Baby on the Way? Here's How to Budget
There is nothing that makes you grow up and budget like getting pregnant. Learning you are pregnant tends to unleash emotions in this order: excitement, terror and then fiscal responsibility.
After recently going through a host of life changing events including, relocating across the country, getting married and moving in with my husband, my budget was left chaotically unrecognizable. Add to that the merging of bank accounts, dissecting our debts and trying to sort out our finances, and it was hard to pinpoint just how much we were spending each month and how much we had left over.
So we hunkered down and fleshed out our budget to start planning for parenthood. We sorted through our spending and saving habits and how much we owed. After we had this figured out, we made six major changes to our budget to make room for baby:
1. We increased insurance deductibles on our house and on my husband's car. However, we made sure both of our cars’ deductibles were no more than $1,000. Depending on your current policy, raising your car deductible could drastically reduce your rates. We have a healthy savings account, so we're not screwed if we bash our cars.
Tip: A wise person once told me that a common budgeting mistake is to over insure. The key is to ask yourself, What can I truly not afford to lose? Put your money there.
2. We trimmed our charitable contributions. While it was a hard decision to make, we decided to nix our annual end-of-year lump sum charitable contributions in favor of modest donations during the year to friends doing charitable events like 5ks.
We also cut back on our yearly giving to our alma maters from a few hundred dollars to $110 each.
To make up for our decrease in financial donations, we have increased our donations of products like furniture and clothes to the local battered women's shelter in lieu of holding garage sales for beer money.
3. We made room for a $275 monthly life insurance bill. My husband is the main breadwinner and his job provides our health insurance. We played it safe; if he dies, I'm heartbroken and devastated, but won't have to worry about money for a few years. Plenty of time to move in with my parents. Kidding, mom!
4. We got into the nitty gritty. Instead of relying on casual estimates of our monthly financial commitments, we looked up each figure to get an exact amount. For bills that vary month to month like utilities, we averaged the bills from the past three months. While this increased our confidence in our budgeting planning, it was also depressing because we realized how little we have to spend each month. Doh!
5. We eliminated non-essential spending. While it was tough, we placed optional expenses on the chopping block, including part of our smartphone bill, our organic CSA grocery tab, our eating out earmark and our massage payments.
My husband nixed his Droid in favor of an uber-cheap simple phone (it doesn't even have a camera), while I kept mine on the grounds that my blogging job requires constant connectivity. We killed our allotment for eating out and massages, splurging only when there is money leftover. Our support for local, organic, farm-fresh veggies, goat cheese, eggs, and meat from our CSA survived, at least for now. We believe in supporting local jobs, enjoy the quality of life that comes with living near a farm, and eating more healthy food because it's in our fridge.
6. We left our retirement savings alone. Each month we both put aside $417, enough to max out our Roth-IRA contribution ($500 if you are 50 or older). We make modest contributions to our respective 401(k)s, too. Afterall, we don’t want to end up leaning on our baby for funds.
Julia Scott writes the money saving blog, BargainBabe.com.