BiggerPockets Money Podcast - 442: Finance Friday: Planning for a Family Costs More Than I Thought…

Episode Date: August 18, 2023

Knowing how to budget is one thing. Knowing how to budget for a pricey pregnancy and future family is another. So, how do you smoothly go from a couple used to saving thousands of dollars every month to a family with a slew of new costs added to the budget? First, let’s look at what you’re making, what you’re keeping, and what you MUST have on hand to safely raise a family.  We’ll be doing precisely that with today’s guest John. John and his wife make a sizable income and keep a strict budget with modest expenses. They’re saving a serious amount of money every month, but there’s one massive expense that’s about to be added to their budget. John and his wife have to go the surrogacy route for their first two children, and the price tag isn’t cheap. With a six-figure cost PER successful surrogacy, John wants to know how to balance his budget with his high student loans about to kick back in. He also wants to invest but knows that could put his surrogacy savings at risk. Even if you’re not going the surrogacy route, this episode is CRUCIAL for any new parent—especially those that still want to achieve FI earlier in life! In This Episode We Cover Budgeting for your future family and how to make sure your savings stay risk-free Surrogacy, expensive pregnancies, and unexpected costs you may have to pay Student loan debt and how to plan for payments once the pause is over The BEST savings account to stick your money into today Active investing vs. passive investing and why rental properties aren’t for everyone And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Join BiggerPockets for FREE Scott's Instagram Mindy on BiggerPocket Grab Scott’s Book, “Set for Life” Scott Trench’s Step-by-Step Guide to Building Your Perfect, 1-Page Investment Plans Hear James on the “On the Market” Podcast Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! Listen to The Real Estate InvestHER Show Join The Real Estate InvestHER Community on Facebook Register for an Upcoming InvestHER Event Money Moment Federal Student Loan Forgiveness Update: What Happens Now? Budgeting for a Baby: The Costs EVERY New Parent Should Expect Click here to check the full show notes: https://www.biggerpockets.com/blog/money-442   Interested in learning more about today's sponsors or becoming a BiggerPockets partner yourself? Email us: [e-mail] Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast, Finance Friday edition, where we interview John and talk about planning for surrogacy. Hello, hello, hello. My name is Mindy Jensen. And with me, as always, is my finally back from vacation co-host, Scott Trench. Thanks, Mindy. It's great to be finally dune with my vacation and back to work. Scott and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when.

or where you're starting or what big expenses you have coming down the pipeline. That's right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business, or deal with the expensive costs of starting a family with surrogacy. We'll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams. Scott, we have a new segment of the money show called The Money Moment, where we share a

money hack, tip, or trick to help you on your financial journey. Today's money moment is stick to water. If you're trying to cut back on spending money but still want to go out to eat, don't order that beloved cocktail or beer. Stick to water. This will significantly cut down on your expenses in eating out. And if you feel like you're going to miss out on drinking, feel free to pregame before you go.

Do you have a money tip for us? Email money moment at biggerpockets.com. Scott, I got to tell you, I love talking to you, but I hate talking to our attorneys. So I am going to say what they make money. me say the contents of this podcast are informational in nature and are not legal or tax advice and neither Scott or I know bigger pockets is engaged in the provision of legal tax or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants

regarding the legal tax and financial implications of any financial decision you contemplate. All right. Now, let's talk about today's episode. I'm actually really excited to talk to John today because he has such an interesting problem. He makes a lot of money, but he has a huge expense coming down the pipeline. Yeah, he certainly has some of those financial decisions to contemplate here. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going and more importantly where your tax refund can make the biggest impact. Because the

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Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more. All accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP money. John and his wife are looking to start a family through surrogacy.

He is looking for guidance to refine his budget, especially with student loan payments kicking back in and dealing with a rental property, all while planning for this larger family expense. John, welcome to the Bigger Pockets Money podcast. We're so excited to have you today. Thank you. I'm excited to be here. Let's start off with a snapshot of your money story. What is your financial situation?

A financial situation is my income grew significantly about two years ago. We have been, you know, saving, investing diligently. However, about two years ago, we found out that, unfortunately, we can't have a family, family naturally. And so going through the process of figuring all that out, we discovered that we have to go through surrogacy. And for those of you that don't know, surrogacy is where you get, an outside party, a third person to carry your genetic child.

