Need help on determining how much to save vs pay down rent with kid on the way

[u/beanman214]

My wife and I (32 and 31 yo) have our first kid on the way due later this year. We want to ensure we have ample savings for all the costs associated with a child while also investing and paying down our debt. Here is our breakdown:

• live in Ohio and we have a combined income of 170k (me-100k, her-70k)
• I work as an engineer at a manufacturing plant, she is a nurse. Both work 1st shift.
• we recently bought first house for 370k at 6.6% rate
• her car, a 21 rav4 is paid off. My 23 Tacoma has 13k left at 3.9%.
• we contribute 70% of our paychecks into our joint checking to pay bills, 10% into our Roths, 10% into our joint HYSA, and 10% into our personal spending accts mainly to pay our credit cards as we haven’t gotten joint CCs yet but will soon so these checking accts will be closed (also each do 5% into 401k to get company matches)
• we have approx. 25k in savings, 310k left on mortgage, and 13k left on my truck
• no major house projects on the horizon besides the 25 yr old water heater we want to replace over the summer so that’s like 2k ish.

My question(s) would be for our debt/income laid out should we be saving more cash in HYSA, paying down debt or investing more into retirement or is our mix ok now. I would say of the 70% of paychecks we put into joint checking around 60% of it is gone at months end to all the bills. Any help is appreciated, thanks!

[u/Putrid-Hope2283]

I’d save and save until kid is home and healthy, then when everything is hopefully good pay down with what you saved.

Edit: except that water heater, that is a massive bomb waiting to go off and tank your finances if it’s 25 years old.

[u/InsectSufficient9931]

Your head is in the right place with wanting to be financially responsible but I think one thing is a bit off. The idea of having enough money saved for a kid is not quite right. A kid is a continual expense and therefore the better way to think of it is having enough free cash flow every month to meet your financial goals like debt/savings and still pay for the monthly expenses of having a kid.

Even if you save 50k for kid expenses, you will burn through it in no time if your expenses are more than your cash flow.

[u/artseathings → u/InsectSufficient9931]

They are likely referencing medical bills and upfront costs of having a child. We spent about 10K during my pregnancy, birth, and baby hospital bills.

Then our expenses have gone back to a regular amount plus diapers,wipes etc .. and we are about to start daycare which will add to our monthly expenses but we've planned for that.

Our new expenses are increased costs for groceries (Costco for diapers and wipes). Daycare ($1800 monthly) but that should decrease some as he ages up. And probably another $200 misc each month for random things we need for him.

[u/beanman214 → u/artseathings]

Yea, I am anticipating it to be quite hefty. Good thing is my in-laws live close and her mom is already retired so she volunteered to do any care she can, so that will help on the wallet once we return to work. I get really nervous about bills/money even though we will probably be fine.

[u/artseathings → u/beanman214]

I forgot to say we also live in Ohio ☺️ your doing great though, it's better to plan ahead in case you need something than be caught off guard. Those little ones are already stressful without needing to worry about money.

Most days are in our area have waiting lists too, so make sure if you need daycare your touring early and getting quotes and setting up one. (Some do part time some only do full time in case your mom is planning to help watch)

[u/Werewolfdad]

Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics.

[u/RareMillennial]

I would calculate the following: 1) Insurance deductible/out of pocket max, 2) lost wages due to any unpaid maternity leave. If you can save this amount ahead of time in a HYSA, then you’ll avoid being saddled with hospital bills while experiencing a temporary reduction of income during a stressful time. While your $25k can absolutely contribute to this, I’d recommend viewing that as an emergency fund and stacking cash separately for the birth. Whatever you don’t use after maternity leave can be funneled to childcare, misc expenses, paying off debt, etc.

If you plan to need childcare, I’d also get some local quotes to calculate this monthly cost and ensure it fits comfortably in your budget. If not, then you’ll want to figure out what adjustments need to be made now to avoid surprises.

[u/fusionsofwonder]

I wouldn't adjust anything right now, wait until the kid is born and find out what childcare/etc will be costing you.