Reader Mailbag: Birthday Celebration

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Starting a garden from seed
2. Losing my job next summer
3. Splitting rent and utilities
4. Dealing with a challenging year
5. Time to have a child?
6. Double disabilities: what now?
7. Budgeting and taxes
8. Prioritizing student loans
9. Child now, with payoff?
10. How much for retirement?

The best birthday parties I’ve ever seen are simply ones where a person gets to spend time with people they truly care about and value. If you want to make someone’s birthday special for them, give them time.

I’ve been trying to start a garden from seed for the last two years and I just cannot seem to get strong plants. This last year, I started the seeds in peat pods in late January, which I moved to medium size pots once the seedlings were about 2 inches high (these pots were kept inside until mid-May). However, most of those plants didn’t grow at all or died in the medium pots. The ones that survived did not transplant in ground very well. Is my timeline too compact, do I need to start the seeds earlier? When transferring the peat pods to should I remove the webbing to allow the roots to expand?
- Nikunj

First thing: were you using any sort of grow light with the indoor peat pods? Grow lights are absolutely essential, because there is insufficient sunlight during the winter months (in the northern hemisphere) for most outdoor garden plants to survive indoors.

I don’t think your timeline is too compact. It just takes practice, adequate water, adequate light, and perhaps a bit of fertilizer as well.

Your best bet is to visit gardening message boards and simply ask for advice on creating the best possible early growth environment for the types of plants you’re trying to raise. While you won’t be able to fully imitate that, you should be able to approximate it well enough to have success with your seedlings.

I am going to lose my job. In one way, I am lucky, because I am finding out about 10 months in advance, but I’m still worried about my future. My entire department has learned that we will not be funded next year. Because we work for one department of a large university, there is always the possibility that I will be able to find a new job before I become redundant, however it is not likely that I will find one at my current pay rate. I have been debating starting my own business for a while, and could move forward with that plan if I cannot find another job at the university, or I have considered renting my house out and going to work overseas for a year or two. I wouldn’t build any wealth doing that, but it would be a great experience.

I am single with no children (or plans to have them), and I purchased a house in July 2009. I currently rent out the second bedroom to a grad student who will be finishing school around the time my job ends. I can afford to live in the house on my own, but having a roommate gives me more financial flexibility. I own my vehicle outright and have some minor credit card debt which is usually paid in full each month. I have been putting extra money toward the mortgage and estimate I have made about 5 extra payments in the year I have owned it. I also have a vacation planned for this winter. I’ve already purchased the tickets, and my on-the-ground costs will be around $1K, so I do not plan to cancel it.

I have about $7500 spread out among various bank accounts, plus $15K in a Roth IRA, $13K in a 401A and $5k invested in a stock fund. I do not want to touch the investments at all.

With the time remaining until my job ends, should I continue to invest in the Roth IRA? Continue to put extra money toward the mortgage? Or should I instead put as much money as possible into my savings accounts?
- Mary

Your first step is to figure out what your next step will be once your current job goes away. Are you going to actively job-hunt? Are you going to attempt to launch this side business?

Whatever you decide, start focusing on it now. If you’re seeking a new job, now is the time to get your resume straight, because the job market is rather soft (to say the least). If you’re thinking of launching a business, start the launch process now, not later, so that things are in place and running by the time you walk away from your current job.

If you’re switching jobs, I would halt the Roth payments and direct them towards an emergency fund until I had a job locked up. Once a job is in place, I’d move all of the saved money into the Roth. If you’re starting a business, keep contributing to the Roth.

My question is this, my boyfriend and I have been living together for a little over two years and now we are both beginning our careers. However, his income is substantially less than mine, I make about $700 more a month. We live in Los Angeles, not a cheap town by any means and I’m beggining to reconsider our financial situation. I have heard from other people that we should split our rent and utilities based on our difference in salary, however, I have some serious school loans, about $32,000 to pay-back and I was hoping to use a good amount of my ‘extra’ money (I live well below my means) to do so. What would you do?
- Lauren

Are you in this relationship for the long term?

If the answer is yes, then your financial futures are tied together and it benefits you to look at your combined state and make whatever choices will put you together in the best financial place. There is no “who pays more rent” to the question at that point. You keep the rent paid and focus on getting rid of the highest interest debt that either of you have.

If the answer is no, then you should absolutely go for equal rent. Living together is a financial arrangement in this case and your personal wealth has no bearing on the rent arrangement.

I have been a very fortunate person in many regards. Through the generous assistance of my parents and grandparents, I was able to graduate from university with no debt and was also able to major in a subject that I loved. While this major (theatre) did not lead directly into a high-paying career, I was able to leverage many of the skills I learned at university into valuable on-the-job skills. (Theatre is a subject chock full of transferrable skills and many of the people I went to school have found satisfying and lucrative work outside the entertainment industry.)

