This is the Future

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MoneyTalk

Where I discuss ways to save money, get good deals, and how to be financially wise.

Response to Geekdad’s “We’ve been doing it wrong” post

Recently on Geekdad blog, a contributor wrote about how impossible it seemed to only spend 3-4,000 dollars per year for each child.  The previous recommendation has been 10,000, and even that price seemed too low for this writer.

However, being a mathematician plus passionate about frugal living, my brain started immediately crunching the numbers.  Is it possible to do 4000 dollars a year per child?  What about 10,000?

As a mother myself, I know the cost of children can be high, but mostly of you choose it to be high.  That first year of being a parent can be quite spendy, because you do all the research and “have” to buy that 1,000 dollar crib and the 500 dollar stroller and you have the get the best daycare at 1500 bucks a month.  I’m here to encourage new parents and seasoned parents alike, I do believe it IS possible to raise a child using 3-4,000 dollars a year.

Let’s quickly look at some numbers.  For the first year, there are all sorts of things possible to buy, and not all of them useful or necessarily.  So let’s price the top things a parent needs for a baby in their first year.

Carseat:60 bucks on amazon, good safety ratings.

Pack n Play: 110 full price (but can be found cheaper at consignment shops)

Also note that one can get away with just a pack n play.  It can be used as a bassinet, then a crib later on.  I slept in a pack n play until 2 years old, so if low on funds, a bassinet, crib, AND pack n play is unnecessary.

Diapers/Wipes: 75/month, but can be way cheaper if cloth diapering, though I don’t know the exact numbers

Clothing: Nice/New baby clothing can be found all the time at thrift stores.  And if you get some from friends, the cost for clothing in the first year could be as low as 100 bucks for the entire year.

Stroller: 50 bucks easy on amazon

Baby food: 30 bucks a month approx if you make your own.  50-60 if you buy in bulk and go for the cheaper routes.

Formula: This one is tricky, it can be about 100 bucks/month depending on how much your little one eats, which is why if you can breastfeed it’s free!  But if you need to do formula, there are cheaper ones and even applying for WIC if needed.

Daycare: If you seriously want to make that 3,000-4,000 mark, daycare is NOT the way to go.  Many people I know basically work for daycare, i.e., their entire salary goes to daycare.  If you really want to save money (and daycare is expensive in your area), have one spouse stay at home and possibly work part time in order to avoid daycare.  I know this isn’t always possible, so bear with me on the numbers.  Certainly 10,000 per kid per year is possible on part time daycare or cheaper daycare, but 4,000 per kid per year would be very difficult to achieve in this case.

Car: If you don’t have a kid friendly car, then sell your current one and buy a used car on Craigslist in cash for the same or less than what your current car is.  This IS possible, because we’ve done it.  We have two cars and zero car payments.

House: You might think you need to buy a new house right when you have a kid, but if it’s going to make money tight, it is possible to live in a small apartment or house for the first couple years until you save the money to make a good down payment.

Toys: Once again, thrift stores can boast great toys for cheap.  My son will play will his 8 dollar playground ball all day long.  And talk to friends/neighbors, go to garage sales to find the bigger stuff, because often it’s cheap and barely used.  So we’ll go 100 bucks for toys total, if you are wanting to be extra frugal.

Health Insurance:  This will cost, of course, but you are probably paying less than 100/month for insurance for your child.

Crunching the numbers leaves us at about: 4080 dollars/year.

It is actually possible to do 4,000/year if you are choosing to be frugal, choosing to not buy the “best” stroller on the market.  I added formula (1200/year) in this mix too, which could easily be cut out if one can nurse for a whole year (I commend you if you can, I made it to 6 months!).

And of course, us parents can cut out many other things in our lives to make having children more affordable!  Check out my other blog posts about saving money. If you do want to spend more money on your children than 4,000/year, then you can certainly do so.  But it’s not so impossible as one may think!

 

How to avoid those “surprise” purchases

I know many people who come home to their spouse and say “Hey look, I bought you an iPhone!”  or “Hey honey, I just bought a new car, come look at it!”

It’s these surprise purchases that can cause much tension in relationships.  While the former example may have been exciting, things may come to a head when the next bill comes and that added iPhone money makes the budget extremely tight.  Or you buy a new car, and your spouse or child gets sick and now you’re in trouble because the hospital bill is added on to your car payment, house payment, cell phone payment, etc.

This is a huge reason why budgeting makes sense to do.  While it can be fun to surprise your spouse with a purchase, it can also cause relational issues.  Even small purchases can add up.  Let’s say you and your spouse don’t budget, and your spouse just went out and bought 300 bucks worth of Starbucks lattes over the month.  Now you have much less to spend on groceries, or even soccer shoes for your kid.