As you can imagine, it's not a cheap process. A lot of it isn't covered by insurance. A lot of it is coming out of pocket. And so with loans starting back up, surrogacy on the horizon, I was hoping to get some input and insight as to like how to maneuver my money a little bit. So let's talk about your money snapshot. You have a nice income. After taxes and insurance and all of that, you're making $11,640.

That's not too shabby. Your expenses are about 4,500 fixed and 2,500 invariable on average, giving you about $7,000. Against $11,000, spending doesn't seem to be your problem. This leaves $4,600 left over. That sounds great. And then we go and look at your investments, which also sound really awesome. You have $351,000 in investments and $83,000 in cash. Your wife has almost $300,000 in investments and $1211 in cash.

Hooray, another awesome scenario. But wait, there's more. There's always more. We look at the debts and that's where some fun stuff comes in. We have a car loan at $15,000, not insurmountable. a car loan again at $4,000, again, not insurmountable. Your wife's student loans are $11,000. You have mortgage number one, $289,000, mortgage number $214,000.

None of that I care about. It's your student loan, John, that I want to talk about. You have $362,000 in student loans. Is that correct, or is that a typo? That is correct. And one other clarification, I think, is that the 11,000 you mentioned is every two weeks. Oh, oh.

Oh. So, okay, wait a second. Hold the phone. So you have a salary of $22,000 monthly? And you're spending $7,000 monthly? My math is wrong. $15,000 left over? That is going to, well, thank you for clarifying that because that changes my conversation a whole lot.

because 4,600 is nice leftover, but 15,000 is even better. However, you still have $362,000 in student loans. Is any of that forgivable? Yes, it is. So we specifically chose where we live now and my current job, because it is a nonprofit institution. And so the loans currently are in the PSLF program. So hopefully by 2027, those loans will be.

forgiven. And how much of the balance will be forgiven? Is it all of the $370,000-odd dollars? So of the 360-odd thousand dollars, I believe 350 of that will be forgiven in 2027. And then is any of your wife's loans forgivable? They were, and they still are. However, she did not enroll in PSLF from the get-go. and so she is behind in payments theoretically. So we just decided that when the loans resume, we'll just pay those off. Okay. That was before I knew that you had $15,000 extra every month.

That was going to be my suggestion was to pay hers off because the PSLF, if I recall correctly, is a 10 or 20-year program? 10. 10. Okay. So if she's just starting that, you're going to be able to pay that off and get it out of the way instead of like worrying about it for 10 years. yours are a touch higher and also almost gone. We have four years left. I would continue to go on that program.

And that kind of changes. So my first question was going to be, what is your greatest money pain point? But I was going to answer that as student loans. Is that still your greatest money pain point now that we know that you have the PSLF program? I think it is. And I say that because, so I'll be paying a certain amount.

theoretically in September when they restart, I'll be at $300 per month for six months until I re-certify my income. Once that happens, the payments will go from anywhere between $1,500 a month to $3,000. I can't get a good number based on various calculators I've looked at online. And so I think that's going to, like in terms of our level of monthly investments, I think it's going to, yeah, it's like a pain point because I don't know exactly how to maneuver the cash. So let's go back a second. What is your job and what is the likely progression for your income over the near future? So I work in medicine and frankly there's not going to be a ton of increase yearly, maybe keep up with previous theoretical inflation rates, maybe like one,

two percent a year. Okay. So do, you know, when we talk like, again, I'll pose Mindy's question again here. What is the, like we have, I think a really good financial position here. We're to accumulate a lot of cash on a regular basis. We know that in 2027, the bulk of the student loans will be forgiven. That will be a taxable event, I believe. Is that correct? With PSLF, it is not. I think in like the 20-year loan forgiveness, it's like a big tax bomb at the end, but with this one, it's not. It's just kind of gone. Okay. So the story for the next couple of years is we're going to be accumulating a lot of cash in a general sense. We'll have the ability to accumulate that on our current base lifestyle. There will be an increase in the amount paid towards the student loans,

which will continue until 2027, but the entire balance will be forgiven tax-free, essentially, the 95% of it will be, maybe 97% of it will be forgiven in 2027. And we're going to be able to invest a lot of money in the meantime, even on top of that, those payments there. So is the is the question and is the the struggle, what should we do with that with those funds? We have some other items that are coming up here as well to think through. Yeah. So, so foreseeably, my wife and I want to get the family started now kind of because the process is so long. And so theoretically I'll be paying, let's say, 2000 a month until 2027.