I worked for a construction company for three years and gradually kept earning more money, although the work was very hard and I was often depressed. After work, I would often shop to make myself feel better if I had a tough day. During work, I was constantly browsing websites for little treats for myself. I managed to save some money, but I also racked up some credit card debt. It didn’t seem worth it to me to pay that debt down – what was the point of working a job I disliked if I couldn’t also have nice things? Mind you, I had a very nice life – but this wasn’t enough. I was always looking for something else to want. I was almost relieved when I was laid off as a result of the market crash. The past year has been transformative for me. I moved to another country to get a Master’s degree in another subject that I love, and managed to get accepted into one of the top PhD programs in the world. Now, here comes the hard part: I can’t afford it. The solution at the moment is for me to return home and spend the year working and applying for scholarships in order to return to school in 2011. I know that this is the smart thing to do and that the short term pain will yield long term gain.

The question I have for you is more personal than financial. This is going to be a tough, challenging year and I have a lot of daunting tasks ahead of me on the path towards getting funding for my dream school. I will be a couple thousand miles away from my boyfriend, and there is no guarantee that anything is going to work out as I have planned. What advice do you have for staying positive, focused, and productive in a difficult situation? I am certainly going to take advantage of counselling services, and I already exercise regularly, eat well and am careful about my alcohol intake. I do, however, get the blues. I know that what is happening to me is part of life, but I also feel very scared about the future. I am afraid that returning home will put me in a rut.
- Slaney

The absolute best thing you can do is establish a very positive routine right off the bat and stick to it. The old saying “the devil finds work for idle hands to do” is true in that time spent just wandering or bored is time that often develops into dangerous and negative habits and routines.

Fill your spare time with personal goals. The exercise routine is a start, but keep your mind exercised as well. Set some sort of reading goal for yourself, an ambitious but reachable one. Fill your time achieving those goals.

If you “escaped” a negative situation with your personal life when you lived with your parents, avoid falling back into it. Do not re-establish contact with anyone that was part of that negative situation.

My wife and I are both gainfully employed. I work as a teacher and my wife works for a non-profit here in Florida. My question is that we are strongly considering children but want to do things different then both of our parents and some friends are doing. We want to give our children a better childhood then we had. Don’t get me wrong we had fun as kids but we both come from households where statements like “we cant afford that” was the norm for items that were paltry in cost. We make about 80k combined and live pretty frugally albeit going out to eat a few times a month and traveling frequently.

[...] My question and concern is this. My job is very stable as a teacher but my wifes job with her non profit works off of grant-funded contracts, so when the money runs out this fall they will be laid off if it the contract does not get extended which it possibly will be through June of 2011 we don’t know yet.. She has received an offer from another non-profit but they to are grant funded also but their grant goes through Sept. 2011 with a strong possibility of extension(Its in the green industry).

We have about $2,000 in emergency savings that we are continually adding to, about 50k worth of student loans currently in forbearance until next year, and debt from earlier in college that have just about reached the 7-year statue of limitations mark so it should be falling off of our credit. Would it be ok in your opinion given the circumstances to go ahead and start having our first child?
- Faith

What do you mean by “giving your children a better childhood”? What will be better about it than what you had?

Spend some very serious time thinking about that question. The best childhood you can give to your children is one where they’re not having to compete with distractions – careers, substance abuse, personal interests, etc. – for your attention. It’s not about buying them an armload of stuff – for children, stuff is merely a distraction from parents who aren’t paying attention to them.

You can give your children the best childhood in the world on a shoestring budget earning much less than $80K. It’s not about stuff. It’s about time.

My wife and I are both disabled and are on disability pensions I am on Canadian one and she is on Social Security. She is not allowed to work at all as a requirement of here pension while I am allowed to work a modest amount on top of the pension. All of our income came to 42000. We have availed ourselves of the Canadian Registered Disability Savings Plan and have together 37000$ which can’t be touched until we are 65. My doctor says that he believes that neither of us should return to full time work, If I was to go off of my pension I would have to pay 13000 in prescription costs for an experimental medication for my disability. We have been thinking of purchasing a low end rental property or two for our retirement. We own our home outright except for a line of credit that we used to purchase our adaptive car. We only have 14000$ left to pay on it. This month we are scheduled to receive a 5400$ settlement and a9000$ in january. Our income this year will likely go down by 7000$ this year. We intend to pay off the line of credit as soon as possible. Should we borrow the down payment for the purchase of the property and then purchase the property or should we wait? Property prices seem to be going up here. We do not have an emergency fund but over the last five years have always paid off our credit card bill at the end of the month. We live simply. For four years after our marriage we did not have a car because we wanted to pay off our mortgage a quickly as possible. We buy everything at a discount and thrift stores. On top of everything else we just had a major flood but are not in trouble because we received the first check from the insurance company and we had the money that we were formerly paying on our mortgage. I would like to start with the property investment before prices go up. We are looking to rent them out over the long term. We would hope that the investment property is paid off by the time that we reach 65 when our income will drop. Is this a good plan?
- Austin

With all of these numbers, the one that would concern me the most isn’t here: your monthly cash flow. You have $42,000 a year coming in. How much is going out?

