Cost to Raise a Child: April 2017

My wife and I are first time parents and we are now one month into the “parenting” process. I made it a goal to track all of our child care expenses so I could truly report on the cost of raising a child.

Prior to us having a child I did some research and the consensus was that it costs roughly $14,000 per year to raise a child, which equates to roughly $240,000 (without college). Don’t get me started on how much college will cost for my child

We are one month in and thus far we have spent $414 on my daughter in total. We have lucked out and received a number of hand-me-down clothes and toys, as well as a ton of gifts from our baby shower that are still holding us over well.

Since inception (March, 2017) = $414

March 2017
Item Price
Clothes $30
Wall art (name) $80
529 contribution $100
Hospital photos $70
Baby announcement $25
Vitamin D drops $9
Birth certificate $50
 529 contribution  $50
Total $414

Cost of College Calculator

Previously I wrote about my newborn daughters projected college costs in the year 2035. If any of my fellow Millennial parents out there have done this, I assume there was sticker shock for you as well. The future college costs numbers are truly staggering. Now that I know what my daughter’s costs ranges are 18 years from now, I now have to figure out how exactly I go about hitting those numbers.

529 College Savings

Luckily I opened a 529 savings plan for my daughter when she was 6-days old, and I now have 18 years of compounding interest on my side. So let’s start crunching some numbers to see what exactly I need to contribute each month to my daughters 529 college savings plan.

In-State School #1

$170,000 (Tuition and Fees Only)

The first in-state public university I would like to send my daughter to costs $170,000 for four years’ worth of tuition and fees (no room and board).

$420 per month contribution x 18 years @ 7% annual return = $170,000

$310,000 (All Expenses – Tuition, Fees, Room and Board)

If I want to pay for all college expenses for my daughter at my first choice of colleges, that price tag would be $310,000. And that costs would include tuition, fees, room and board.

$760 per month contribution x 18 years @ 7% annual return = $310,000

In-State School #2

$92,000 (Tuition and Fees Only)

The second in-state public university I would like to send my daughter to costs $92,000 for four years’ worth of tuition and fees (no room and board).

$225 per month contribution x 18 years @ 7% annual return = $92,000

$111,000 (All Expenses – Tuition, Fees, Room and Board)

If I want to pay for all college expenses for my daughter at my second (much cheaper) choice of colleges, that price tag would be $111,000. And that costs would include tuition, fees, room and board.

$275 per month contribution x 18 years @ 7% annual return = $111,000

I Opened a 529 for My Baby at 6 Days Old!

I don’t use this Millennial personal finance blog to brag about anything I do financially, whether it be via investing or my professional career and my salary. However, I do want to take a minute to pat myself (and my wife) on the back because we just opened a 529 college savings account for our newly born daughter, who is less than one week old. To be exact, she wasn’t even six days old actually!

529 college savings plan

I know there may be some naysayers out there, considering you can technically open a 529 college savings plan prior to your child’s physical birth. You can open an account long before you even have a child or the minute you find out you’re expecting. I was fully aware of this option but I just couldn’t bring myself to opening an account for a baby we hadn’t had yet. I know the risks are ultra-low of complications with the baby, but I just felt like it was a possible jinx if I opened a 529 before my baby was born. But I was determined to open a 529 nearly immediately after she blessed us with her presence.

Oddly enough, I actually opened my account for my 6-day old the same way you would if you opened a 529 college savings plan for a child 6 months before birth. I didn’t yet have a social security number for my daughter, which along with a name and birthday is all you need to open a 529 college savings plan. So instead I opened the 529 and assigned myself as the “student”, aka the beneficiary of the plan. Once I have a social security number for her I can then transfer the account over into her name. Any transfer within your family is free of charge. It is no different than the transfer policy from one child to another due to one child receiving a scholarship and deciding not to attend college.

