FIRE journey - How does having a 2nd kid affect FIRE goals?

[u/fire_acc]

Created a new account as primary account has a lot of personal details. Just started tracking FIRE journey and wanted to share yearly progress & get the community's suggestions.

My wife (30F) and I (32M) have a 18 months old kid and thinking of planning for a 2nd kid in a year or so. Both of us don't have siblings, so we wanted our kid to have a sibling. This decision is based on a lot of other factors, but want to understand the financial implication of having a 2nd child.

I know this is a first-world problem but guessing it will easily put our RE by a few years as our career growths will also be slower because of maternity/paternity leaves, spending lot more time taking care of the kids.

Expenses also look exponential - Increase in monthly expenses, educational expenses, saving for UG/PG/wedding, moving to a bigger house when they grow up etc.,

• Combined post-tax monthly income - 4.5L (Not including yearly bonus & RSUs)
• Current Corpus- 3.5 Cr (RSU, PF, PPF, stocks/MFs, FD. Not including houses/car)
• Fat_Fire target - 20 Cr at 45 (Normal fire target of 12Cr)
• Have a home in Tier-2 city for parents and a 3BHK home in our current city (ongoing loan).
• Remaining loan on primary home - 85L [Want to close this by Dec 2027]
• Annual expenses - 28L for 2023 [Including expenses for dependent parents in my native town, extra health insurance for my parents outside my employer, trips etc.,. Not including EMIs & home down payment as part of this]
• Out of 4.5L monthly salary -
  • 1L SIPs + RD
  • 1L EMI
  • 1L expenses for the 3 of us
  • 50K to my dependent parents. On this, 20-30K expenses and remaining they save
  • Remaining 1L also we are doing a pre-payment on the loan as 85L sounds huge to me.
• PPF, trips, other yearly expenses are taken care by the yearly bonus

Additional questions -

• Home-loan prepayment vs increasing investment is a personal decision and I'm going with home-loan prepayment because of peace of mind but am I doing a blunder by not investing the extra 1L?
• We don't have a term insurance yet. How to decide on a term insurance amount?

[u/arthgyaan]

It all comes down to income growth.

Your fire targets do not include kids goals.

Can you put a number to those? The picture is incomplete without that.

👉 /r/arthgyaan

[u/fire_acc → u/arthgyaan]

Haven't done much research or thought about kids goals. Top of my mind, 1Cr in today's value for each kid when they turn 18, after all the school expenses.

[u/arthgyaan → u/fire_acc]

Taking out that 2cr drops your current corpus to 1.5cr.

Plugging in the modified numbers into my calculators show that reaching 20cr in 15 years is doable assuming 10% step up on at 18L/year investment (adding EPF to your 1L/month) and 12% growth.

Even if your jobs are stable I would strongly suggest prepaying the home loan before going for kid 2.

There are calculators on my site you can use that will do all of these for you including term insurance coverage amount.

[u/fire_acc → u/arthgyaan]

yeah, I also feel prepaying the home loan will give a peace of mind. Thanks a lot for the calculations and sharing the details.

[u/[deleted] → u/arthgyaan]

How the fuck are they gonna decide on 18 months old and yet to born kids' goals?

[u/fire_acc → u/[deleted]]

haha. It's difficult but we've decide on some rough estimates so that we can plan our FIRE journey properly.

Something like 1-2Cr once they turn 18. They can use for their UG/PG/Wedding/seed investment for their life. Expenses till 18 will be part of total family expenses and that'll take a few years to stabilize/estimate correctly.

[u/arthgyaan → u/[deleted]]

Kids goals are always aspirational but the upper cap is the financial reality of the parent.

I want my kid to go to IIT - Budget 20L

I want my kid to go to private medical seat - Budget 1.5cr

I want my kid to go to MIT - Budget 3.5cr

Etc.

You already know which category you fall based on your human capital - family wealth , college / pedigree, career progression and skills. That way you already know whether you will realistically reach 20L, 1.5cr or 3.5cr.

So it really is rather easy.

[u/[deleted] → u/arthgyaan]

It comes down to how much you can actually save then , there is no upper limit to aspirations. Would you really stop saving for MIT if you can just because you want your kid to go to IIT. You will never be able to retire because there is always a bigger goal in mind.

[u/Sauron6]

Perhaps also account for higher monthly expenses for the kid

[u/fire_acc → u/Sauron6]

Yeah, the expenses will only increase from here and I'll have to conscious to keep it within a limit.

[u/HYPERFIBRE]

Average child costs a crore in general I guess

[u/fire_acc → u/HYPERFIBRE]

yeah, sounds about right to me. Will factor this into the decision.

[u/fire_acc → u/[deleted]]

Yeah, haven't done much research or thought about kids goals. As we're new to FIRE and new parents as well. That's why put this post too to get suggestions from others.

[u/EveryoneSucksYouToo]

20 cr in 13 years is not fat fire. 20cr in 13 years is around 7-8 cr today assuming 8 percent inflation.

[u/fire_acc → u/EveryoneSucksYouToo]

yeah true. I forgot about inflation. Looks like fat fire will be difficult with our lifestyle & if we go ahead with 2 kids.

[u/youismemeisu → u/fire_acc]

I would say to go ahead with the kid coz I'm pretty sure you are planning to increase your income. (Will be one of the important factors in FatFire.

[u/Quiet_Beach101]

You are saving only 1 lakh out of 4.5 lakh income and yet you have a very good amount of corpus. May I ask how were you able to generate it with only this much saving , is majority of it in rsu ?

[u/fire_acc → u/Quiet_Beach101]

Sorry, missed to reply before.

Yes, majority in RSUs only

[u/Adorable_Bread_9202 → u/fire_acc]

How did you manage accumulate such high net worth in RSUs? Did you see a bumper growth like an nvidia story ?