From what I can gather, you’re breaking even right now and are about to experience a $7,000 reduction in your income. If that’s the case, you should not be borrowing additional money. You should take the settlement money and use it to pay off the line of credit to free up your cash flow so that you can survive the downturn in your income.

If owning a rental property is your dream, you’re going to have to make some other cuts in your spending to be able to afford it (since earning more isn’t an option). If you can’t, then it’s not a realistic dream.

Every financial blog/book/article I have read on budgeting talks about figuring out your gross pay and then breaking it into percentages e.g. 60% of gross for living expenses, 10% for debt reduction, 10% for short term savings, 10% long term savings, 10% for fun.

So WHERE do taxes fit into all of this??? I have never seen a good answer–or even anyone addressing this. If you want to use this on the blog–feel free–but I would love a response back personally if you are able. And maybe you already have answered this but I have overlooked it.
- Leigh

The obvious answer here is that they’re talking about post-tax dollars, not pre-tax dollars.

The best way to make this type of “60% solution” actually work in a person’s life is to apply it to each paycheck after the taxes are already taken out. You utilize 60% of your take-home for living expenses, 10% for debt reduction, 10% for long-term savings, 10% for short-term savings, ant 10% for fun.

In fact, I’d go even further and look at it as post-tax and post-401(k) money. This really should be used in the context of your paycheck that you bring home, nothing else.

I’m in graduate school this year-last of 2 years. My tuition has been covered by a scholarship, and I live about an hour away from the school. I’m a working adult with 3 kids, so I can’t really take on much more work. The fees and books come in around $1500-2000 per year. Last year I used our credit card for this and it’s really bitten us in the butt! So two questions:
1. Would you recommend taking out the Stafford Subsidized Loan? The rate is much lower than the credit card-6% to 28%, but that’d be another payment.
2. Do I take out all the Stafford money I’m eligible for to help with last year’s credit debt? It wouldn’t get rid of the credit card, but would be similar to a transfer.

- Samuel

Yes, you should use the subsidized loan here to pay for your credit card debt. In effect, you’re using this year’s loan to pay for last year’s textbooks.

That’s the purpose of having student loans that cover more than your tuition – they also ensure that you have the textbooks and supplies that you need if you don’t have the cash to pay for them.

If I were you, I’d take all of the Stafford money, buy your books, and pay off as much of the credit card as I possibly could. That student loan debt is better than that big pile of credit card debt.

I am 27, living in Brooklyn and married. I have a very high-paying job that I absolutely hate, and my husband has a lower paying job that he’s frustrated with but is dealing. I have about $70,000 in law school debt and we have another $20,000 in debt from a business that my husband started right before the crash (we have, incidentally, whittled that debt down from $60,000). My question is when I should leave my job. Put simply, I can’t stand it. I work at a large law firm and the work is both mind-numblingly boring and incredibly stressful. I want to start my own small business as either a lawyer back in Austin (where I went to law school and have friends and connections) or earn money online through e-books and affiliate marketing. I believe that I can be reasonably successful at either of these options (eg run with a very low overhead, come out in the black, and make enough to at least make my loan payment each month). My husband can do his job from anywhere and would be able to support us on his salary alone in an inexpensive city like Austin (but with essentially no savings). Right now our emergency fund is pretty much nil.

We are expecting a large tax refund soon and we have been steadily paying off the business debts so that we should only have my student loan debt (6.5%) by January of 2011. Alternatively, the refund should be enough to pay off the remaining business debt. At that point we will be able to save several thousand dollars a month. I have basically come down to two choices. 1. I could try to get pregnant and work at my job until I give birth, at which point we would move in with my parents during my (very generous) maternity leave to save money. Then I would quit my job and we would move to Austin. This path would net us about 90,000 in savings, but I would have to work until early to mid next year and of course we would be parents, which would be a huge change. 2. I could quit in November when our lease is up and we would move to Austin. We would have pretty much no savings and we could live off my husband’s salary while I try to make a small business work. In that scenario we would put off children until we are more financially stable.

I am frankly scared to have a child (but then I think I always will be), but I am also ready and so is my husband. It also seems really unwise to pass up a really generous maternity policy at my firm when we know that we want kids soon anyway. I know that there is never a “good” time to have children, but I am worried about the stress of moving across the country with a brand new baby and trying to get a business off the ground. On the other hand, I do really want children, we are both ready and $90,000 is very hard to pass up.
- Cara

There is a good time to have children. It’s when you and your partner want one and have the financial ability to make it work.

Right now, it sounds like you’ve got a strong “yes” on both counts, so I would absolutely go for it. Right now is probably your best opportunity in your life to have a child.

Yes, you’re a bit scared. Guess what? Anyone who thinks about the monumental job of parenting with any level of seriousness is a bit scared.

If you want it, go for it. There will probably be no better opportunity.

