It’s understandable that some parents stay in the workforce even when they earn less take-home pay than child care costs. By leaving the workforce, parents may lose out on health insurance or an employer’s retirement plan contributions, along with potential promotions or wage increases. The good news is that there are a number of cost-control methods new parents can employ when raising children. Here are some tips that may help.
Create a spending plan. Write down your income, debt payments and expenses to get a solid picture of how much money your household brings in every month and everywhere you’re spending. Once you have a good handle on your income and expenses, map out a plan that includes various categories of spending such as housing, utilities, entertainment and groceries. Look for areas where you can cut back without resorting to an unsustainable plan.
Get thrifty. Check consignment shops, eBay, local Mom groups that may have hand-me-downs and second-hand stores for gently-used children’s merchandise, which are often available for pennies on the dollar compared to the full retail price. This is a good cost-management strategy for clothing and toys as your child grows. This can also be helpful if your clothing size has changed after having a child.
Don’t buy the big house… yet. Sure, it’s nice to have a playroom and a yard for children, but it’s OK for children to share bedrooms and to forego either the eat-in kitchen or the dining room rather than paying for both. Choosing a home in a neighborhood with a good school system may also save on the cost of private schooling. Living closer to your school or public transportation may cut down on vehicle wear and tear, and may give your child a chance to walk or bike to school.
Develop and contribute regularly to an emergency fund. With a child, it’s important to build a cash cushion to prepare for the financial surprises life may throw your way, such as medical expenses or unexpected home repairs. Try to have six months of expense money in a savings account or money market fund that you can access easily.
“Working mom’s guilt.” On a more personal note, as a working mother of three great kids, I’ve sometimes succumb to what I call “working mom’s guilt,” and that can get really expensive. When you work all week and only get to spend time with your kids during the weekend and weeknights, some moms, like me, put too much pressure on themselves to make that time awesome. I think about all the trinkets and useless toys I’ve agreed to buy because I didn’t want to fight with my kids – and how much those barely-used toys cost. However, these things don’t buy happiness and it’s OK to say no.
Invest for retirement. Lastly, never lose sight on saving for retirement! Investing over time is still the best way to secure your retirement. You might also consider opening a 529 savings plan, so you can put those long-term investment principles to work for your child’s college education. You might even ask friends and family members to contribute to the fund in lieu of future gifts.
