For many years, my wife and I opted to be child-free. I could see myself having kids, but also felt at peace with the idea of not having children at all. My wife was more firmly in the “no thanks” camp when she was in her 20s.
Then, we both changed our minds.
It wasn’t any one particular event or conversation, but more of the cumulative effect that I think many people experienced during the COVID-19 pandemic: 2020 put things in a different perspective.
It created a pause in our normal day-to-day lives that gave us a chance to reflect and think about what truly mattered to us: close relationships, being part of a community, and doing meaningful work, whether that work was in our business or beyond it, such as caring for others.
That led us to agree that we did want to have children after all. Being financial advisors, we knew that such a left turn in life would require us to review and reconsider the financial planning we had done to date.
We felt good about reversing our stance on our family structure precisely because of the financial planning philosophy we use, for ourselves and in my work for clients as a personal financial advisor: You don’t know what will change in life, but you can know with near certainty that something will change. You have to make financial decisions and plans that account for that reality.
We made our financial plan highly adaptable so that it was easy to shift once we realized we wanted to grow our family. These 5 steps were critical to our success.
1. We made a habit of saving more than we “had to” or “should”
We spent a decade saving between 30 to 40 percent of our income because we prioritized future flexibility. We also knew how powerful “frontloading” our savings could be.
To reap the biggest benefits from the power of compounding returns on investments, you need to stay invested for a very long time period. And the earlier you start, the more you can benefit from the compounding effect.
Courtesy of Eric Roberge
We save less now, partly because we have all kinds of expenses we did not have before adding a child to the family — school tuition, a third airplane seat on trips, endless stuffed animal acquisition, and so on.
But “saving less” does not mean abandoning the savings habit altogether. We now save about 25% of our income annually. While it’s less than before, it’s still higher than average, though it feels like an easy target to meet after sustaining higher savings rates for so long. It’s also sufficient to meet our biggest current financial goal of retiring in our 50s.
2. We avoided major fixed costs or hard-to-reverse decisions
While we were child-free we opted out of the biggest fixed cost most people put into their budgets: buying a house.
Without definitive clarity on what the future might look like, we prioritized the flexibility and ease of renting even when everyone around us was buying homes. We reasoned that we should take advantage of the fact we had no external force tying us to a specific location.
Homebuying is a specific example, but we tried to use this frame of thinking more generally to help us avoid very large fixed costs or decisions that were hard to undo. If a choice in the moment would narrow our options for tomorrow, we tended to view it as a sub-optimal choice and sought other alternatives.
3. We kept lifestyle inflation to a minimum along the way
Even as our income grew, we rarely increased our spending. This allowed us to create a larger and larger gap between what we earned and what we spent — giving us a surplus we could save and invest.
Before adding a new recurring expense, we asked ourselves if it aligned with our values or provided benefits like giving us the ability to buy back our time. If not, we didn’t allow that line item to add to our budget.
When we did eventually buy a house, we looked at homes that were significantly less expensive than what a lender would call affordable to ensure we didn’t max out our budget.
4. We said no to traditional FIRE-style retirement goals
Instead of trying to get out of the workforce on the slimmest investment portfolio possible, as some FIRE strategies that were extremely popular in the 2010s aimed to do, we worked to:
Doing so allowed us to harness our increasing cash flow power for present-day purchases and more contributions to growth assets in our investment portfolio.
5. We pivoted when the situation called for it
What works today might not work in the future if things change — and that’s okay. Being willing to change is a huge asset.
When we had our daughter in 2021, we chose to save a little less so that we could spend a little more on her as well as things as a family. We did this knowing that a higher level of spending introduced a bit more long-term risk into our plan, due to taking our foot off the gas in terms of contributions to long-term investments.
At the end of the day, the only constant is change — whether from external forces you can’t control or from the choices you willingly make with full agency.
The more willing you are to adapt to the situation at hand, the more likely you’ll be to continue on a track for success.
By being proactive, accounting for unpredictability, and having contingency plans in place, you’ll better position yourself (and your money) for whatever life throws at you — without having to give up long-term goals you’re working hard to achieve.