First, some background: I’m married, and my husband is in his second year of medical school. He is on a Navy scholarship, so they are paying for his very expensive education, and providing us with a monthly living stipend. I have had a difficult time finding work in my field since we moved, but finally got a steady job for this coming year. Together we only make about $3100 a month, but we have learned to live on about $2000 monthly. We have no debt, about $15,000 in savings, and $3700 in a 401(K) from a previous employer.

Here is my question: Knowing that my husband will have a much higher income about three years from now, what should we be focusing on right now? We’re putting as much as we can in savings, but would it make sense to put more money away for retirement? What percentage should go into retirement each month?
- Madeline

Put as much into retirement as you can possibly afford to right now, preferably in a Roth IRA or (if you can) into a plan that offers some matching funds from an employer. The matching funds should come first.

Why save now? If you have matching funds, you should always be taking them. Also, if you have a chance to get money into a Roth IRA, particularly if you expect your income to skyrocket in the future, you should take it.

If you have no debt and a big emergency fund (which you do), you’ll never ever regret socking away money for retirement right now.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Amy says:

    I’m sure that others feel differently, but for the woman who is considering using her “very generous” maternity policy to save enough money to quit her job, has she considered the impact that might have on future women working at her company? Sure, she has to make the decision for herself, but they companies that do offer good maternity policies do so because they want women to come and stay working there. If management sees women treating the maternity policy like this, people shouldn’t be surprised to see generous benefits disappear.

  2. Cara says:

    Thanks very much for the response. My husband and I had arrived at the same decision. We are now trying for our first child. It feels right. Thank you for answering reader questions. It is a great service to us.

  3. Johanna says:

    @Leigh: From what I have read about the 60% solution, taxes are part of the 60%. That is, 60% of your gross income should cover taxes, shelter, food, utilities, transportation, and all other necessities, and the other 40% should be broken down like you said.

    Really, though, all of these “solutions” – 60%, 50/30/20, etc. – are just guidelines. If you’re having trouble forming and sticking to a budget, they can help you figure out where you’re going wrong. For example, if you’re spending 80% of your income on necessities, trimming your entertainment budget probably isn’t going to help you very much – you’re better off focusing on reducing your big, fixed costs. But if you have a budget that works for you but it differs a little bit from the 60% solution, don’t worry about it. If it ain’t broke, don’t fix it.

    @Mary: I don’t see any reason not to keep contributing to your Roth IRA, since you can always withdraw your contributions penalty-free if you need to. But do *not* pay any extra on your mortgage. You won’t see any benefits from those extra payments until years and years down the line, and you need the money now.

  4. Jeff says:

    In response to the first question about gardening, talk to your local extension agent (http://www.csrees.usda.gov/Extension/). They will know your local conditions, the types of plants that grow best, when to plant from seed, transplant, etc. They are there to help.

  5. Julie says:

    @Samuel: you can’t just “take” a subsidized Stafford loan. Staffords are income based, from the FAFSA. The only difference between them is that for the subsidized Stafford, the feds pay the accrued interest while you’re in school. I’m hoping you already knew this. But just in case you didn’t…

  6. Sarah says:

    @Faith –

    If you and your wife aren’t able to kindly tell an adorable pleading pixie some form of “No, I am not going to buy that for you now, and this is why”, you are not yet ready for parenthood.

    (Alternatively, you will have an easier time if you learn how to positively deal with a tantrum in some other terms than “I won’t do it and you can’t make me” which is what “We can’t afford it” with no explanation is, translated from adultspeak into kidspeak.)

    Please start actively reading up on how to teach kids self-discipline, self-knowledge and self-reliance. Trent talks about this occasionally – another place to go is the Love & Logic Institute, which has helped us tremendously.

  7. Des says:

    @Lauren

    I disagree with Trent’s advice on this one. Split everything evenly for now. If you pay down your student loans with the extra and you end up getting married, it will have benefited him too. If you break up, then you helped yourself, which you won’t regret. That seems like a win-win to me.

  8. Johanna says:

    @Lauren: $700 a month ($8400/year) doesn’t sound like such a huge income difference to me, unless your incomes are both quite low. If one person’s income was 2-3 times the other’s, how you split the rent would be a much bigger deal. (And in that case, as I’ve said before, I definitely think the person who earns more should pay more.)

    You don’t mention whether your boyfriend has any student loans or other personal debt. Does he? I think that a fair solution would be to split your expenses in proportion to your monthly income minus monthly debt payments. But if that works out to pretty close to a 50/50 split, you might as well just split things evenly, rather than quibbling over a few dollars.

  9. Leah W. says:

    Julie, unless they’re independently wealthy, graduate students usually CAN just “take” subsidized Stafford loans. This varies vastly from undergraduate subsidized Stafford loans, which for dependent students are based on parent income. I went through grad school and law school and was eligible for subsidized Stafford loans the whole time, and so was everyone I knew.

    Leigh, Trent clearly misunderstands the concept of GROSS income, which by definition means BEFORE TAXES. He didn’t answer your question at all!