And we also need to like save money or take out a loan to have a family. we have money saved up currently for child number one if everything goes well the first time around but we'd like to ideally have like two or three kids and then adopt as well which is not as expensive as surrogacy but that's kind of our thought process as well and so we want to save up a good amount of money to do that okay and can you explain the process of surrogacy so we can understand what the cost entails here and what the timeline looks like for this process okay so You find out that you have to go through the surrogacy process. You then match up with an agency.

The agency starts looking for a surrogate for you. Sometimes that timeline can take up to a year to get matched. You then get matched. The process for them to go get medically cleared, you get medically cleared can take several months. And then the surgery occurs and you go through like the regular pregnancy process. So that's the average rate for getting matched. Sometimes it takes longer, sometimes it's shorter. Sometimes the medical process going through the medications takes longer.

And unfortunately, sometimes the pregnancy doesn't occur. And so we know people in the community that have gone through three previous surrogates before being successful. And so this is a process that can take years. So my wife and I have kind of been through this since 2020. And, you know, we're still going through it. Awesome. And you provided an estimate for us of, you know, a multiple, a six-figure sum, mid-110, 110 to 160,000, it looks like, is your estimate there?

Is that kind of the ballpark that we should be thinking about here for that? Or is there even more fluctuation possible? Is that for one cost, or is that for both of the potential shortage you'd like to have? So that's actually just for the one. And that's one, if it's completely successful with no issues that arise. So it varies a little bit. Maybe 100 if you do it all on your own and you and your partner go through, you know, doing all the insurance stuff and contacting the surrogate and getting, getting, finding one and doing all that on your own, which is essentially kind of like a part-time job in and of itself. And then there are certain agencies that will do the soup to nuts that for $150,000 flat, you don't do anything.

They match you and go through the whole process. and you never essentially see an insurance bill go to you. Everything just kind of goes through the agency. And so you have that variability there. Okay. And in that second case, it's paid in a lump, it sounds like 150, or maybe installments. Like, is there a cash flow or financing component to this? Or is it pay as you go?

Or how do we think about financing this from a financial perspective? I want to say it's financing because a lot of the people that we have met haven't been as fortunate as we have in terms of like our cash flow. So they've had to take out, you know, mortgages on their home and things like that to finance it. I'm sure there's loans that you can get for like the surrogacy process. But from what we've gathered, it's kind of like lump sums that occur at different milestones throughout the process. Okay. So you're still accumulating approximately $15,000 a month right now that you could be putting into your cash pile for.

the surrogacy program. What is your timeline for surrogacy? You said you've been going through this since 2020. Have you paid anything into it yet? Or is this more of just conversation and you're about ready to get started? Thus far, we've paid $25,000 to the agency and we have a surrogate in place. And so we're in the process and now. Earlier when you were discussing our like cash reserves, a good chunk of that is for the first surrogacy. So I, I, I would say at least a hundred of that is just for the surrogacy. Okay. So I show about 200 in cash.

Let's just, for the sake of this conversation, earmark that for surrogacy and any issues that could arise with that. You've paid 25 in so far. You have matched with the surrogate. And now you're in the sciencey part of it. A lot of science. Yeah. Okay. So how many rounds do you go with the surrogate?

surrogate before realizing it's not going to work or like is there a set number? Ooh. I don't know if there's a set number. Well, sort of. Well, so when you first go through the process and we harvested eggs, we have four viable embryos. So essentially we have like four shots of attempting pregnancy before we have to, you know, go through the whole sciencey stuff again. My wife and I haven't talked about how many attempts we want to try with this current surrogate,

but I don't know if there's a scientific, like, hard line. Like, you've tried this many times. You have to move on now. Okay. And when is your first embryo implantation going to happen? Hopefully in a few months. We hit a couple roadblocks a few weeks ago. We had to see other specialists in medicine and get clearance and get some treatments.

and then hopefully we can reconvene in like two weeks to then do the implantation process. So this is potentially within the next year, if all goes according to plan, you will have the first baby, the first implantation for sure. Yeah, yeah, hopefully. Okay. At the same time that student loans are coming back. And so your 15,000 is going to be, let's say it's going to be $3,000 a month. Now you're going to be accruing $12,000 a month instead of $15,000 a month.

