Can you grow your family on a shrinking income?

Our two kids came with an almost two-year gestation, similar to an elephant's gestation, actually. (Here's where I would make a joke about now our salary feels like peanuts, or something, but I'm not that funny.) Between starting the adoption process and taking custody of the kids, we had much longer than most parents do to prepare.

And we tried to prepare. We made some decisions to increase our job flexibility and to allow us to have more time to spend with the kids. These decisions affected our income, because I quit my full-time job on July 30, 2013. My husband had already taken a pay cut in January of 2012 when he switched to a more flexible job with more earning potential.

Before we made changes to our income, we evaluated our bills to see how much income we could afford to lose and tried to estimate how our expenses would change by doubling our family size.

I realize that not everyone starts their family by adopting, and most people start with an infant, but I thought a little case study about how children really affect the financial picture could be helpful.

1. Income. First, our income. Our job changes have (so far) cut our income by 58 percent. In May, one of my jobs is ending, so our income will then be down 63 percent from its highest level. We spent two years working really hard to prepare to slack off a little when our kids arrived, so there was no way we were going to be able to keep up that pace with kids. I have some ideas to make more money, but I can no longer put in as many hours as I used to. Am I satisfied with our income? I always like more, but it's working now.

2. Savings. This is the most painful financial part of the change to having kids. We had been saving nearly 40 percent of our income in short- and medium-term savings. Now, we have a 10 percent savings rate. I would like to save more, but I think we're still practicing good habits. We have cash on hand to replace our vehicles when that time comes, and we have an emergency fund. One thing we haven't done is discuss college savings for our children. That's something that we need to discuss, and I will probably write a post about it in the future.

3. Retirement savings. Between my and my employer's contributions, and our contributions to our Roth IRAs, we were saving about 10 percent of our income in retirement savings. Once I quit my full-time job, however, I lost my employer retirement plan. Our retirement savings rate is now at 7 percent of a much smaller income. I am not concerned about this for several reasons. First, we started our retirement saving habits early and, according to this Forbes article, we are on track for our ages and income.

4. Charity. We like to donate a certain percentage of our income each year and then donate extra as opportunities present themselves. We haven't donated to anything extra since becoming parents. I don't like it, but it's our reality for now.

5. Other expenses that have increased

  • Our food spending has, no surprise, increased by $125/month. For a family of four, we are spending what this worksheet tells us we should be spending. It feels like a huge amount of money to me, though. We eat out less; but when we do, it's more expensive than it used to be. We also waste very little food. I had always thought that most recipes/packages were created for four to six people, so we have fewer leftovers and other random things to eat now. Our increased food costs are also due to school lunches, which are more expensive than what they could take from home. Eventually, we will ask the kids to pack a couple of lunches a week, and we're having a bigger garden this year. We also just got some baby chicks that should be producing eggs in a few months.
  • We took out more life insurance to make sure the kids would be adequately provided for, so the extra policy costs us an extra $34 per month.
  • Our medical expenses have also increased by $200 per month. Of course, the premium has increased, but we also had some extra medical expenses due to some medical conditions needing a baseline evaluation, making sure the kids were up to date on their immunizations, and things like that. However, we will continue to have costs associated with physicals, eye exams, and dental cleanings, even if they don't get sick.

6. Expenses that have remained the same.

  • Our car insurance, house insurance, real estate taxes, cell phone, and Internet bills don't care how many people are in our family, so these bills have remained the same…at least, until the kids start driving. Although our electricity bills are higher, it's hard to know how much is due to the very cold winter we had and how much is due to having two extra people in the house.

7. Expenses that have decreased.

  • Since I am not commuting as often, our fuel costs have been decreased by $200/month. They will decrease even more when my job ends in May.
  • We're no longer paying extra on our mortgage, so we pay about $500 less per month than we used to.
  • Surprisingly, we have been spending less money on clothes. I assume this may be a fluke, that people donated more clothes to us this year and it won't be the standard? I also buy fewer clothes since I am spending more time working at home.

