What to do when Easy Street develops potholes

The moral of this story is obvious: It's a lot easier to get ahead financially before children enter the picture.

Now that I have that brilliant thought out of the way, let's get into a keepin' it real kind of post by analyzing the last few years of the Aberle budget.

2009 – Making more money. Start targeted savings accounts. Pay off car loan. Only the mortgage is left.

2010 – Find a nice side job. Add to savings accounts. Work more hours and make more money.

2011 – Side job turns into an amazing opportunity. Work more. Find another side job. Keep adding to savings accounts.

2012 – Continue with all side jobs. Saving. Big adoption costs. As part of my decluttering effort, I paid bills immediately. Paying extra on mortgage. Finances are automated. Haven't worried about overdrafts or having enough money in the accounts when the credit card bill is withdrawn. There is always enough. My finances are under control, and I like this. I can't tell you how good it felt, because, today, I am trying to remember.

But now we're in 2013. This is the year that rocked my confidence in my financial skills. The year that is forcing me to (again) adapt my lifestyle to meet my finances. And I thought I had planned for this!

Twenty-twelve closed with the highest household income ever. Nice.

Twenty-thirteen started with my husband's new job and resulting significant pay cut. Nice for him, bad for the checkbook. Then we spent two months overseas. July 31 was my last day of full-time employment, so that meant our family income dropped again. In fact, between our job changes, our household income is just two-thirds of what it had been.

But that's not all. We've increased our spending, mostly due to some medical expenses associated with the kids. And our evenings are now spent on homework, laundry, reading, and playing. We don't have time to do side jobs in the evening anymore.

While I am no stranger to financial woes, I prefer not to have them. Still, the truth is that we have dipped lower than usual in our checking account balance. I haven't paid our mortgage in four months (which is OK since we were ahead so many payments). And almost every month, I have to transfer money out of savings into our checking account. That isn't sustainable. And if that isn't enough, I forgot about our credit card payment coming out of our checking account. I think I will be lucky enough to escape a $20 overdraft, but this isn't the financially savvy me. What happened to her?

Time for asphalt on the potholes

It's a lot easier to save money (and make it) when you have less responsibility. But now that we have a family, we have to change our process. We're still making enough money to pay the necessary bills, but we need to buckle down and realize that we are living on less.

1. Budgeting and tracking our spending. I have tracked our spending before, most recently in a tedious spreadsheet. But it was saved on my computer, and my husband never looked at it. Now that we have to communicate about money more often, I want something that helps us both.

Enter You Need a Budget, or YNAB.

I have seen YNAB mentioned many times in the comments here before, so I checked it out. What I found was a 34-day free trial. Free sounds very good right about now. Well, I am nearly done with my 34-day trial, and I like almost everything about it. Dropping $60 is worth it. Plus, their smartphone app is now free when you purchase the desktop version.

I believe this will help my husband and me  stay on the same page. I also think that an at-a-glance look will keep us focused on our goals and help us not to overspend. I'm interested to see if my nine-month net worth growth comes close to $3,300 (as they claim their median is) or not.

2. Fun money. Now that things are going to be tighter financially around here, I will need $20 per month that is mine to use as I want to. If I know I have a little bit of cash, I hope that I won't feel deprived and spend more.

3. More careful planning. When you have spare cash, you can afford to buy when you feel like it. When you don't have spare cash, you can't. My son needed gloves. A careful planner would have started looking for them before he needed them, but at least I planned by going to Goodwill first! I did find some very warm gloves for less than $2. Staying organized will help.

4. Cut down on credit card use. I always pay the balance on my credit cards, so it's not something that is hard for me to control. However, it's a surprise every month now when the bill comes due. And I confess, it's a lot harder to come up with the money to pay the bill than it used to be. So I think it's time to stop using our credit cards for random expenses. I will still leave monthly bills that are paid automatically on the card, but it's time to control our spending.

I am having a surprisingly difficult time adjusting to all the changes that have come to our family in the last year. Even though I know we're making less, I am having a hard time getting myself to act like we're making less. Have any of you had to change your financial course or plan mid-stride?