That's still a really great savings plan. What is that, $144,000 a year? Theoretically, and you know life doesn't cooperate, but theoretically, you could be saving for the next surrogacy for the whole year while the surrogate is getting ready to be pregnant and then being pregnant. and by the time the first baby is born, you could have enough money for the second baby, all while still living the life that you're living and paying off your car, your wife's student loans. I think that that should be, well, but that doesn't account for any investments. You're in your 30s right now?

35. I mean, babies are, you've got a great start on the investments. Well, you know, look, look, I presume you don't want to have two children within six months of one another, right? Like this, you're going to have the first one, then you're going to wait a year or two and then have the second one, right? I don't know, honestly, because keep in mind that we have to do some sciencey stuff that is time dependent, and I don't think my wife would want to wait for that sciencey stuff to happen two years from now. So I very much think that, like, we're going to kind of hop back on the bandwagon. hopefully as soon as the first one is, you know, hatched or born. I've always thought about referring to my children as the trenchlings, so the hatched works really well with it. Okay, so we've got, we've got, presumably we're going to wait for child one to be born before second. You might start it immediately the next day even, but you wouldn't have a second child going before the first one is born.

Is that the plan? Yeah, exactly. So we want to have one, go smoothly or smoothly as it can go. And then once that's kind of in place and we're good, then we'll do hopefully the next one, the next one. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going.

and more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets.

What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com code pockets. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast?

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over $24.50 an hour. Employees also have the opportunity to grow their skills and their paycheck by enrolling in free skills training programs for in-demand fields like software development and information technology. Learn more at aboutamazon.ca. Okay, great. So we're going to accumulate $15,000 per month after tax in cash, after your salary, investments, and expenses.

Is that a fair statement in terms of your go-forward expectations and cash accumulation? Yeah, that's kind of roughly what it comes out to, yes. Okay, perfect. That's $180,000 per year. So you have $200,000 currently. You need $150-ish, $150, $150,000 to earmark towards surrogacy one. By this time next year, you'll be right back at that number after cash flowing it before any investment returns or any other cash flow is considered. considered. If you stick the $200,000 that is currently in your bank account into high yield

savings accounts, that's going to generate a four to five percent yields. That's about $1,000 a month, give or take there. So that's $12,000 on top of this. You're probably going to, most likely pay some of this incrementally throughout the process and not one big lump right now. Right? Is that the, that's the current plan as I understand it? To give it in installments. Is that what you said? Yeah. Yes. Yeah, exactly. Okay, so we don't have a cash flow problem here. And so I guess it's pretty simple for me for the next two years, right? You have a cash for this now. You're in a responsible financial position to do this. There's no reason not to. You have the ability to cash flow it for the next year as long as, you know, we have a stable job situation. And so to me, the bigger, the higher level plan is how do we, you know, and we know we're going to get a knock on cash flow when you have to start paying the higher student loan. amounts, but we're still going to have plenty of cash flow, $100 to $120,000 per year that we're able to play with after child number two, and it has been, the surrogacy has been paid for,

and after we've, you know, started paying more for the student loan debt. So I see a path to, by 2027, having your current investment situation remain largely unchanged, maintaining a strong and stable cash position throughout the entire thing, slowly amortizing your car loans, some of your student loans that are not going to be forgiven, and then your mortgages. And on top of that, having another quarter million dollars in cash accumulated, which we can deploy towards some type of investment. And at 2027, that's the position you're going to be sitting in is today with no student loan debt, $250,000 more to invest.