With almost a year of parenthood down, I am still trying to adjust my financial perspective. Although we're still saving, I have to get used to the slow increases. I also need to get used to the smaller gap between our income and expenses, which is easier said than done. There have been a few challenging moments, but not as many as I thought there might be.

While we didn't anticipate everything and we underestimated some expenses, I know that our planning paid off. During our planning period, we were able to save up a decent savings cushion and prepare as much as possible.

Throughout all our planning, there was one thing we hadn't planned on: A positive pregnancy test. Yes, a third child is expected to make his or her arrival to the Aberle household this summer. Surprise!

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Tina in NJ
Tina in NJ
6 years ago

Mazel tov on all 3 kids. Remember, this is what you saved so hard for, so you could have the flexibility to be with your kids. Both of mine were adopted, 9 years apart (blended family). Keep in mind the difference between needs and wants, as in what your (entire) family needs vs. what they want, and you’ll be fine.

Beth
Beth
6 years ago

Congratulations on the surprise! I’m a firm believer in “it’s not how much you make, it’s how much you save”. I think people who have a plan and who can work with life’s financial ups and downs will be successful overall. On the clothing side, many of friends and their families are great with “hand me downs” . The challenge comes as kids get older and start to care more and more about their appearances. (You should see some of the fashion plates I used to teach!) I think that’s why my parents started teaching us about what a clothing… Read more »

Dee @ Color Me Frugal
Dee @ Color Me Frugal
6 years ago

My hubby and I are planning on adopting soon, so this was a helpful article for me to read! We have also been spending a lot of time thinking about ways to make life more flexible and it will likely include one or both of us making less money. For now we are saving our butts off to get ready!

Stefanie @ The Broke and Beautiful Life
Stefanie @ The Broke and Beautiful Life
6 years ago

Talk about a surprise ending! Congratulations! The fact that you’ve planned and you’re still managing to save is definitely a good sign. Hopefully, now that you have most of the supplies, your new addition won’t be too much of an additional cost.

Jon @ Money Smart Guides
Jon @ Money Smart Guides
6 years ago

Congrats on the surprise! I think the hardest thing for me when my wife and I have children is the reduced savings rate. Like you, we are saving around 40% of our income (trying closer to 50% this year) and watching our net worth increase is a very motivating thing. Seeing us grow at a much slower speed is something that I’ll have to get used to.

MoneyAhoy
MoneyAhoy
6 years ago

Congrats on the kids! A >50% cut in income is huge! It sounds like you’re weathering the storm pretty well and still continuing to save. That’s a tremendous achievement in and of itself.

These buggers are pretty expensive, but in the end they are worth it!

lmoot
lmoot
6 years ago

First off…CONGRATS! Wow, I can’t believe the timing. Going from 0-3 in .0001 seconds. That’s insane. I like this article and think it’s helpful for even those who don’t have kids. My whole life I have been used to my disposable income going up. Even the year I had to buy a house and a car, weeks apart,and was out of work for 2 months; 2009 tested my nerves to the fullest. Two weeks after closing on my house (and spending more money than I ever spent at one time in my life), the car I drove since highschool went… Read more »

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  lmoot

It is insane! As my husband (who has a dry sense of humor) says, “Some people have 3 kids in 13 months. Some don’t.” He is a funny guy.

jim
jim
6 years ago
Reply to  Lisa Aberle

Ha! Love that comment (3 kids in 13 months) It is exactly your sense of determination and his sense of humor that will get you through. Congrats and best of luck.

Laura @ Rather Square
Laura @ Rather Square
6 years ago

I think what I most take away from this article is the emergency fund and savings part. That’s something my husband and I have been building up ourselves, especially since we became homeowners (and parents). Like you say, it’s important to continue saving even when your income decreases – even though that’s a hard thing to do! We recently had an emergency (furnace breakdown) that our emergency fund saved us from going into debt for. I’m a big fan of emergency funds!
http://www.rathersquare.com/2014/03/how-we-pay-for-surprise-home-costs/

And congrats on another new addition to your family!

