This is a guest post from Corrinne Fisher, who is transitioning from career woman to stay-at-home mom.
I stared down at the two pink stripes on the pregnancy test with the same feeling one has when they find themselves strapped into the front of a roller-coaster. Heart pounding, you start to wonder whether you really want to take this ride, but the decision has already been made. And as you climb to the top of the first giant drop, you realize that for better or for worse, there's no turning back.
For us, this was something we wanted. We'd been married for several years, had found financial security, and had decided that it was time to expand our family. But once “trying” became “we are”, we had some major thinking to do. Planning our financial future was topmost on that list. We faced another challenge because we decided not to use daycare, but to have one of us stay home to raise our daughter.
I hope that by sharing our financial preparations with other expecting parents, we might help them develop a plan that will allow them the freedom to make the choices that suit their plans and values.
Start from a good financial perspective
By the grace of some very influential resources, we were able to start this baby savings plan from a place of financial security. Neither of us earns large salaries; however, we have learned some financial lessons that have helped us to talk and to plan for this major life change.
- From David Bach's Smart Couples Finish Rich, we learned how to talk about our values and have them govern our spending decisions. This helped us establish a financial dialogue that is the foundation of our marriage and has bridged the gap between the spender and the saver.
- Dave Ramsey's The Total Money Makeover taught us to eliminate debt and to shed the mentality that carrying debt was just the way it was. His book also helped us establish our goal of a fully-funded emergency account.
- The third resource was the Get Rich Slowly website and blog. This has helped me, in particular, learn tips and strategies to maintain a lifestyle to help us continue our path to financial security. I've obtained some good advice from parents that helped us to create a plan that will allow one of us to stay home with our baby.
Evaluate your current budget
What are your necessities and fixed expenses? Who makes what? Can you meet your fixed expenses and necessities with one salary? Our answer was “just barely”. If we eliminated travel to see family, fun money, and frivolous purchases, we could do it, but those are exactly the type of choices that would have us turning to credit cards. We needed find a way to supplement our single income with a little more money per month.
Identify expenses that can be cut if necessary, such as separate phone services and bills, the number of dinners out, or cable television. We found that between online viewing and Netflix, we are able to watch just about everything we would want. We go back to the values-based decision making. What is more important to us, having a parent at home or having access to some of these “perks”?
Calculate new insurance premiums into your fixed expenses
Make sure you have a good medical insurance plan, and anticipate the change in premiums when you move from a single plan to a family plan. Our premiums rose by a shocking $400 per month. Additionally, start looking at life insurance plans — it's more important than ever now that three people are dependent on one wage-earner. Consider this when you are looking at your budget and your fixed expenses.
Create a new savings account
We opened a new account at ING Direct called “Baby IRA”. The money deposited there will be drawn in the leaner months, much like distributions on a retirement account. We have been contributing to that account twice a month when I receive my check. We have accumulated enough to supplement my husband's income, permitting an occasional night out or a trip to see family.
Reduce dependency on one of your salaries
Since we had become accustomed to two salaries, it didn't seem likely that we could stick to a plan where we could immediately sock away my salary. Instead, we took a graduated approach to savings, taking a greater sum from each of my checks each month until we have reached saving (almost) the whole sum of my check. In the last month, we allowed ourselves a little more flexibility to allow us to live it up during our last days as a twosome.
We've agreed that our emergency savings should not be used to support our new lifestyle, but should remain untouched until we have an emergency. That said, should my husband lose his job, we could survive a few months before we would be facing dire circumstances. This makes it easier to leave the security of that second salary.
Talk to your boss
As soon as I knew that we weren't going to use daycare, I told my boss about the dilemma. Ideally, I would like to continue my relationship with my employer and earn some additional income, but I understand that my decision creates a hardship for the company. Luckily, we have agreed that I will take on a portion of my job and work as a consultant when I complete my unpaid maternity leave. Had this not been an option, I would have been working my network to see if I could find some project-based consulting that utilized my skills.
Please note, that consulting comes with its own expenses and needs to be budgeted and accounted for — not only for the day-to-day expenses, but also the taxes that will need to be estimated and saved.
Beg, borrow, and buy used
There's no reason folks need to spend tons of money in anticipation of a baby — most of the stuff can be reused. We accepted a range of hand-me-downs from maternity clothes to all of the baby stuff. While we don't always get the best or cutest baby accoutrements, we are happy to know that we have barely spent any money out of pocket for the items that we need.
Save gift cards for upcoming needs
We received a lot of gift cards. We have used a couple to buy necessities, but have saved the bulk of them for things we will need in the future from clothing to diapers to who knows what. These cards will help us to weather the changes to our budget that a new baby brings on.
Putting the plan into action
We welcomed our daughter Cecelia on August 4th, and have just recently sat down to reevaluate our budget and the increases in many of our expenses. It is going to be tight year, and I am sure we have some tough spending decisions ahead. However, we have a solid plan, an account to draw on saved especially for this purpose, and a plan to continue supplementing our income with additional work.
There is no guarantee that we won't have financial struggles, but we are well on our way to feeling secure in our decision to have one of us stay home with the baby.
Roller-coaster photo by gaelenh. Photo of parents and baby by J.D., and is not a photo of Corrinne and her family.
This post is part of the MBN Group Writing Project for September. Other participants include:
- Mighty Bargain Hunter: Save Money When You're Young
- Wise Bread: 6 Random Things I Have Taught My Kids About Money
- SmarterWallet: 8 Summer Fun Activites That Won't Break The Bank
- The Digerati Life: How Much Do You Need to Save for College?
- BluntMoney: Buying Kids Cars