I spent some time practicing my Excel skills this week. I'm the first to admit that my Excel "skills" are totally remedial by b-school standards, but other lawyers--especially the senior ones--seem to think I'm some sort of Excel ninja so I'm doing what I can to keep up appearances. I started out by running a few annuity calculations and setting up some amortization tables.
This reminded me of the MBA core finance midterm that tasked us to calculate how much we should save monthly for a newly born infant to attend college. So I ran those calculations again, assuming tuition and living expenses for one child, born in twelve months, who would attend my alma mater; and, to complete the grim picture, also ran some calculations to check whether my current retirement savings are on track.
The numbers were sobering, but it turns out that accomplishing my big financial goals is within my grasp if I can maintain my current income. What are those big financial goals? To be able, by myself, to buy a modest house, pay for one child to attend daycare and college, retire comfortably and take a couple of vacations along the way. How do I know I can meet these goals? When I had some spare time as a first year associate, I modeled the next forty years of my personal finances and I've updated the model every month since.
It is reassuring to know, in theory, that I am capable of meeting my goals, but maintaining my current salary will be a challenge, if not impossible. This is why I'm trying to make the most of my time on an expat package by socking away extra money each month. This month was a particularly good one: I contributed 12% of my pre-tax income to my 401(k) and 86.5% of my post-tax income to savings and investments. When I have a particularly lonely week, I remind myself how incredibly lucky I am to have this opportunity to build a strong financial foundation.
Speaking of college tuition, do you know someone who started making contributions to a 529 plan before they had any kids? How did that work out for them?