Tuesday, August 23, 2011

Reader Questions: Affording a Child

I recently received an email from a reader who is about to transition from being a SAHM. She was asking for advice on transitioning to a single income and I gave her a lengthy reply detailed to her specific situation. However there is one part of her query that I think all would benefit from reading:

"Thing is we are pretty frugal people already and that is how we have been able to save money over the years. It seems like we won't be able to put money away now but I don't want to have to dip into savings either. I guess for big ticket items, carriage, crib, doula, will have to come out of savings but I would like to keep the monthly budget even. Can you help me figure out how much diapers and things for the baby will be or what is included there?" 

It's a great question. First I would reassure readers that every now and then there are times when you have to dip into savings - that's what they are there for. When someone loses a job, when there is a major life change, and when you make a big purchase you have been saving for (like a house) then savings get used. It's a normal part of the savings cycle. As longs as you are using savings for a reason - to increase future earnings by getting a degree, to invest in the value of a year at home with a baby - and it is a temporary situation, you should not feel guilty. 

The key is to  always keep an emergency fund and to have a strict definition of emergency (most say this super reserve fund should be between $500-2,000 ). This fund keeps you from using a credit card or high interest loan when a sudden disaster happens.  You should also minimize savings depletion as much as possible. You will begin to replenish savings as soon as the temporary period of depletion time is over. This means when you buy a house, your mortgage should still allow you to put a little in savings every month. If not, you have taken a mortgage that is way over your head. When you get that degree, or return to work you will have more income to replenish the savings. Retirement savings are NOT to be thought of as usable savings. You should not dip into them unless you are in dire circumstances.

On to the crux of the question: how to afford a new baby. The answer is that babies can be as expenssive or as cheap as you make them. 

Nursing - If you nurse the baby you will need to eat more (but usually not more than you did during pregnancy) and you may want a pump and some bottles but you won't need to buy costly formula. It's also really good for the baby. So if you can nurse I would highly recommend it from a health and budget standpoint. If you have trouble, and many do, there are people to help - I recommend La Leche League. They have helped many people I know. If you are going to bottle feed, sign up for programs like Similac strong moms to get free samples and coupons.

Hand-Me-Downs need not be ancient and covered in mothballs like they used to be. Remember how I did not need much maternity clothes because people were itching to give it away? Same for kids clothes, once their kids are grown. Kids wear them and outgrow them so fast people want to see more use from these articles, especially family members. Check out your local freecycle board as well. And if that's not your style - log onto thredUP where parents post boxes full of kids clothes and toys and you pick one and have it shipped to your door for $5 plus shipping. You can get a whole kids wardrobe for very cheap and most looks new so no one will ever know. Avoid used car seats as this can pose a safety issue.

Do Not Buy - Yet!- If the urge to look for a great deal on a carriage hit you the minute that home pregnancy test turned positive, you are not alone. But wait a bit on those big ticket items. Unless you see an insanely good deal, keep your money in your wallet. The deal will come again but you may not need to buy these items. If this is your first baby, then you may get them as gifts. In the first few days you only need a few outfits and will be getting some baby gifts. Save yourself the hassle, see what comes in before buying, to avoid duplicates. Before each purchase ask if you or the baby really needs this item - they make tons of things for infants, but most are not necessary and just clutter your home.

Know Your Prices - Start scoping out sales now, just don't buy. This will help you keep a price book and know how much you should be paying for things. My research so far has led me to believe the ideal price point for diapers is aout 10-20 cents a diaper, but I am still working on it. This will help you set a budget. Scope out baby websites and compile a list of items you think are "needs" for the baby. Go over it with another mother who has a similar financial and parenting philosphy. This will help you figure out how much it will cost and will help you avoid purchasing things you do not need.

Save - Loosing one income means you need to try and cut more out of the budget to still be able to save. If you can achieve it, it is worth it. Babies become toddlers that become kids that become teens that all need money. Sit down with last years bills and make a new budget based on the single salary. Start learning about how to stock sale items, what ideal pricing is, how to use coupons, the best stores in your area, and how to tap into freebies. Also look for ways to supplement income at home. Be prepared - having a new baby is tiring and you may not have enough energy as you think. So don't formulate a budget based on your being able to bring in a set amount each month from Work at Home, unless you have a steady client all ready set up with deadlines. Instead set the budget for the one income and do not exceed it. Then the extra money is bonus savings. My favorite kind!

Have a question YOU want answered? Email me at caristramd@yahoo.com


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