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How to incorporate yearly "gift"?

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  • jfoxcpacfp jfoxcpacfp 
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    Status: Financial Advisor, Accountant, Small Business Owner
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    Joined: 01/09/2016

    if I ever gave my grandkids $50,000 and he put it into a vanguard index fund he would be sure to get another $50,000 next year. If my other grandkid spent it on a fancy car that would probably be the last gift.

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    I would agree in most situations and would feel the same way. However, I believe it is important to consider the context of the  relatives’ request. Apparently, the DNA of this family tree carries the opposite problem. They save so much, it has become (again, in the eyes of the givers) a problem. Just as it is possible to make money mistakes by over-spending (most common), it is also possible to err in the opposite direction and make saving an end unto itself rather than doing so for a higher purpose. This dynamic is, naturally, more rare, but it exists (experienced it on occasion with clients).

    I sense this issue is what the givers are attempting to emphasize with their request. Given the plan the recipients already have in place, it does not appear (impo) that they suffer from uncontrollable spending impulses or will model such for their children. Hence, the request to enjoy and “break the mold”. I believe the terms of this gift were carefully thought out before they were communicated to @labralterror and should be considered out of respect for the relatives, if for no other reason.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #232272 Reply
    Avatar EndoRobert 
    Participant
    Posts: 69
    Joined: 01/12/2019

    I don’t think there’s a right answer here. You and spouse are certainly getting all the big things right.

    If it were me I’d think about- Does mom like working? How is the 170 divided, 110/120 and 60/50 or more like 130 and 40? What’s plan for childcare now that you have a newborn and a 2yo? Childcare is expensive and if wife doesn’t love work I’d be thinking about maybe having her stay home if she wants.

    Things remaining constant however, what I would do for the next ten years:
    5-10k to buy my way out of some call and bump up our vacations. (Allocate how you’d like)
    12k for kids college (I’d dump it all in the 529, but if you want to go up to tax break and then put the rest in taxable for flexibility I think that’s fine)
    28-33k to pay off mortgage and car (yes, they’re *very* low rates, but I want to free up cash flow and I think this is honoring the spending wish more than simply dumping into taxable. And yes, i realize I’m probably losing here mathematically.)

    You’re now 43, have zero debt and a reasonably large college fund. From here I’d-
    10-20k for no call and vacation fund
    Reevaluate 529 and what goals are moving forward
    Use remainder plus freed up cash flow to double savings rate
    Spend the rest

    At 50 I’d be in great shape to cut way back.

    #232335 Reply
    Liked by ZZZ, LabralTerror
    q-school q-school 
    Participant
    Status: Physician
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    Joined: 05/07/2017

    Has no one here seen Brewster’s millions?

    #232343 Reply
    Avatar LabralTerror 
    Participant
    Status: Other Professional
    Posts: 11
    Joined: 07/20/2019

    Has no one here seen Brewster’s millions?

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    Hahaha

    #232345 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
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    Joined: 02/11/2019

    Good idea. Send all correspondence with your family using collectable stamps.

    “Never let your sense of morals prevent you from doing what is right.”

    #232346 Reply
    Liked by LabralTerror
    Avatar LabralTerror 
    Participant
    Status: Other Professional
    Posts: 11
    Joined: 07/20/2019

    I don’t think there’s a right answer here. You and spouse are certainly getting all the big things right.

    If it were me I’d think about- Does mom like working? How is the 170 divided, 110/120 and 60/50 or more like 130 and 40? What’s plan for childcare now that you have a newborn and a 2yo? Childcare is expensive and if wife doesn’t love work I’d be thinking about maybe having her stay home if she wants.

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    It’s $100k for me and $70k for her. (She is only working 3 days per week in order to stay home and provide full caregiving 2 days per week, then a juggling act between Grandmas for the other 3 days of coverage (whom we pay a very low wage). Our 2yo is likely to start pre-school Jan 2020, for at least half-days to start. You are correct, it is expensive and is an expense we know we need to plan for.

    Appreciate your response otherwise, as it does make sense to begin planning in time periods (say, 10 years), to determine where we will be vs want to be. Wife and I have previously done this in regards to our Personal investing statement. Good time to re-visit this. Thanks

    #232385 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8113
    Joined: 01/09/2016
    What’s plan for childcare now that you have a newborn and a 2yo? Childcare is expensive and if wife doesn’t love work I’d be thinking about maybe having her stay home if she wants.

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    Please understand this is not a slam on you, but (as a former SAHM) I am compelled to comment: if the wife doesn’t “love work”, assuming the role of SAHM checks the wrong box.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #232669 Reply
    Avatar EndoRobert 
    Participant
    Posts: 69
    Joined: 01/12/2019

    Agreed. Which is why there’s the whole first-half, qualifier part of the paragraph.

    They happen to be paying $0 for childcare and proportionally she does incredibly well, plus family support. It’s a pretty unicorn situation before the 50k gift.

    My point was if you’re paying $.75/1k a month for 1 kid, you’ve just added a newborn who will also need care (so now at $1500-2000/month), what does wife make? If it’s close to 50 and you’re gonna be paying 25k/year in childcare, I was asking if she’d *rather be home* with newborn and 2yo because, if yes, the math is pretty compelling.

    Heck, if they were paying childcare and he wanted to stay home and she could work full time at 125k I’d be great with that.

    #232692 Reply
    Liked by LabralTerror

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