My husband and I split purchases into categories as we budget, so we know how much is in each category for the month.  For example, we put a certain amount of clothing money for the month, if I decide to go over that (i.e. to buy another pair of shoes I don’t need) I know the rest must come out of my “discretionary” category.  Discretionary is basically our allowance for the month, the amount we can spend on anything we want.  My husband tends to save his over the months to make a big purchase, while I tend to make smaller purchases every month.  Once we are out of discretionary, then we can’t buy that Woot shirt or headphones until the next month unless we both agree to take it out of another category.

This has helped us greatly, that way we aren’t surprised or shocked when the other makes purchases.  As long as we agree to stay within our budgeted amount, we can each have that amount to spend in whichever way we desire.   Sometimes, if I want to make a bigger purchase, I’ll discuss it with my husband, and I’ll either sell something on eBay or he’ll give me some of his discretionary especially if we plan on sharing the purchase, whether it be a bike or a Nintendo 3DS.

The overarching idea is communication.  Making sure each person in the relationship knows how much to spend on groceries, clothing, entertainment etc, so that way one person doesn’t use all the money for one thing and leaves the other person out to skimp along the rest of the month.  We use a program called YNAB (you need a budget), which has computer program plus apps that all sync up together.  So, if I’m at the store, I can look and see how much I have to spend in each category.  Every single weekend, we go through our receipts and enter our purchases in (you can enter in the purchases on the go as well with the app) and evaluate each week how much left to spend.  Sometimes, we’ll spend more in groceries than usual because of a party, but maybe less in restaurants, so we’ll make the proper adjustments.

Having a plan on finances lessen arguments and tension in the household.  Having budgeting program is essential, and get help from a friend or family if you aren’t tech savvy.  Communicate each week on how the budget is faring, and if adjustments are needed.  Give each person in the family an allotted amount to spend each month, and don’t judge them if they decide to buy 10 star wars t-shirts with it or save up for LED water fountain speakers.  These tips should help prevent those surprise purchases and the small ones that add up so quickly.

Communicate.  Budget weekly.  Give allowance to each other.

 

How to save money in small ways

In today’s economy, many people are struggling to get by, living by paycheck to paycheck and in a world of credit card debt.  Too many times, these decisions are because we Americans like to “keep up with the Jones'”.  Credit card debt can occur because you want that one thing, be it an iPhone, XBOX 360, or new grill and you just “can’t wait” until you can actually save the money.  Now I know this isn’t the case with many people (maybe a family member has a costly medical condition or you have school debt), but in my experience, it is the case with at least 50% of the people I encounter who have financial troubles.

For those of you who don’t want to live your life in debt or paycheck to paycheck, here are some simple ways you can save money each month.

1. Get rid of cable!  You DON’T need it!  Save yourself some money and sign up for Netflix (there are $7/month options).  If you are a big sports fan like I am, many sports have streaming options which are much more affordable than getting a whole cable package plus sports.  Even basic cable is often 60 bucks/month these days, which is 500 dollars/year.

2. Don’t get an iPhone.  Or even a smart phone. The data plans are expensive and the phone is as well especially if you buy it w/o contract.  You don’t have to get an iPhone 5 just because your friends did.  If you are currently in debt, you should not be purchasing the most expensive phone/data plan.  But if you just “have” to get a smartphone, at least try to join a family plan with another family in order to save money.

3. You don’t need an XBOX 360, Wii U, or PS3.  If you like gaming, try old school by getting a PS2 or N64, there are tons of games for cheap at goodwill or half.com, and that way you aren’t spending 60 bucks per game, paying for an Xbox live (or equivalent) subscription.  Or wait until Black Friday where you can get incredible deals.  But don’t feel like you have to get these systems just so you can be cool like your friends and play Halo all the time.  If you are in debt, you should not go out and buy any new gaming system.  If you have already done that, then to save money, don’t renew your xbox live account and try to get used games on craigslist instead of buying full price.

4. Buy used cars and get a good and honest mechanic. Both these things can save your tons of money. I got my car on craigslist, it’s a 2000 Dodge Caravan and I love it.  We were able to pay cash, and now we’ve only had to spend basic maintenance on it.  If you aren’t in debt and want to buy a new car to have for 10-15 years, that’s a fantastic investment.  But don’t create more opportunities for debt by having more monthly payments that you have to deal with.

5. Buy your things at thrift stores.  I’m serious with this one.  At least where I live, you can get new and/or like new quality name brand items such as a Bodom French Press or brand new Nike shoes for a fraction of retail price.  If you do want to find new products but don’t live near a good thrift store, Ross also boasts name brands (Nike, Adidas, etc) for great prices.  By not paying retail for quality items, this can also save money in the long run.

These five things can help you to save money.  Some of them are simple (like getting rid of cable), and others are hard (buying used cars), but these steps can help you get out of debt or simply save money for emergencies, house mortgage or paying off school debt.

Some great resources I recommend:

YNAB (You need a budget) program:  Can help you to budget categories so you don’t accidentally overspend where you don’t need to.

Dave Ramsey’s Financial Peace University

How to Save Money when you don’t have any By Erik Wecks, available on amazon through kindle or paperback