The process for opening my daughters 529 college savings plan could not have been easier. I was able to quickly setup the account and connect it to my bank account via a routing and account number. I easily setup an automatic monthly transfer that begins this April. And then I setup an auto increase on her birthday each year. So beginning in March 2018 I will contribute $25 more each month, and then again in 2019, 2020, etc. I was then able to make a one-time contribution to kick start my daughters 529 college savings plan.

Automate Your 529 Savings Plan

I love automating my savings goals and this 529 plan allowed me to do this effortlessly. I will now be contributing to my daughters 529 at least monthly and that amount will go up each year to ensure I save as much as possible. We hope to receive some “college money” as gifts for her birthdays over the years from grandparents and other family members as well. We can then easily log in and make a contribution to her account when that happens. Its great.

Future Cost of College Calculator

And I am going to need all the help I can get to afford college in 18 years (year 2035). I played with a future cost of college calculator and the projected costs are unreal. Seriously, unreal what the anticipated costs of college would be in 18 years. For an in-state public university in my state, college tuition is expected to range from $92,000-$170,000, depending on the university, in the year 2035. Again, these ranges are only for in-state public school, nothing private, and these costs are only for tuition and fees, no room and board. If I want to pay for all college expenses (tuition, fees, room and board), that will run me anywhere from $111,000-$310,000 for four years of college. Wish me luck…at least I opened her account when she was 6-days old so I now have compound interest on my side.

Habitual Savings for Retirement

Earlier this week I posted my review of Charles Duhigg’s wonderful self-help book on ‘The Power of Habit’. Duhigg explores how we form habits and what it takes to break those bad habits and form new, good habits.

“As people strengthened their willpower muscles in one part of their lives—in the gym, or a money management program—that strength spilled over into what they ate or how hard they worked. Once willpower became stronger, it touched everything.”

Like virtually all books I read these days, I instantly go to how this came help me financially and help me with my personal finances. Over the last couple of years I have gotten into the “habit” of saving aggressively for retirement and budgeting so I ensure I live within my means. In 2015 I increased my 401k savings and upped my emergency fund. In 2016 my wife and I both maxed out our Roth IRA’s and I again increased my work-sponsored 401k plan.

It became a game for us to challenge ourselves to save more and more. It became a habit and we kept pushing ourselves to save more. We knew the more we could save at an early age, the better our chances are at retiring early. We kept learning how to live on less money each month so that we could continue to allocate more towards savings and retirement.

In 2017 I again increased my 401k savings to 12% of my income. We both plan on maxing out our Roth IRA’s. We’ve even discussed the potential of maxing out my work 401k plan, which would be $18,000. I don’t think we’ll get there this year or even next year, but still, if I can max out my 401k before the age of 35 we’d be in a great spot at eventually retiring early (age 55). We’re expecting our first child very soon and plan on starting to save for college ASAP via a 529 plan. So the new, added expense of a child makes maxing out my 401k a bit challenging for now. We’re going to see how our budget changes with a child to now care for and raise, then go from there. Diapers and college, here we come!

Last Week Stock Market (Feb 27-Mar 3, 2017)

Last week, Feb 27-Mar 3, 2017, U.S. stocks increased for the fourth straight week. The Federal Reserve (Fed) have taken note of these positive surprises, and many have stated that a short-term interest rate increase would be appropriate at its next meeting on March 15. And next week light vehicle sales will be released, which should help move the market, whether that be positively or negatively.

Last Week’s Stock and Bond Index Performance (Feb 27-Mar 3, 2017)

  • NASDAQ 0.4% (YTD 9.1%)
  • Dow Jones Industrial Average 0.9% (YTD 6.3%)
  • S&P 500 Index 0.7% (YTD 6.4%)
  • U.S. Aggregate Bond Index -0.8% (YTD 0.3%)

How did my retirement portfolio perform last week (Feb 27-Mar 3, 2017)?

Below is a snapshot of my three biggest retirement portfolio mutual fund movers (and losers!) in terms of percentage gained last week.

The below mutual funds are held within my work 401(k) plan as well as two separate Roth IRA plans. All accounts are held with Vanguard.