  10. Matt says:

    @nikunj

    Disregard trents grow light comment, you probably don’t need one, unless you are being serious about starting lots of seeds. A sunny window will provide plenty of light. As for dying outside are your hardening off the plants? You cannot move them directly outside where there is wind and rain as the plants have lead a sheltered life up to this point. Also what are you transplanting into? Peat is fine for starting, but will not provide much food, you need to mix in some compost, or use a liquid fertilizer, I use PHC for seedlings. Make sure the plants you are starting transplant well too. Some things are better off just started in the garden as they are very difficult to transplant successfully. when moving to larger pots you have to make sure you are watering sufficiently, but also not over watering. Again this depends on what you are trying to grow.

  11. Patty says:

    Leigh: net vs gross? (its not just your paycheck if you get a big refund or have to pay extra taxes at the end of the year.)
    Samuel: Loans are for school costs but no matter where you charge the money you have to have a strong payback plan. Also remember that cc debt can sometimes go away in bankrupcy but student loans don’t at this point so if you pay off your cc debt with a student loan then rack up more debt again and go to bankrupcy you would still owe the student loan. Hope you don’t have to face that but something to consider.
    Cara: Having a child isn’t something you just do for the maternity leave benefits. And if you are anything like me the stress of your job could make becoming pregnant and having a healty child harder. Really figure out what you want in life and how expenses will be paid.

  12. Katie says:

    Leigh, Trent clearly misunderstands the concept of GROSS income, which by definition means BEFORE TAXES. He didn’t answer your question at all!

    Well, whether he understood it or not he gave you a functional answer – make the calculations based on your after tax salary instead. It’s not rocket science (though yeah, you may need to tweak the percentages a tad for your individual needs).

  13. Gretchen says:

    Yes, you need a light to grow seeds. Also heat. We use a heating pad. You’ll also need to time things correctly. Late January to May is an awfully long time .

    Some things just grow better from seed than others.

  14. Leah W. says:

    Katie:
    He gave a functional response, sure. But anything based on “gross” income cannot mean that, really, it’s based on income after taxes, which is exactly what Trent said was the case! In fact, he called it “the obvious answer.” I don’t think it’s obvious at all, and I completely understand Leigh’s frustration. Lots of PF people give advice based on gross income, and the question was simple: Do any of these people plan for taxes? Where’s that in the budget?

    *Note: I’m not looking for an answer to those last two questions, just expressing why I find gross percentage estimates frustrating as well!

  15. Bill says:

    @Nikunj

    I use grow lights but just normal florescent lights. Keep them as close to the leaves as you can. It sounds like you might not be hardening them off correctly, I didn’t know this my first year and lost most of my seedlings and the rest took so much damage they never recovered. Another mistake I made was I kept the seedlings covered because I saw kits at the store with clear lids. These are only till you get sprouts then remove the lid or you will get “leggy” weak plants.

    If you can’t figure it out, take one of the sick/dead plants in to a nursery. They will normally be able to quickly tell you what is wrong.

  16. wisnjc says:

    Is it wrong to us an employer’s “generous” maternity/paternity leave benefits, and then quit the job directly after the benefits end? Is taking the full leave benefit, without mentioning your plan to then quit, dishonest?
    Faculty sabattical agreements often require you to work X number of years after finishing the sabattical, akin to “paying back” the institution’s latest investment in you.
    As a young female trying to figure out the lay of the land in work/life balance issues, I’m curious of people’s thoughts on this matter.

  17. a.k. says:

    @Cara
    I know you are technically entitled to maternity leave, but taking the leave when you know that you are going to quit when it runs out is really bad form. It also will make it that much harder for the next woman at your firm to take her leave without people assuming that she’s just going to quit anyway.

  18. DivaJean says:

    wisjnc asked: “Is it wrong to us an employer’s “generous” maternity/paternity leave benefits, and then quit the job directly after the benefits end? Is taking the full leave benefit, without mentioning your plan to then quit, dishonest?”

    Most employers will have some type of agreement you must sign before taking the maternity leave time that will indicate how long you must come back afterwards or what the repercussion will be is you end up not coming back. I know of a co-worker who made the arrangement for child care just to cover this time frame. Her time back with the company was worthless, imho, because she was just marking time in the knowledge she would be going out.

  19. I’m curious about the “applying for scholarships” bit in the letter from the person was accepted for the PhD program.

    The best PhD programs I’m aware of offer teaching and research fellowships to all their students, which will cover tuition and pay a small living stipend. You have to live frugally to live on the stipend, but it’s generally doable if you don’t have to deal with pre-existing obligations. (I managed by living with roommates, and not owning a car for most of my time in grad school.)

    It may be that the writer’s credit card payments would eat too much into the stipend to make this work. If so, the writer should work hard at paying that debt down. Or it may be that the PhD program doesn’t adequately support their studemts. If that’s the case, the writer may want to reconsider the program. (I’ve heard it said many times “don’t go into debt for [PhD] grad school”, and I agree with that advice.) If you don’t know about the support available in the program you’re looking at, you need to find out before accepting a spot. (Make sure you talk to students as well as faculty and administrators to get the real skinny on support.)

