than does, but I know retirement is important. So, after retirement, I figured out how much each month to put in for a car payment (to save for the next car purchase), and whatever is left goes to house projects.

We save very little for college. When DS1 goes, DH will be 53 and will have been saving for retirement for 26 years. At that point, we plan to drop our retirement savings to the amount needed for the match. The balances will be large enough to gain more by the market changes than our deposits anyway. We will use the money to partially cash flow college.

[abh5e8]

I would save more, before spending on travel or remodeling. Retirement accounts don't allow that much per year, right? 18k in a 401k and 5500 in an IRA. so every year you don't max them, you lose out on that tax advantage. There is a little room for catch up payments later on, but it's small, and will never make up for many missed years. Especially with big upcoming expenses like private school, and dh' s job loss or decrease in income, I would be saving every extra penny. You can always decide later to use it for something fun. But, I know that is just me. I'm a saver.

Congrats on the new job! Its a great "problem" to have.

[Liziz]

I would do as much as possible to max out retirement savings, too. Not only is there a tax advantage to that, but saving more now vs. saving more later can be a substantial difference (i.e. - you give the money a lot more time to grow if you put it in earlier). This is a very nice "problem" to be considering, though!

[Zukini]

OP, you didn't mention your savings allocated to emergency funds... If you don't have 6-8 months of expenses saved up in a relatively liquid account, I would prioritize that till it is beefed up sufficiently. So 1) max out retirement space to take advantage of all matches, tax advantages etc 2) build up complete emergency fund and then allocate remainder to additional investment accounts earmarked for college (would do this 3rd if there are tax benefits to be reaped as well, and bump it to second place once e-fund is complete ), retirement, and medium to long term projects / goals eg home renovations. This also does not take into account any non-mortgage consumer debt eg credit cards and auto payments, which is something I would pay down aggressively with the new income whole bumping savings to next level and before lifestyle creep sets in.

Also now is a good time to check your life insurance coverages, and make sure you and DH both have sufficient term life insurance independent of your employers to cover DS expenses (at a minimum) through 18, and then maybe for college and to pay off any mortgage. Depending on your coverage/ ages / health, the term policies may be a blip every month or may be a more substantial line item in the budget.

[niccig]

Thanks everyone. We've had a few difficult years with DH's work and expenses from me in school, so we're looking forward to being able to save. I really want to get ahead as just don't know what will happen with DH's work.

We will each be maxing out a retirement account through work. I agree that it's best to save as much as we can. We do need to prioritize travel as both our fathers aren't doing well and we know we have limited time left. We've agreed that house projects are lower down the list. We did replace the appliances in the kitchen last year, so that's made the kitchen a better work space. I do want to save what we can for college as DH's decrease in salary will match DS's college years. I've seen so many college friends with crushing debt, I'd like to help as much as we can. We're actually pretty OK for retirement due to starting early. I'll also see what side work I pick up and that can go to house projects or more savings too.

[niccig]

OP, you didn't mention your savings allocated to emergency funds... If you don't have 6-8 months of expenses saved up in a relatively liquid account, I would prioritize that till it is beefed up sufficiently. So 1) max out retirement space to take advantage of all matches, tax advantages etc 2) build up complete emergency fund and then allocate remainder to additional investment accounts earmarked for college (would do this 3rd if there are tax benefits to be reaped as well, and bump it to second place once e-fund is complete ), retirement, and medium to long term projects / goals eg home renovations. This also does not take into account any non-mortgage consumer debt eg credit cards and auto payments, which is something I would pay down aggressively with the new income whole bumping savings to next level and before lifestyle creep sets in.

Also now is a good time to check your life insurance coverages, and make sure you and DH both have sufficient term life insurance independent of your employers to cover DS expenses (at a minimum) through 18, and then maybe for college and to pay off any mortgage. Depending on your coverage/ ages / health, the term policies may be a blip every month or may be a more substantial line item in the budget.

Yep, you're right I didn't put in emergency fund. After maxing out retirement options through work, that's next on the list before anything else. We'll only have my student loans, and we've factored that in to bills, as no credit card debt. Both cars are paid for, though DH does want to replace 1 car, which was the plan but we needed to do an expensive repair earlier in the year, so we've agreed it has to wait for at least another year. I'm driving that car and I hope to stretch that 1 year to 2 years.

I am worried about lifestyle creep as that's happened to us before. This time though, I'll have a paycheck, so I want to set up auto deductions, so the money is put to use before it hits our checking account, or straight out of the checking account as soon as it comes in. I'm also going to be using mint more regularly than I have to keep on top of the creep in lifestyle.

[Zukini]

Yes, Mint is awesome! We sing its praises here as it's been awesome to help us keep up with what's going on in our accounts, and the bottom line net worth numbers keeps us pumped and focused on our goals. Yay! For being on top of your numbers, knowing where the money really goes is half the battle

I think making sure to account for some "fun" one-time stuff or experiences with the new income that isn't necessarily a new committed expense or recurring bill might make saving seem less of a chore. It will allow you to enjoy the added household income but stave off the dreaded creep that comes from feeling deprived and consequently adding to your monthly committed spending. Maybe every quarter designate a spend $ amount for something concrete that you will remember well vs numerous small splurges and overflows here and there (so for example, a refreshed work wardrobe for yourself or a weekend camping outing etc).

[niccig]

I think making sure to account for some "fun" one-time stuff or experiences with the new income that isn't necessarily a new committed expense or recurring bill might make saving seem less of a chore. It will allow you to enjoy the added household income but stave off the dreaded creep that comes from feeling deprived and consequently adding to your monthly committed spending. Maybe every quarter designate a spend $ amount for something concrete that you will remember well vs numerous small splurges and overflows here and there (so for example, a refreshed work wardrobe for yourself or a weekend camping outing etc).

This will be the difficult part. For so long we've put things off and said "when I'm working, we can do x". There's a lot of things we need to replace/repair.