  1. Vanguard REIT Index Fund (VGSLX) -1.4%
  2. DFA U.S. Small Cap Value Portfolio (DFSVX) -0.7%
  3. Vanguard S&P 500 Index Fund (VFIAX) 0.7%

Can I Beat the Stock Market?

I am actually not trying to “beat the market” with my retirement portfolio…I am trying to match it. I do have alternative indexes in my retirement portfolio to help possibly beat the market, e.g. Small Cap Value, REITs, International, and Emerging Markets. I am purposely over-weighted in Small Cap Value, which at times helped me beat the market and at the same time lag the market. I am actually considering rebalancing my allocations a bit so I’m not so heavy in Small Cap Value, but I do like its potential. I’ve read countless academic articles about how it has historical beat large cap stock and the S&P 500. I am investing for the long haul so even though I am not beating the market right now, I feel confident about my future earnings/potential.

With that said, if I can beat the market I will absolutely take it (obviously)! In the last 90 days my portfolio is up 5.84%, whereas the S&P 500 is up 8.72%. So I am lagging the market, and this is the first time I am behind in months.

I am a liberal arts major and I am my own financial advisor. My goal with this personal finance blog is to show all Millennial’s that you have the power to take control of your personal finances through self-educating on money and finance, and by striving to become financially literate. That is what I have been doing for years now, focusing on becoming financially literate, so I can one day become financially independent. I’m trying to prove to Millennial’s that we can all do this and thrive with money. Follow my blog as I highlight relevant personal finance topics pertaining to us Millennial’s.

Traits of Self-Made Retirement Millionaires

Several years ago my wife and I decided to dramatically change our lifestyle and stop living paycheck-to-paycheck. It’s taken us just under three years but we now 100% have our financial life in order. Our retirement accounts are hefty for our age and we have an emergency fund with 5+ months of expenses. We are now living well within our means, which provides us with a lot left over to throw at retirement and our home mortgage.

The purpose of my personal finance blog for Millennials was to show others that you don’t need a finance degree to get out of debt and become financially independent. I read money, finance, investing, and personal development articles and books like crazy. I listen to podcasts and audio books on money as well to continue to grow my knowledge on investing and personal finances.

I recall reading an article about the traits found in self-made millionaires. I read the article and felt great at every turn because I thought to myself, “that’s what I do!” It’s a great feeling. I wanted to share those traits with my fellow Millennial readers to inspire them to think differently about money, investing, and retirement so you and I both can one day (very soon, hopefully) be Millennial Millionaires!

But first, to put the idea of becoming a “Millionaire” into perspective, that examine how much money, or lack thereof, that really is. If you retired with one million dollars today and used the 4% withdraw rule that would leave you with $40,000 annually to live on. Not so great, huh? Us Millennials have time and compound interest on our side so we need to think bigger. I want to be a Millennial Millionaire with $3 million to retire on. That would leave my wife and I with $120,000 annually to live on. That sure sounds like financial independence to me! So what is it going to take to become a Millennial Millionaire?

Traits of Self-Made Retirement Millionaires

Millionaires are often well-educated

Graduating college is not required, obviously, to become a millionaire, but getting that degree does better your chances of accomplishing this feat. In the book The Education of Millionaires: Everything You Won’t Learn in College About How to Be Successful, author Michael Ellsberg cites the fact that 80% of all millionaires have graduated from college.

I am a college graduate and my wife is not. I feel like we’re in a great spot and on the right trajectory. So goes to show that any education level makes it possible, but a college degree may help more. However, I would argue that work ethic trumps the degree.

Millionaires understand the power of compounding interest

From the day I graduated college and started my first full-time job I began saving for retirement. I was only 22 at the time. I had lots of debt (student loans and credit card) and wasn’t making a ton. But I knew I needed to save for retirement and save as much as I could. Any little bit at that early age would help. I did the same for my wife (who was only my girlfriend at the time) and forced her to open an account with a brokerage firm since she was independent. Compounding interest is amazing and can virtually double your investment every 7 years.