    To that general advice, I would say that if you’re prone to “the blues”, which is both explicitly and implicitly noted in the letter, this can potentially be a big warning flag for going to grad school. Pretty much every PhD program has some degree of “hard, lonely slog” about it that can affect even the cheeriest of students. Some programs have more of it than others.

    This can be overcome if you’ve got a very good support system (adviser, friends, colleagues, etc.) but lots of people ultimately decide it’s not worth it for them. If they’re lucky, they make up their mind about this early in the process, or they otherwise get positive rewards out the experience. If not, they may end up spending lots of years in misery with little to show for it when they leave.

    Which is both a reason for considering carefully whether to go to grad school at all, and an additional reason not to go into debt for it.

  20. Ajtacka says:

    With regards to maternity/paternity benefits, this is something I’ve often thought about before as well. I’m fortunate to be currently working for myself, and when I do take maternity leave it will be almost full pay (the benefits of a post-communist society!). But I have a friend from home who’s a teacher. She planned her pregnancy so her leave would begin after the start of the school year. That just feels icky and quite dishonest to me. It’s nice to know others might feel the same.

    Personally, I think taking the leave but intending to quite is wrong, but there is a grey area where the decision changes part way through. As someone else mentioned, any woman not coming back does make it harder for the next one to take leave – or even be hired, depending on industry/company/culture.

  21. Johanna says:

    I don’t like the fact that employers discriminate against women of child-bearing age either, but I don’t think it’s fair to lay all the blame on mothers who are just acting in their own best interest and within the rules. (What I’d rather see, I think, is a change in the rules to let a new parent be honest about the fact that she or he is not coming back – then, at least, the employer can hire a permanent replacement right away, and give that person some job security.)

    What worries me about Cara, though, is that gaming a generous maternity leave policy strikes me as a really bad reason to have a child that you wouldn’t otherwise have right now. “I’m scared but I’m ready” reads to me as “I’m not ready,” and Trent didn’t even attempt to address her (valid) concerns about moving and starting a business with a baby to take care of.

  22. Crystal says:

    @Mary, I’d squirrel away cash so you have some padding while you look for a new job. If you get one lined up, then you can start contributing again without that stress on your shoulders. Remember that you can always take out your contributions from a Roth IRA without penalty, but you can’t pay yourself back.

    @Lauren, I agree with Trent. It won’t matter much if it ends up being joint money, but if that’s not where this is going, I’d just split it 50/50. Cover some of the dates if you feel like you have more fun money than him…

    @Faith, I was raised CHEAP comparably to many kids and came out fine in my opinion. As long as you can cover the basic necessities and have time to teach and raise a child, you have enough to have a child. :-)

    @Leigh, I just calculate based on net pay…tax refunds (which we don’t usually get) and “extra” money that I didn’t budget for are divided between savings or the mortgage and our fun money and vacation accounts.

    @Cara, I don’t leave a job until I have another one lined up, no matter how much I hate the first job. Believe me, I hated telemarketing and left as soon as a bowling alley position opened up. As far as kids go, have one when you can cover the necessities and will have time to raise a child together (which it sound like you two already have).

    @Madeline, I’m with Trent 100% since Mr. BFS and I want to be financially independent by age 52 (we save about 30% for retirement). Sock away as much as you can but remember to give yourselves at least 5% a month for fun money. :-)

  23. KC says:

    @ Madeline – I was in your position a few years ago – my husband’s medical school was paid for and I had a decent job. First of all don’t assume that medical income will come directly. After medical school there is residency where he’ll probably make about $40k a year (working some ungodly hours). Then he may decide he wants to do a fellowship – another few years of $40k, but the hours aren’t quite as unreasonable. Then when he enters the workforce he has to “buy in” to a practice so he won’t be making the big bucks just yet. Usually when you are about 35 yrs old things are where you thought they’d be as far as income.

    The thing I’d stress most is continuing to live within your means. You will likely be moving in the future and it helps to keep your “overhead” low. Make sure your house or car payments don’t keep you from taking offers in other places. We stayed in a small affordable home well after we could afford better. It allowed us to move and take a wonderful opportunity in November of 08 – we couldnt’ sell our old house, but we didn’t care cause it was cheap – we just owned two houses until the next batch of residents moved to the area and one of them bought our “close to the hospital” small home. So keep your overhead low until you are certain you know where you’ll be living most of your adult life.

    As far as retirement I’d focus on the Roth – you won’t be eligible for that at some point in the future. You also won’t be eligible to take deductions on a traditional IRA. You, Madeline, may choose to not work, which means you won’t have a 401k. So I recommend both of you focusing on that Roth if you can max it out since you already have ample savings. You may not be able to max it out, but 15% could give you $450/month or $2700 a year into your each Roth, if you can swing it.

  24. Julia says:

    As a female professional, I too don’t like hearing about women taking maternity leave just to quit after. It makes us all (professional women) look bad.

