Daycare or Not Daycare

The other day, a good friend of ours asked if we knew a specific date we'd be hitting financial independence. Unfortunately, I told her I didn't think we could give an answer. At least in our case, I'm not sure we'll really be able to do a lot of forecasting.

Financial independence, ironically, becomes less in our control as we get closer to it. More and more is in the hands of the market, while our contributions make up a smaller and smaller portion of the overall portfolio. If the market goes up the next year or so we'll likely hit financial independence in my fortieth year without much problem.

If the stock market dips hard, then there's literally nothing we can do to make up for it. Those are the breaks.

As someone with a lot of control issues, having so much out of my control is a weird, unnerving feeling.

It's also a feeling I need to get comfortable with since that's going to be our normal state of being once we stop working and everything relies on the thousands of companies and governments that comprise our investments. We've got a few decades of things being out of my hands and in those of the market, so I better get used to it.

One thing that is in our control, at least in most respects, is our spending. We recently paid off the mortgage to keep our spending artificially low. And now, with the exceptions of our property taxes, a couple insurance policies, and our utilities, I suppose you could say that all our spending is discretionary. It's all up to us.

We can decide to eat in more or eat out. We can decide to buy a new car (and the expenses that come with it), or we can continue rocking our 2006 Matrix and stay a one car family. We can take two trips this year, or none at all.

And our spending obviously is a big determinant for our financial independence plans. The amount we choose to spend basically determines the target for our nest egg. In our case, we take our annual spending, account for changes that will happen after we leave work like health insurance, and then divide that amount by 3.5% to get our target FI figure.

The big decision that we're working through now is how to handle daycare as an expense. It's in our annual spending now, and it's a big line item: roughly $1,000 a month. Our plan is to have a second baby (the yet-to-be-named MC Baby) prior to pulling the trigger on FIRE, and that would send our daycare costs even higher.

But our plan after leaving full time work was not to continue with putting the littles in daycare if we're both not working: we'd watch them instead. There are two of us so that would make things easier than if just one of us had to take on that labor.

But time with family is also the main reason we're even working towards financial independence. Baby AF will be in school before we know it. We'd like to get more than the time we get right now with him before and after work, and on the weekends.

Still, plans change. With us, they change a lot. After a year of family bliss in early retirement, we might see the benefits of some daycare.

That still leaves us with a bit of a decision on how to account for an expense we have in our budget right now, but one that we don't plan on having later...but definitely could have later because we cannot predict the future.

Let's look at some graphs and see if numbers help us come to a decision.

Here is when the Mad Fientist's laboratory projects we'll hit financial independence under our current plan, under a 3.5% withdrawal rate and assuming a $36k annual spend that doesn't include daycare, and does not include a mortgage (which was only true for monthly budgets after August 2019, following the white line on the graph).

Click for bigness

I kind of like the graph because it means we'd hit our goal while I'm still forty. Hypothetical success!

But what would our date for financial independence look like if we wanted to budget for $1,000 of daycare going forward? Even if they're not in daycare, there could be kid-related expenses that end up in that range...right? 

Let's take a look at what happens to our plans if we increase our monthly spending by *checks notes* a ridiculous thirty three percent.

Click for bigness

Dear God, that is a lot longer. Done by Forty-Two doesn't have quite the same ring to it. We'd have to work for an additional two years and two months to cover just daycare.

Somewhat ironically, Baby AF would probably be too old for daycare by the time we'd saved up enough for him to attend.

And that's the rub. Adding an extra thousand dollars a month to our budget is such a big change that we'd have to save up an additional $343k just to cover it. 

When we think of the small fortune we'd have to amass to get the benefits of daycare, it it worth the effort? Is it worth the time?

My gut says, no. That juice is not worth the squeeze. While we'll be the first to admit that there are a lot of nice benefits to daycare, I'm not sure I'd work an additional two plus years and save up an additional three hundred and forty three thousand dollars, just to get the benefits of daycare.

What I can imagine us doing is finding some sort of post-financial independence work that we just enjoy doing for its own sake, and sending the kiddos to daycare because, well, they're kids and someone needs to watch them. While this isn't what we think will happen now, I can definitely imagine a reality where we (or at least one of us) would like to give some new, interesting work a shot.

But I also think we'd probably give staying at home with the kids a shot first. That we'd try early retirement on for size, see how it felt. Maybe we'd love this next life of ours, filled with day trips with the kids and board games and going for hikes around our little state.

Or maybe we'd get them back into the care of professionals as soon as we could.

I wish there was some way to know how future Brian would feel about all this stuff. How can we budget for a future that might be drastically different than our present?

If we budget for the big expense, that will cost us a lot of time and money. If we leave work too early and find out we need daycare, then we may need to work again, sacrificing the early retirement itself just to pay for it. It's a dilemma.

As always, I have no answers. I have some spreadsheets and some scenarios, but no way of knowing which will match our reality. 

I hate to say we're going to have to wing it, because these are big decisions with price tags to match. But without a way to see what's coming around the corner, I think we'll just have to keep on this path and see what future we run into when we get there.

As always, thanks for reading.

*Photo is from kidsworkchicago at Flickr Creative Commons.

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