Self-made millionaires live within their means

One of the biggest traits of self-made millionaires is that they tend to live within their means and operate within the parameters of a budget. This certainly wasn’t me until a few years ago. I didn’t get on a written budget until my late 20’s, but I can’t stress enough just how much money that saved me. It really shines a light on where your money is going and where you can cutback to save, and ultimately increase your take-home pay without actually getting a raise.

We swear by our budget now and monitor it very closely. We also live within our means and save habitually. We actually challenge ourselves each year to save more and more. I keep increasing the percentage of pay towards my Roth 401(k). Every bit of extra money we come across now we save. That was not what we did in our early 20’s though…but we do now and will continue to do so until we are financially independent.

Millionaire’s typically have multiple income streams

A great deal of millionaire’s are well diversified with their income streams. No shock there. This is probably my biggest weakness right now as I don’t have any other source of income other than my job. Same goes for my wife. I have obviously created this personal finance blog for Millennial’s to track and note my journey. I plan on buying a rental property at some point down the road when I have enough money, but right now I live in a really, really hot real estate market where it just doesn’t even make sense right now. Hopefully at some point in a few years that changes a bit and I can dip my toe in the rental market.

Self-made millionaires usually have a mentor

Another common trait a number of self-made millionaires share is that they’ve found a career or wealth mentor along the way who has helped shape their path to prosperity. I would have to say my “wealth mentor” right now is Dave Ramsey. I follow his podcast regularly to keep me straight on my budgeting and personal finances. He regularly refers to himself as a “finance coach” too. I look at his that way without ever have meeting him. I have a couple bosses at work I really look up to professionally speaking. I follow their lead when it comes to advancing my career and increasing my income. But financially I do follow Dave Ramsey, The Motley Fool podcasts (see my post on the best podcast for Millennials), as well as a number of other great personal finance and retirement authors and bloggers out there. I try and keep my money knowledge as diversified as possible so I know all of my options.

Millionaires have defined plans and measurable goals

Finally, not only do self-made millionaires have goals they want to reach and the drive to reach them, but they ensure their progress is measurable. To become a millionaire you obviously have to make money, save well, invest diligently, and live below your means. However, without goals we have absolutely nothing to aim for. I once read if you aim at nothing you’ll hit it every single time. You have to set challenging, yet realistic goals for yourself and track your progress.

If you read through my Millennial Millionaire page you’ll see I’ve set a number of goals for myself.

  • My goal for 2017 is to increase my net worth by $60,000 up to $440,000, which would be a 15% increase
  • By 2018 I will have a net worth of half of one million dollars
  • I should be a Millennial Millionaire and have a net worth of $1,000,000 before the age of 40 (my estimate is sometime between 2024 or 2025)
  • I hope to retire with a portfolio worth $3 million dollars
  • I plan to retire by age 55

Retirement IQ

I was testing out Chris Hogan’s popular ‘Retire Inspired Quotient’ (R:IQ), which is essentially a retirement IQ calculator. You plug in what you consider your dream retirement (family, travel, hobbies, relaxation, etc.), your current gross annual income, how much you need right now monthly to retire, and then your current savings.


The retire inspired quotient tool runs a calculation based off all of your parameters to generate your “R:IQ” number, e.g. the amount of money you need in order to comfortably retire based off everything you just laid out previously. It also tells you how much you should be investing monthly in order to hit your desired retirement age and “R:IQ” nest egg number.

12% Market Returns…Really?

This is a pretty cool retirement calculator, however, it skews on the very high returns side. I think Chris Hogan, famed Dave Ramsey “retirement” personality”, leverages this retirement IQ tool to be more inspiring than factual. The only reason I say that, which is the same reason I am very critical of Dave Ramsey’s investment advice, is because they assume a 12% return, ALWAYS. They automatically assume you can and will get those returns. They essentially say you can beat the market every single year year, considering the stock market has historically returned approximately 10% for the last 80+ years.

