Managing as a One-income Family
For many couples, deciding to have children brings an additional question: "Can we cover household expenses and pay for a new baby with one less financial provider in the home?" For those families who opt to have one parent stay at home after the birth of a baby, smart money management becomes more crucial than ever. One way to do this is to start with understanding what you've got, then planning for what you need. Here are some suggestions for how to live within a budget in a single-income home.
1. Define bi-weekly spending.
When asked to estimate how much money is spent in a two-week period for household expenses, many parents have a hard time coming up with a figure. The easiest way to calculate how much you spend overall is to identify specific regular expenses, for example: $90 for groceries, $20 for dry cleaning or $90 for bills. Once you've made a list, it's easy to come up with a monthly budget. It may help to use your checkbook or a simple computer program to record and compare monthly expenditures.
2. Identify wants vs. needs.
When trying to minimize expenses, it's sometimes hard to give up things that we want, particularly if we've grown accustomed to having them. If the above exercise shows that you are spending an excessive amount (as it relates to your income) on dining out, it's important to acknowledge that expense and discuss alternatives. This step involves compromise and sacrifice, but it's integral to saving money.
3. Assign dollar amounts to each category.
When developing a household budget, it helps to factor in fixed costs first, and then include additional baby-related expenses. These are the expenses that are consistent every month, such as the mortgage and a car payment. If the costs of a certain item vary from month to month, look at what you've paid the last three months and come up with an average. If you are expecting your first child, ask friends about how much they spend on staple items such as food, diapers and formula to help calculate these expenses. You also may need to budget a few extra dollars in the first few months for major equipment you need, such as a crib and a stroller. Keep in mind baby products that don't need to be purchased immediately. For example, a high chair can be bought at a later date.
4. Devise a savings plan.
It's a good idea to include a savings plan as part of your budget. Whether its $.50 or $50 a day, many of us tend to fall short when it comes to putting money away. But let's face it: Most people would agree that they feel more comfortable with some sort of financial cushion for unanticipated costs or emergencies.
5. Discuss and reorganize your budget as needed.
Be prepared to reassess your budget regularly or whenever there is a change that affects the family finances. Whether it's a debt that is finally paid off or you need to buy a second car, you will need to make adjustments to the budget.
Finally, remember that when it comes to maintaining a budget, discipline is key and documentation is critical. If you keep good track of what you're spending – and saving – you'll feel more in control of the family finances.