Brian@ Debt Discipline
[email protected] Debt Discipline
6 years ago

Congrats! We were in sticker shock when we had our first children (twins) on the cost of diapers and formula. It took some time to work into our budget, by the time we had our 3rd we were old pros.

Holly@ClubThrifty
6 years ago

Congrats on the kids!~

It’s expensive to go out to eat with the kids in tow, isn’t it? For us, it never seems worth it. They don’t like restaurant food any more than regular food and I spend the entire time picking up forks off the floor =)

Lisa Aberle
Lisa Aberle
6 years ago

Oh yeah, it’s definitely not as much fun to take the kids out to eat – not even counting the expense. I don’t have to pick up forks, but they’re still working on learning good table manners!

Linda Vergon
Linda Vergon
6 years ago

Surprise indeed. Isn’t that wonderful?

As far as making ends meet, I think it helps to divide focus: A short-term perspective keeps you looking for opportunity and a long-term perspective keeps you sane knowing it will all work out in the end!

Congratulations, Lisa!

Susan
Susan
6 years ago

Congratulations on the growing family! I am closing on my first house in a couple of months. While the down payment is already in the bank I have taken the same approach to preparation (with the exception of reducing working hours), which is to save as much cash as possible in preparation for the expenses of home ownership. I know that once I have a mortgage payment my savings rate will decrease and likely my disposable income will also decrease, at least for a few years.

Alexandria
Alexandria
6 years ago

I can very much relate to this article. We saved my spouse’s entire income when he worked (our incomes were 50/50). We consciously took a 50% pay cut when we had kids. Of course, for us it was a rather temporary decision. But then the economy happened. So we have stayed the course for the long run (my eldest is now 11 and I don’t see any jobs on my spouse’s horizon). We have never contributed less than 10% to retirement, so I think that was also kind of our low point. But then I got raises and we were… Read more »

spiralingsnails
spiralingsnails
6 years ago
Reply to  Alexandria

I feel ya on the health insurance. My husband is covered through his job, so before kids coverage for just me was something like $125 a month. Now that we’re adding our third child, our premium is about to go to $900 a month! Granted, that is for Gold-level coverage and next year (since we won’t have birth expenses to plan for) we should be able to drop down to Bronze – which will still be $600/month. But even then the kids’ share of the premium will still be more than what we spend on their clothing, food, misc. care… Read more »

Mrs PoP
Mrs PoP
6 years ago

Congrats, Lisa! Makes me think of my aunt and uncle who adopted 3, then had a surprise, and then adopted one more! It was a very full house. =)

Sarah @ Little Bus on the Prairie
Sarah @ Little Bus on the Prairie
6 years ago

Congratulations on the great news! It can feel scary knowing that you are responsible for more than just yourselves as your income shrinks, but kids are so resilient and flexible and really don’t actually need as much as we in America often seem to think that they do.

Despite your income reduction you seem to still have much more than just the basics covered. I think you’ll do fine 🙂

Carla
Carla
6 years ago

Congratulations!! What a wonderful surprise! 😀 I had to be a Negative Nancy but finance is the main reason we decided not to have children. The decision was made before I was diagnosed with a (second) chronic illness over the summer that would make creating another life a horrible choice healthwise for both baby and I. Never having a particularly high income, having to take a huge chunk out to go on disability and spending all savings on out-of-pocket health expenses would have made having children an financially irresponsible choice. Heartbreaking, but you can’t always get what you want. To… Read more »

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  Carla

Somehow I missed that you were diagnosed with a second chronic disease. I am so sorry to hear that :(.