With that said, the retire inspired quotient (R:IQ) tool is still very functional. I simply modify my number by accounting for a more modest return…not 12%. You too can play with that percentage return and use something more like 7%, 8% or ever 10%. But 12% is extremely optimistic.

Retire Inspired Quotient

Without further ado, below are my personal retire inspired quotient (R:IQ) results. Based off Chris Hogan’s tool my wife and I are in a pretty good spot. The R:IQ says I need $3.36 million dollars to retire by the age of 55. In order to hit that mark I must save $1,626/month for the next 18 years. All of that is great to hear…and this is based off a 10% return, not 12%.

Retire Inspired Quotient or Retirement IQ
Retire Inspired Quotient (Retirement IQ)

What is even more encouraging about all of this is the fact that my wife and I collectively save significantly more than $1,600 per month. We sock away a lot of money each month for retirement. We both max out Roth IRA’s and I have a 401k with company match and profit sharing. So even if we get returns more in the 7-8% return, our monthly savings should help make up that gap.

Millennials, what is your retire inspired quotient?

Guarantee Retirement in 30 Years

I was listening to one of my favorite podcast on money by Paul Merriman and he focused on a topic I think a lot of us Millennials think about…early retirement. We Millennials are a ways away from retirement, which means, lucky for us, we have tons of time to save and let compound interest work in our favor. I have always targeted age 60 as my goal retirement age. And even that seems “early” in comparison to when most people retire these days. The average retirement age is 63.

I am in my early 30’s now and have been saving for retirement now for 10 years. I track my retirement progress religiously and I am always trying to push myself to save more for retirement. Paul has inspired me to rethink my goal retirement age. Instead of retiring by age 60, I am now moving my ideal target retirement date to 55. I am still 20+ years away from this age so I have more than enough time to achieve this goal, if I save diligently.

Retirement Projections

A couple years ago I put together a retirement projection spreadsheet, based off my current savings, savings rate, and projected annual rate of return. The below projections are for both my wife and I and what I anticipate we may like have in retirement savings by age.

Retire by 50?

– 7% return = $1 million
– 8% = $1.25 million
– 10% = $1.68 million

Retire by 55?

– 7% return = $1.63 million
– 8% = $1.96 million
– 10% = $2.85 million

Retire by 60?

– 7% return = $2.4 million
– 8% = $3 million
– 10% = $4.79 million

Retire by 65?

– 7% return = $3.5 million
– 8% = $4.58 million
– 10% = $7.95 million

So what jumps out most about these numbers? To me its two fold. The first is that obviously the longer you work the greater your savings compound to. Case in point, with a modest 7% return I should have just barely $1 million dollars by age 50. But if I keep working and allow my savings to continue to grow, by age 65 I may have a $3.5 million nest egg. That’s 3.5x more! The second biggest take away from these numbers is the difference 1-2% points can make on your retirement portfolio. At age 55, a 2% difference in return means nearly $1 million dollars. By age 60 that jumps to a $1.8 million difference. Worse yet, at age 65 a 2% difference is more than $3 million dollars.

I want to retire by at least 55

So the obvious answer is save longer and shoot for higher returns, but that is easier said than done on the returns side of things. And I’m writing this article because I’m broadcasting my goal of retiring at least by the age of 55.

How to retire in 30 years, guaranteed

Paul Merriman’s premise is that you can retire in 30 years if you manage to save $12,500 per year for 30 years and receive an annual return of 12%. Saving that much each month for 30 years actually isn’t all that challenging, as it equates to you and your spouse each saving $520/month towards retirement. The 12% return is what is tricky. However, if you miss 12% and hit 10%, you’re still looking at a $2 million dollar nest egg. Pretty good consolation prize. The other option is to work slightly longer or simply save more than $12,500/year. For a couple earning $100,000 annually, that is only 12.5%. I will strive to save 15-20% to guarantee (more or less) my success. If you upped your savings to 15% you would end up with $3.6 million (with a 12% return) or $2.4 million (with a 10% return). Even an 8% return would still net your $1.7 million.