    Maternity leave is in place to retain qualified employees and provide flexibility for building a family while still holding a job. It’s not you’re employer’s job to help you build your family, they need good employees to run a business.

    I don’t have a kids, but if/when I do, I like to think I will still be available to my company in emergencies (like if one my projects goes sour).
    If I work somewhere that I wouldn’t be willing try to make that work, then I would quit before getting pregnant.

    Cara, why don’t you move in with your parents NOW, save your money for a year, then move to Austin and start your business. Once you get going there, tackle a plan become financially stable so you can start having kids.

  25. Johanna says:

    I got the impression that Cara can’t commute to her job from her parents’ place, so she can only move in with them if she’s not working. But I could be wrong.

  26. valleycat1 says:

    Cara – My concern with your situation is the financial side – you have already racked up $20K in debt from another attempt at starting a business, so you should already know the risks inherent in your plans. To move to Austin in November without a job or a business in place, and with no savings, is supremely risky & seems to me a sure way to end up even farther in debt. Regardless of whether you hang onto your job until your maternity leave expires, or go ahead & leave in November, I don’t see from the information you provided that you have the financial reserves needed for relocating AND starting a business.

  27. Julia says:

    @valleycat1 – thanks for helping me refocus on the real question

    @Cara – in addition to valleycat1′s comments, trying to start a business with a baby in hand won’t help either.

    I would address the issues in this order:
    1) Build emergency fund
    2) Quit job/move to Austin
    3) Pay off debt
    4) Build business
    5) Have baby

    Between now and November, sock away every penny you can in your emergency fund. If you’re making extra payments on your debts, stop doing that and put that money into your emergency fund.
    In November, quit your job, move to Austin, and find another job. Then re-evaluate and get back to aggressively paying down your debts.

    If you can’t save an adequate emergency fund by November(4 months living expenses plus about $1000 for moving expenses), then start looking for another local job right now. Switch jobs and keep working towards your goal of moving to Austin over the next 6-months or so.

    After moving to Austin and paying off the business debt, that would be the time to seriously think about building your business. (I’m assuming you have no other debts besides your student loan and business debt) You will need cash reserves to do this, so you will have to shift your focus once again to saving and only pay the minimum on your loan.

  28. Julia says:

    One more thing,
    You could switch the order of “Build Business” and “Have baby” putting whichever is more important to you first. But expect at least 2-3 years between the two events because they are both 24/7 jobs for the first few years.

  29. Brandon says:

    The 60% thing – I assume you are talking about – http://articles.moneycentral.msn.com/SavingandDebt/LearnToBudget/ASimplerWayToSaveThe60Solution.aspx

    The 60% figure INCLUDES taxes. For most people, that tends to leave about 40%. That type of plan was a creation so you didn’t really have to track each individual expense, but merely keep the total within guidelines. Generally, I tend to agree with the author – it’s a great ratio that absolutely makes you feel in total easy-mode control.

    It also requires some acrobatics for anyone who isn’t solid middle class to get to – it’s doable for us plebs, but much harder than if you have a 80-100k income.

  30. Sarah says:

    @Cara: I live in Austin. Most lawyers that I know that graduated from UT and stayed in Austin earn about $40-$50K on average. This market is glutted with lawyers – which is one reason that all of our family friends who are lawyers advised me against pursuing law school. We have family friends with their own practice as well as those who work for the state. One, who graduated from a top 5 program, took almost 2 years to find a law job – which pays $35K! Obviously, you haven’t done your research about starting a small law firm in Austin!

    @Stanly- my PhD was fully funded – they paid me $30K a year plus all tuition and fees. I cannot imagine ever getting into debt for a PhD! Don’t do it! It won’t pay off!

  31. Amy B. says:

    Regarding the “maternity leave and then quit” option: I think both sides have merit, and it largely depends on how your company handles the leave itself.

    When my employer provided generous benefits out of operating costs, and I was on a professional track, I would concur that taking the bennies and running afterwords would have been a poor choice, reflecting on me in a way that wouldn’t have been favorable.

    Then, I was a contract employee with no guarantees and maternity leave consisted of a disability claim, that I had to prepare myself, and provided me 6 weeks of 60% of my regular pay. My employer paid for this short term disability policy for me as it did for all employees. As far as my boss was concerned, they had paid for the coverage, so I might as well have the money.

    One size does not fit all.

  32. Amy H. says:

    The 60%/10%/10%/10% plan is meant to be for your gross income, with taxes included in the 60% alloted for required expenses. Reference: Articles on “The 60% Solution” on MSN Money. The article on “The Basics” specifies clearly that it is based on gross income, and that the 60% includes all taxes.