Carla
Carla
6 years ago
Reply to  Lisa Aberle

Thanks, Lisa. Its almost unbelievable and I lived in denial until I could no longer ignore the symptoms. Maybe Ill write a book about it someday! 🙂

Teinegurl
Teinegurl
6 years ago

I had two pregnacies back to back with one boy , one girl so i can relate. Some things i could use for both but not a lot and i also needed a double stroller and 2 car seats ,etc. I’m not going to lie it was very hard for me the first 5 years finding childcare, have a job that was flexible that paid well and had good hours. Last year they started kindergarten and it was awesome! I was able to have more structure. You were way better prepared then i was but i think the lose of… Read more »

Jimena
Jimena
6 years ago

CONGRATULATIONS!! What wonderful news 🙂

We are preparing to buy our first home and beginning to shift our midterm savings to an adoption fund. I would be interested in your adoption story and experience through the process – any planning/hindsight tips would be greatly appreciated.

Mark Battle
Mark Battle
6 years ago

Congratulations on your third child. Althouh I have not experienced the joys(terror’s) of young one’s, I do have a large contingent of nephews, nieces, grandnephews and grandnieces(at last count 50 altogether, 46 from my wife’s side and 4 from mine…whew!!) but I digress from my main point…have you and your husband considered looking into grants for the children’s education finances..??
I am not a proponent of goverment grants neccessarily but there are some decent ones out there and a slew of other non-govermental grants. Might be worth a look.

J. Babatunde Fagoyinbo
J. Babatunde Fagoyinbo
6 years ago

Your article seems to have been written for the developing countries. However, ostentation seems to have taken hold of us. My son left the university seven years ago but no employment. He studied economics. All efforts to make him get into business at small scale proved abortive until of recent. He attached himself to struggling surveyor who is putting him through. Now, he says he wishes he had listened to me all along. Your blod title says it all”GetRichSlowly”. One of my Cadets was withdrawn in the final year at the Academy. I invited him into my office and advised… Read more »

Laraba
Laraba
6 years ago

It seems one thing you did VERY right was to plan ahead. I often hear people say something on the lines of “We’re going to wait a few years to have kids so we can enjoy our lives now.” I DO understand that, and understand the desire to travel and do “fun things” but if those things are expensive — I wonder if some people struggle to live a more restricted financial life when (if) the children do come along. I was an engineering grad student until I was 27, living on a $16K a year stipend. I finished my… Read more »

Cate (Austria)
Cate (Austria)
6 years ago

Congratulations, what a wonderful surprise!!!! You and your Family will do Great i am sure.

Rachel Davis
Rachel Davis
6 years ago

Congrats on all three! We also got pregnant after adopting… go figure. 🙂 Now that my kids are school age (or at least my oldest is), I am wishing I could send them to one or two classes like ballet or at least swimming, but when you have four kids, that gets very expensive. Instead, we are buying an above-ground pool which they will hopefully learn to swim in! (They are still so short, it should be plenty deep for learning in) Also, since you’ll be home full time soon, I think you’ll find that you can reduce the grocery… Read more »

Rachel Davis
Rachel Davis
6 years ago

Small savings tidbit: BumGenius or other popular cloth diapers. LOVE them. $300 up front or $30/month on disposables until they’re 2 or 3. And you can keep using the cloth on baby #2. (I personally like China-made Assuntastore which sponsors a charity, but for US made, there are lots of good mainstream cloth) For college: neither of our parents saved for college, though my parents had put aside $1000 to pay for our wedding and $2000 as a wedding gift (married 9 years ago) and that was great. We’d like to be able to support our kids further education, but… Read more »

Donna Freedman
Donna Freedman
6 years ago

What a nice surprise. Congratulations! A former co-worker had undergone cancer treatment and wasn’t conceiving so she and her husband adopted an infant girl. The day they picked her up, they found out that K was pregnant…with twin girls. So they had three kids within seven months (cue the nervous jokes from their dad about “three prom gowns at the same time every year” and “three weddings”). Put it out in the universe that you will cheerfully accept hand-me-downs no matter what the age of the child. As they get older I bet you’re less likely to get good slacks/jeans… Read more »

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