And so the plan is, what do we want that position? look like in 2027, which is really the next of the, which is the moment when your financial position will be completely overhauled, right? We'll be looking at a completely different fresh set and a new, the next, you know, what's the word, next era in John's financial life here, right? That's what we want to look. We're trying to back into. How's that sound? Am I thinking about this the right way? Is this, is this how you think about your situation? I think so, sort of, I mean, a lot of that cash reserve that we have currently is some of that's kind of earmarked toward certain things, like, you know, emergency funds or a house or, um,

travel, you know, things like that, that my wife and I, uh, do. So that 200 or so that we have currently is not all of it just sitting there with no purpose. It has kind of like a job of sorts. Yeah, I figure you have $50,000 for life and $150 for the surrogacy. That, like, that's kind of how I bucketed it in a big block. It sounds like you're much more prescriptive in detail, which is awesome about how you bucket the cash out. Yeah, yeah, essentially. So if I was in a similar position, I would do everything that Scott said, except I would prioritize any, anything like if you have a 401k or whatever the 401k option is at your place that has a match. If your company has any sort of match, I would do that.

I would contribute enough to get that match. If you have an HSA plan, I would continue to max that out because that is triple tax advantage. It's not tax going in. It grows tax deferred. And spending is tax-free when it's a qualified expense.

You're going to have a lot of qualified expenses. I looked into my crystal ball and kids do a lot of things that need medical bills covered. So it just even band-aids and that kind of thing, you're going to be up to your eyeballs and band-aids, although you could probably get them at work. But anyway, so anything like that, any, I don't want to call it free money because it's 401K matches are like part of your, your compensation.

HSA accounts aren't free, but they are a triple tax advantage, which is my favorite. I love not paying taxes when I don't have to. But after that, then I would prioritize just putting it in cash because you've got such a solid foundation, because you have such a bright future, financially speaking, I would then take and either, like Scott said, because you're not making lumps on payments, cash flow the surrogacy payments and keep this existing $200 in cash in cash just in case. And by cash, I agree with Scott, a high yield savings account, not just in a bucket under your bed.

But easily accessible. I would not put it in the stock market because while stock market is great for long-term growth, you need it in the short term. And you want to make sure that you have it available. If the stock market has a sudden 50% drop, I have full faith that it will eventually recover. Past performance is not indicative of future gains. But I have every confidence that it will recover eventually. It may not recover in time for you to actually use it.

So I would keep it as liquid as possible, which is, a high yield savings account, maybe even look into certificates of deposit that have like a one year time frame. Do they have six months CDs? I'm not sure. But maybe if they pay more, you don't need it for a year because you can cash flow everything, then you get a slightly higher rate. But other than that, I think you have a great financial future and taking two years off of investing isn't awesome, but you're doing something else with the money on purpose. And you know, growing a family is a good use of your money. I think that's the tough part for me to swallow is putting a hold on investing,

just because in medicine we start a little bit later. And so I don't have like the compounding effects from my 20s. And so I know I have a decent amount saved up, but still it's, I don't know, it's like a mental block to just stop completely putting money into that bucket. I don't think you have to. I think the situation is right now you're, you're, you're, you're, you're, you're, you're, have a good investment portfolio, like we just said, you can cash flow the two children here in the situation, and you're going to accumulate $250,000 over the next three to four years

in investable, in the next four years, in investable liquidity. And to Mindy's point, you know, yeah, I agree that a logical approach where I'd start with is maxing at the HSA, taking the 401k match, you know, maxing out maybe the 401k, the Roth IRA, and then after tax investments in either real estate or stocks with whatever's left over. But yeah, you're going to accumulate $250,000 in investable liquidity that you could invest over this time period while cash flowing the surrogacy for both of your children. So I think that's a pretty good overall situation. Is it the great, you know, like you could, yes, accumulate another 300,000. but you would prefer to have a family and that's super reasonable right that's not something you're

going to be able to do in three four five seven 10 years as easily as you can do it right now and you have the means so i i think i think if i'm in your shoes hearing what you're saying and i'm like okay i'm going to accept the reality that this is cash out out the door for this purpose i can invest it because what am i going to do like put it in a in like an investment that could possibly be at risk and then delay the birth of the next child because an investment didn't work out, right? That's just, that's an unstarter for me in this situation. It's got to be liquid. It's got to be safe and set aside for this purpose.

