Downshifting from DINKS to Average Single Family Income Status

What a terrible time to be downshifting, but somethings just happen when they happen. Fresh off our international assignment, we have come back to the US, bought a family friendly house, have a baby on the way, and are now living off just my income.

Take any one of these events and its enough to wreck financial havoc, add them all together along with a recession of epic proportions and I have been losing some sleep over whether we are making the right decisions. After all just a few months ago we were able to save nearly my entire take home pay, now we are trying to budget our monthly expenses and still maintain our retirement savings cadence (401k and 2 Roth IRAs).

We also have a gap on how we continue to grow our emergency fund level to where it needs to be and buy all the major ticket items we want or need (baby furniture, new carpet, new bed, family friendly car, etc). In a couple months I think we will get a better feel for how we can make things work going forward.

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Comments (14)

2mil - I'm sorry you're feeling pressured; those are a lot of life changes. I'll continue to beat the dead horse, and encourage you to simplify your financial life by deleveraging and selling clutter. I really wish you hadn't purchased the 'family friendly' (expensive) house, but what's done is done. You could probably put it back on the market and move into one of your rentals the next time there's an unexpected vacancy.

Posted by CPA1298 | February 19, 2009 10:43 AM

Hey CPA1298 - thanks for the comments. No sympathy needed, we are in good shape overall, just a very different and unsettling feeling when its back to budgeting again. I feel we made the right choice (at least for now) buying a house that we could live in long term and were happy with. It make take us a couple years to get settled financially again, but we should be fine - this is why I saved so hard early on was to prepare for this time period.

Posted by 2million | February 19, 2009 11:49 AM

I thought both people have to have earned income to contribute to their IRA.

Posted by ken | February 19, 2009 12:24 PM

Don't be discouraged because in exchange for the stress of making ends meet you will have a child. It is the hardest thing you will ever do but also be the most positive aspect of your life. As hard as it is, the positive far outweighs the negative. Just wait and see. As to meeting your financial goals with these additional burdens, it is possible. It may take a little longer or require more sacrifice on your part but it is possible.
--Matt
p.s. I have a two year old daughter. It is like having a second heart. My wife stays at home so it affected our finances, but I would not trade this for anything in the world.

Posted by matt | February 19, 2009 1:35 PM

2mil - I should've disclosed that my wife is a virtually stay at home mom for our 7-month-old, and we love it. She works one day a week when I can be with him. We made a decision a couple years ago to keep a relatively modest lifestyle; our house is only worth about $130,000 and our household income is about $60,000, and we have no debt other than a mortgage. The mortgage is about to be paid off after we recently liquidated everthing we had in the stock market, which I wish we would've done BEFORE losing ~45%. This second 'crisis' in less than a decade has made me permanently distrust the equity markets. I plan on sticking with insured credit union accounts and paid-for real assets.

Posted by CPA1298 | February 20, 2009 10:36 AM

cpa1298:

while i admire your decision to live within your means and not crave for materialistic things (i cannot match you in that aspect!), shame on you for selling off only after you lost 45% (i have matched you and - now - exceeded you also probably) especially if you are really a cpa! you ought to be better off than the average (or even extraordinary) joe - you should've sold months ago.

2mill:

while i sympathize with you, i am sure you are aware that you are still in much worse shape than you. ibm is holding up pretty good here, it appears. i didn't realize you were dinks in china.

- s.b.

Posted by some body | February 20, 2009 1:53 PM

First child is stressful in more than one way - but the impact on personal finance is certainly a big one. With the economy, many of us are feeling the stress and that's understandable. However, this is all transitory... whether it will take a year or three the economy will get better and you will get used to being a father... :-)

Posted by Shadox | February 21, 2009 3:08 AM

Sorry to hear the financial downturn has hit you too. I guess it is hitting most people. My business is down 25%, my networth possible 33% aproximately. But the good thing for me was avoiding buying a home as an investment or as a place to live during the bubble.

But there are lessons to be learned from all of this. First, I now believe that is better to time the market using tehnical entry and exit points as opposed to buying and holding. I could have saved several hundred thousand had I known what I know now.

Secondly, buying home as an investment only makes sense when they ROI is higher than 7%using rent alone. Capital appreciation should not be the primary goal in buying a property as most people have believed for years.

Posted by rick | February 21, 2009 3:37 PM

Some body,

IBM is actually NOT holding up as well as they are putting on. They have already had many layoffs and more are on the way. They have not been reporting these because they claim it is business as usual. :rolling eyes:

Posted by andy | February 22, 2009 11:23 PM

Some Body - I am a C.P.A., but I don't have a gift for stock market omniscience. For years I have believed in market efficiency, etc., and I rode the market up and down. Now, however, I have given up. No more equities. The market is manic-depressive and full of moral hazard. I give up. I like the feeling of a paid-for house. An investor would've been better off in a checking account the last 12 years than in equities.

Posted by CPA1298 | February 23, 2009 1:47 PM

andy:

i did not mean the company, i meant the stock.

- s.b.

Posted by some body | February 23, 2009 4:19 PM

2 Mill,

If you've made your decision on the matter, then I wouldn't worry about it anymore. What's done is done. If something comes up in future, then cross that bridge when you get there. But second-guessing yourself isn't a productive use of your time or sleep, for that matter. From the sound of things - well, from what I've read anyway - you guys are fine, you're just micromanaging yourself a little here. Not entirely without reason given the nature of the economy; however, I suspect that as well as you guys have handled yourselves to now, that going forward will be just fine.

@ andy - I'd be curious to know what leads you to believe IBM is not as well as they say. I work in Austin, and I know they've had a huge layoff here, but they claim, as you've mentioned, that it's business as usual and part of their cycle. The credit union I work for originated as IBM TEFCU; however, when the layoffs started happening several years ago we knew we needed to expand our charter in order to grow. So, I'm just curious, do you work for IBM?

Posted by Kristy @ Master Your Card | February 23, 2009 6:12 PM

I'm planning for the first child too, and wonder about the increase in expenses. Will you do a post on how you're budgeting for it, and how you are adjusting from your previous plan? It would be really interesting, as I've read all sorts of different takes on how much children actually cost.

Posted by Mike | February 26, 2009 6:31 PM

My wife and I just had our first baby less than 6 months ago. Sure, there are expenses, but they are not as noticeable because I am spending less money going out, eating out, etc.
When your baby is born and you start getting into the swing of things you will easily see your newest member will providing you with plenty of dividends.

Save, plan, live.

Posted by Joe | March 10, 2009 9:30 PM