  33. tarynkay says:

    Cara works for a large law firm in a large city. This law firm is presumably full of very intelligent people well versed on various ways of gaming the system. It would be really bizarre if they hadn’t thought of the possibility of an employee taking maternity leave and not coming back. I agree with DivaJean- they probably have some kind of agreement that you would need to sign regarding your obligations if you take their generous maternity leave package. My first step would be finding out what this agreement consists of. You may be required to come back and work for some amount of time. That may or may not be worth it to you. If they don’t require that, please don’t feel concerned that you are taking advantage of a large firm full of high powered attorneys. They would not offer this maternity package if it didn’t make sense for them. I could see feeling guilty about this if you were working for Legal Aid, or a boutique firm that was really stretching itself to let you take 6 weeks off, but truly, large firms of successful lawyers in New York City can take care of themselves.

  34. Kim says:

    I used to really enjoy these question/answer articles but lately the questions have become so long-winded that I lose interest before I even finish the question. Can’t you find any shorter, more concise questions to answer for those of us with shorter attention spans?

  35. jennifer says:

    I want to weigh on on people saying they want to have children…but is it a good time? My hubby and I have a 14 month old and while it wasn’t a “good” time career-wise for me (I traveled a lot, made a ton of money, but quit when he was a month old) I wouldn’t ever regret it. Money is tight now, but I know in my heart we made the right choice.

  36. ETF says:

    Regarding PhD programs, there are several options. One is to talk to the admissions folks at the department. They generally (though perhaps not in this economy) have some spare money lying around to coax stars into the department. Also talk to any professors who may have championed your admission. Another is to go to a lower ranked school – they will be even more willing to provide you with financial assistance. The big advantage to being in a lower ranked school is that you will get *tons* of extra support (academic if not financial) because you will be their star. I was in a second tier (top 15, not top 10) school for my PhD and the top guys (who came for the money, although they’d gotten into better schools) did EXTREMELY well coming out – no negative ramifications for stepping down except less debt.

  37. ETF says:

    Regarding PhD programs, there are several options. One is to talk to the admissions folks at the department. They generally (though perhaps not in this economy) have some spare money lying around to coax stars into the department. Also talk to any professors who may have championed your admission. Another is to go to a lower ranked school – they will be even more willing to provide you with financial assistance. The big advantage to being in a lower ranked school is that you will get *tons* of extra support (academic if not financial) because you will be their star. I was in a second tier (top 15, not top 10) school for my PhD and the top guys (who came for the money, although they’d gotten into better schools) did EXTREMELY well in the job market – no negative ramifications for stepping down except less debt.

  38. Esther says:

    @Madeline

    My husband is going to be on the Navy’s scholarship for med school as well. I was wondering what your experience has been like, both good parts and bad parts. Is he planning on serving more than just 4 years or not? Have you found support from other women in the Navy?

    Thanks so much!

  39. Erin says:

    Regarding taking maternity leave if you know you are not coming back – many people don’t realize this, but in the U.S. paid maternity leave is usually not technically maternity leave, but short-term disability leave that you get for medical reasons. This is typically 6-10 weeks based on your company’s specific insurance policy and whether you had a c-section or not. Then many people take additional time unpaid under the Family Medical Leave Act (FMLA) to finish out their leave, though you can only take a total of 12 weeks after the birth including disability and FMLA and still be guaranteed a job when you come back.

    So I don’t see anything wrong with taking a medical leave that you are entitled to under an insurance policy that is specifically intended for situations where you medically can’t work for a period of time, even if you aren’t planning to come back.

    However, it sounds like Cara’s firm may offer something more than the typical leave, so as others have said she should definitely check whether she has to pay back any money if she doesn’t come back to work.

  40. Mom says:

    Faith- what kids remember most is parents who are involved in their lives! We have 5 kids, 3 now graduated college, and they are happy and responsible and don’t feel deprived they didn’t have the newest Playstation or cell phone or gadget growing up. Their Nikes came from ebay, family time is still a day at the ocean, and they know how to shop for a bargain. To put it in perspective, we have never made more than $54,000 a year and we are not on government assistance. We’re debt free, live in a small house with one bathroom, and are quite content because we’ve made do with what we have. I’d rather be at their soccer games than working to have two new cars and a lot of stuff that really doesn’t matter. Come up with a working budget, and spend as much time as you can with your kids. That will give them a childhood to remember!

  41. spaces says:

    Cara, As a biglaw refugee to a wanna-be biglaw refugee, I encourage you to have your child while you still have your firm job if there’s any way you could possibly stand it. The money and the health insurance are huge. It will give you more freedom in the long run if you can stick it out a big longer because of the $.

    I did similar when I had my child, and have no regrets. I wound up going back to work for a few months on a “reduced” (50 hours a week!) schedule to finish up some things that I’d been heavily involved in, and went on my merry way after that, happily richer.

  42. Madeline says:

    @Esther

    My husband’s only one year into med school, so I don’t know too much about how the Navy will be in the future, but so far it’s been great. They pay for all medical school expenses, including books, lab fees, and health insurance (just for the student, not the rest of the family), and provide a bi-weekly stipend for living expenses. I know that one of their requirements is that you serve 45 days each year of medical school, which includes boot camp the summer between 1st and 2nd year, and doing rotations at Navy hospitals during 3rd and 4th year.

    I hope that helps, sorry I don’t have more info for you!

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