So it's not investable beyond whatever you're going to earn in a high-yield savings account in an FDIC insured bank. And so that's it. And then we think about, okay, what does this game look like in 2027? How do I get the best, most flexible, strongest position? that gives my future family, all the options in the world at 27. And guess what? You have a great shot at becoming close to, you know, can you get to a million? You might be able to, you probably will get close to a million dollars in net worth or, you know,

three quarters of the way there by 2027, once that student loan debt is wiped and we've got another $250,000 that we added to the pile plus the investment, any investment returns and amortization of your debt. How is it? How am I doing here? I kind of said this earlier, but am I getting any closer with this? I think so. I think so. I think when I have like you guys like outside sources telling me like, hey man, it's okay, just put money towards like the kids. Like this is the right thing to do.

It's like I know it's the right thing to do. It's just that weird mental block. It's what you want. Yeah. Yeah. I think I think that's it. Right. It's it's like what's the right thing to do? There's no right thing to do. Right. If you want the advice for how to get how to make the biggest pile of money in, you know, 30 years at retirement age, then the answer. are just don't have kids. That's a terrible answer, right? Like, I can't imagine. Like, I love my daughter so much. It's, it's so wonderful. I hope you, you have the same type of experience with your future children there. I know how much Mindy loves her kids. But, like, is it like, would I be richer? You're like, sure, right? But it's just, that's just not the game you're playing right now,

I think, within this situation. And the reality of your situation is that this is the way to make that work. And you can do it responsibly. You don't have to take out a second mortgage or put yourself into debt, more debt and to do it. You just have, you have accumulated the cash because you've studied hard and went into the medical profession and have a great income to pay for it. Yeah, you're right. We're very fortunate in terms of, in that regard, so I can't complain too much. Yeah, I'd be way richer if I didn't have kids, but I can't spend all the money I have now. So, have you heard of the Rule of 72, just to drive this point home a little bit more? The Rule of 72 tells us that you should be able to double your money every seven-ish years.

So assuming a normal rate of, what, assuming long-term market returns stay more or less the same. So I've done some math for you. At age 35, you have $500,000. Doubling seven years from now, you'll be $42, a million. That's just with no additional ever actually going back in. Age 49, you have $2 million. Age 56, you have $4 million. age 63, you have $8 million. That's just Coast-Fi. If you want to continue to put more money in,

you'll have more money sooner. How much can you spend? I guess if you ask my wife, we can spend a lot more. I mean, in the next couple of years, you're going to be spending a lot of money, but you're going to be spending money on good things. You will, and you can cash flow what you're spending on. I mean, you could cash flow the first one and then cash flow the next one. It takes a while. It takes a while for them to cook. You guys are bringing in $250,000 a year. You have to live like you're bringing in $70 a year for the next couple of years until 2027, like I mentioned with that, right? And when you're, when 202027 rolls around, like, again, that's the whole picture is going to be completely different, right? Because this loan's going to be out of there. Both of their kids will be

born or hatched. Life will be good. And, and you're going to probably, presumably, continue to increase this excellent salary over that time period, like I mentioned. So again, I really think that's where you got to be thinking. How do I back into the most advantageous position in 2027? Because right now, with the goal of having these two children, you're not going to be able, in a realistic sense, to earmark way more capital than we've currently got to investments that are going to cash flow, unless you're going to, unless you're willing to risk the timeline with the births of these children as a result of that. It's a unique circumstance, but I don't think you can afford any risk with the cash that you're earmarking for this purpose, in my opinion.

Yeah, you're still investing. You're just investing in a different thing. You're investing in your family. Yeah. One of the kids will pay for your retirement, you know, the retirement village that you retire to, and the other will visit you. So this is going to be a really good investment. So I'm investing in my future is what you're saying with these kids. They'll take care of me.

that's always a guarantee. If you have kids, they are guaranteed to take care of you in your old age. Oh, perfect. Also, I just want to clarify to anybody listening, the hatched comment came from John first. That's right. Yes, we just, we just continued along that one. Yeah, it's all in good fun. You know, it's one of those things that it can be a really sensitive topic,

and there's a lot of emotions surrounding it, but I try to make light of it because what else are you going to do? I think I totally respect and admire that. So this is awesome. This is a hard situation, but also one that you are, you're prepared for financially, right? Your, your household is ready to take on this challenge, this, this financial decision, this investment, this, the start of this family. John, we really appreciate you coming on and sharing this. This is a tough, you know, a situation, a very personal situation.

