I hated paying for childcare. Childcare is ridiculously expensive and we didn’t like the idea of other people raising our kid. When I was working full-time, we paid $1,250 per month for a fulltime daycare, that’s from 7 am to 6 pm. We didn’t get to spend any time with our kid and missed quite a few milestones, even though we both tried to get off work as early as we could. This was a big reason why I wanted to quit my full-time job to become a stay at home dad. Earlier this week, Amanda from Frugal Confessions was asking for examples of people who save 50% or more of their income while paying for childcare and I volunteered to go through my record. Amada’s adorable baby is 9 months old and she is looking for childcare options so she can work a bit more.
Here is my data from the last 5 years. There were a lot of changes over these past 5 years so we should go through it one year at a time.
|Year||Total Income||Total Expense||Tax||Kid expense||Saved||Saving %|
*The kid expense column includes childcare, clothing, high chair, diapers, and all the typical kid expenses.
2011 – Our kid was born and went to a daycare
RB40Jr was born early in the year and we waited until he was 6 months old before putting him in a daycare. We took care of him in the first 6 months with a combination of Mrs. RB40’s maternity leave, my sabbatical, and help from grandparents. So he was in daycare for about 5 months in 2011. This was a good year financially. We made about $200,000 in income and saved about 50% of that. I didn’t keep complete record of our cash flow in 2011, so this is my best estimate.
2012 – Daycare until SAHD
I retired from my engineering career to become a stay at home dad in July 2012. RB40Jr was in daycare for the first half of the year. Our income was higher than normal that year because I sold a bunch of stock grants and stock options. We also paid a lot of taxes that year. 2012 was another nice year financially. We saved over 50% of our income.
2013 – SAHD and then preschool
In 2013, RB40Jr spent most of the year with me. We looked into preschool in September and sent him to an in-home preschool. That first preschool didn’t work well and he basically got kicked out. In November, we found another preschool nearby and that one was a much better fit. He went to preschool twice per week and it cost around $450 per month. Our kid expense was very low in 2013 because I took care of him for most of that year. Financially, 2013 was worse than usual. Our income took a big dive and our saving rate followed. We still managed to save 36% or our income. It seems you really need to make more money to have a high saving rate.
2014 – Preschool
In 2014, RB40Jr increased from 2 to 3 days of preschool. We were also trying out a different preschool even closer to home. This transition occurred at the start of the school year in the fall. After three months, we switched back to his former preschool. The monthly cost increased to about $500 because he took some extension classes. Our income swung upward in 2014 due to our 4-plex sale. The saving rate looks good in 2014 at about 54%.
2015 – Preschool
RB40Jr increased from 3 to 4 days of preschool in September, 2015. This increased our cost to about $600 per month. Our finances have started to stabilize and I think we will stay at this level of income and expense for a few years. Our saving rate is at 43%. I’m happy with that level of saving considering I’m not working full-time anymore.
2016 – Preschool to kindergarten
Woohoo! We are almost at the first milestone. RB40Jr will start kindergarten this fall and our kid expense should decrease quite a bit in the following year. 2016 isn’t quite done yet so I had to estimate the 2nd half. I don’t think we’ll have any big surprises, so the numbers should look similar to 2015.
2020 – Public school
Mrs. RB40 plans to retire in a few years, so our income will drop again. I estimate our income to be around $60,000 and I plan to spend all of it. Our kid expense should be minimal at that point because he’ll be going to a public school. Our saving rate will be 0%, but that’s okay. We should have enough investment by then to keep growing.
Can You Save 50% While Paying for Childcare?
Whew, there were a ton of big changes over the last 5 years. Life sure is interesting. Childcare seemed expensive at the time, but it turned out to be a small part of our annual expense. We never spent more than 5% of our income on childcare. Our biggest expenses were taxes and housing. We also see that the more money you make, the easier it is to save. Our saving rate was best in the years that we had more income. In years with lower income, we weren’t able to exceed 50% saving rate.
Q&A from Amanda
Amanda – What are some things you’ve had to give up in order to still maintain high percentage of savings while paying for daycare? Were these consciously made choices?
Joe – I don’t feel like we gave up a lot of things. We go out much less than when we were childless. We just spend a lot more time at home after we had our kid. I think that’s just because it’s hard to go out when you have a kid. We also stopped international travel for the same reason.
Amanda – Do you tend to put greater focus on increasing income, or decreasing expenses? Building on that – focusing on the big ticket expenses or nit-picking the little expenses? (home/car expenses versus cheapest gas/ Starbucks stops)
Joe – I tend to focus on keeping expenses down. Our income is dropping because we are in transition to early retirement. I try to keep expense down where ever I can. Currently, our housing is the biggest expense for us. We like where we live and we aren’t ready to relocate to a cheaper location yet.
Amanda’s reader – I’m wondering about the cost of living where they live – did they purposefully choose a lower cost of living area to live? I would guess that they just haven’t grown their expenses as their incomes have grown? Do they still budget for vacations and everyday splurges & mini-luxuries.
Joe – We live in Portland. The cost of living is moderate compared to other major west coast cities, but it is increasing quickly. We have always been relatively frugal and never spent extravagantly. Our income growth outpaced our lifestyle inflation for most of the last 20 years.
We stopped taking international vacations after our son was born. It’s just more trouble than it’s worth. Last year, we started traveling again and visited Costa Rica. Our son was 4 so he could enjoy the trip as well. Now that our childcare cost is decreasing, I feel like we can splurge on travel again.
Amanda’s reader – Also, depending on the ages of their kids, do they find the need to explain some of their lifestyle and budgeting choices with their kids (for example if the kids want something that the parents aren’t willing to pay for, even though the parents could afford it, but it’s more a lifestyle choice not to purchase it), and following up on that, how do the kids handle that? If the kids are older, do they feel jealous of the “stuff” other kids have, and how do you handle that (knowing that you could afford it, if you chose to)
Joe – I haven’t had a lot of problem with this so far. Our kid is still pretty young and we tell him that we need to save some money. We taught him that money comes from working, not from the ATM.
As for toys, we only have one kid and he often receives cash for his birthday and other holidays. He has over $200 in his piggy bank and he wants to buy Lego sets. Recently, we let him purchase an expensive Star Wars Lego set and we also told him, no more new Legos until Christmas. He needs to learn to pace his purchases.
He isn’t aware of brand names yet so we can get away with inexpensive clothes and shoes. I’m sure this will be harder as he gets older.
No more childcare!
That’s it for today. I’m really looking forward to kindergarten so I will have a little more time to work and exercise. I love being a stay at home dad, but I can’t get anything done when Junior is around. I’m also really looking forward to not paying for preschool. We could save a little more or allocate that money toward more travel. Saving 50% or more of your income is really hard. You either have to make a lot of income or live a very frugal lifestyle. I think only a few households can do it.
Do you save 50% or more of your income while paying for childcare? How do you do it?
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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