So thank you for sharing it. I'm sure that other folks are thinking about these things and having trouble with the tradeoffs that they involve. We hope this was helpful for you. day and would love to hear about how things kind of turn out over the next couple of years. Yeah, yeah, of course. I really enjoyed this. Yeah, it's a personal topic and it's hard for a lot of people.

And if there's anyone going through it out there, I just know that there's a ton of support groups out there. There's a lot of message boards. Facebook has a ton of groups for that. And they've been really good in terms of just getting more information and assistance. So I'd highly recommend looking for those resources. Awesome. Thank you, John.

That was really helpful. I really appreciate your time today. No, thank you guys. Okay, we'll talk to you soon. All right, Scott, that was John, and that was a very interesting discussion. I think he set himself up very well financially, and I think he faces a problem that a lot of people face. I want to invest, but I can't, but I want to, and I have the means, but I also have this big expense that I am looking at, and it can be really tempting to put that money in the stock market. I hope that he takes our advice. to just leave it in liquid cash or even a certificate of deposit or something that pays a little

bit more than a high yield savings account, but keeps it fairly accessible because it isn't something to be invested right now. He, well, it is invested. It's going to be invested in his family. Yeah. You know, for me, you know, I'm kind of this person where if it's, if I'm buying my forever home, right, well, I'm going to invest in the stock market and figure it out. And if things go well, I'll buy it sooner or if things go worse, I'll buy it later. Like that's, you know, while some people would be very risk-averse to that, because that's a huge decision. Like for me, that's the way I would view it.

But with a child, I feel like you've really got to be able to have that cash. Like, you can't invest the funds that are going to be used to create a family with that. I think you have no choice but to put the stick it into a FDIC insured deposit account, make sure it's available for that purpose and nothing can interrupt it if that's the the core plan. We got to make sure that that gets done before we invest. I mean, you can. And I guess, you know, there's a case for some other ways to think about it. But that's, that's for me, how I would be approaching this particular decision in that situation. And I also want to highlight, like, there's just chapters of life sometimes where something's got to conclude, right? Kids are in

college and you're cash flow in college. If you made that decision, like maybe you got to wait until college is over to really begin aggressively planning out the next how you're going to deploy hundreds of, you know, whatever, tens of thousands of dollars in cash that you're going to be accumulating because that expense is out, right? In this case, you know, we've got two children to go through the surrogacy process with. That's several hundred to thousand dollars that can't be invested. We just got to get through that period. And we know we're getting this huge loan forgiven. Like, let's just zoom out, accept the reality of the next situation, finish the enjoy this chapter of life and then get serious about the next wave of financial decisions that are

going to be much more meaningful right after that. And of course, we can put a little bit of strategy to that by determining whether we want to be a tax advantaged investor with HSAs and 401Ks, or that we want to be building a little bit more of a flexible position in aftertax liquidity, maybe with some more real estate or after tax investments or debt. That's the decision. That's the relatively minor or relatively lower stakes decision that John has to confront in the next couple of years. And the higher stakes investment decisions will come in the next chapter in 27 and beyond. Well, I would like to hear from our listeners. We suggested a high yield savings account or even a certificate of deposit. Are we missing anything? Do you have any tips for higher

yield accounts that are still very liquid? And a certificate of deposit isn't super liquid. You have to, It's kind of locked in for a year or maybe six months or 18 months or whatever. But do you have any suggestions for John? Come on over to our Facebook group and share your ideas. Facebook.com slash groups slash BP money. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the Bigger Pockets Money podcast.

He is Scott Trench, finally back from vacation. I am Mindy Jensen saying cheerio mistletoe. If you enjoyed today's episode, please give us a five-star review on Spotify or Apple. And if you're looking for even more money content, feel free to visit our YouTube channel at YouTube.com slash biggerpockets money. Bigger Pockets Money was created by Mindy Jensen and Scott Trench,

produced by Kaelin Bennett, editing by Exodus Media, copywriting by Nate Weintraub. Lastly, a big thank you to the Bigger Pockets team for making this show possible.