 
More about...Budgeting, Planning

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FI Pilgrim
FI Pilgrim
6 years ago

With your financial skills (and habits) in place, I think you’ll look at the trend line of your life in a few years and see this period as a small dip, not a recession or crash. You just have to keep your confidence up!

Beth
Beth
6 years ago

“It’s a lot easier to save money (and make it) when you have less responsibility.” I enjoyed this post, but I respectfully disagree here. One thing I’ve learned reading PF blogs is that people can succeed or flounder financially regardless of their marital status or whether they have kids. I think we’re all tempted to look at other people — or our past selves — and think “oh, they have it so easy…” But we never really know what challenges other people face. Some people don’t have the responsibility of kids, but face other challenges like job losses or poor… Read more »

Kiernan
Kiernan
6 years ago
Reply to  Beth

I’d agree with this … and on the flip side, some of us don’t become financially savvy until we have kids (or another life-changing event). My late husband and I never thought much about where our money was going until our child was born, then we got a lot more disciplined about saving and investing. I still cringe when I think about all the money we wasted just being mindless in our pre-kid years. We had fun, though!

Ramblin' Ma'am
Ramblin' Ma'am
6 years ago
Reply to  Beth

I don’t know–sure, emergencies can happen to anyone, but the day-to-day expense of raising kids is so huge that I think Lisa is right. Obviously there are a lot of expenses that can be cut out if you live frugally, but things like childcare and health insurance can’t.

That is not to say that people without kids don’t have emergencies, or are sometimes irresponsible with money–just that, IMO, it’s much easier to live frugally as a single person than with children.

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  Beth

Beth – I should have said “It was a lot easier to save money (and make it) when *I* had less responsibility.” Mainly because I had more time to actually be making money. But while our wallets may be emptier, our hearts are full. I wouldn’t trade these kids away for an easier time, that’s for sure!

Beth
Beth
6 years ago
Reply to  Lisa Aberle

You rock 🙂

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  Beth

Naaa, not me. But thank you!

JoDi
JoDi
6 years ago
Reply to  Beth

I have to respectfully disagree with your comment. The article was about the relative ease of saving and earning before and after adding a new responsbility NOT in comparison to someone else’s situation. It is undeniably easier to save more and earn more when you have less responsibility. Whether the added responsibility is adding children to the household, taking care of aged parents, or dealing with a new health problem, does not matter. You will have more expenses and less time available to work to earn more once that responsiblity is added to your plate. Lisa’s life example was adding… Read more »

Beth
Beth
6 years ago
Reply to  JoDi

I agree with you. A friend of mine recently bought a house and I’ve been thinking about the added expenses and responsibilities I will face when I decide to take the plunge. In many cases, taking on a responsibility is a good thing we enter in to willingly. I don’t think a chronic health issue is “responsibility” in the same way. I’m just saying that we all have to play the hand we’re dealt 🙂 I know couples with a stay at home parent and multiple kids that are in better financial shape than some of the singles I know.… Read more »

A-L
A-L
6 years ago

When my husband and I both decided to go back to grad school at the same time, YNAB is what really helped us. We were able to agree on how our money should be allotted, and we just got it done. Right now there is some job uncertainty and we are also expecting our first child. I think that our past experience with budgeting and planning will help us, but of course, only time will tell.

Money Saving
Money Saving
6 years ago

We’re going to be going this pretty soon so I feel for you.

My wife will go part-time so that she can spend more time with the kids while they are “school age”. This will mean that we’ll really have to trim the fat in our budget and maybe even downsize our house to make everything work without sacrificing our retirement goals.

Good luck – I think you’ll be fine if you’re willing to analyze things and make the tough decisions.

retireby40
retireby40
6 years ago

Sorry to hear about your recent troubles. Hopefully you’ll get back on track soon.
Can you get another full time job? That should help a lot right? If 2013 is so hard, maybe you are not really ready for semi retirement.
Our income dropped by 60% when I quit my job and we’re doing OK.

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  retireby40

They still haven’t filled my old full-time position, so I could go back to that. I need to pencil out everything, but it involves a long commute, some commitments that would require after school care for the kids, and other expenses. With my side jobs, I was working two full-time jobs before kids, and I just don’t have enough hours in the day for that anymore. So I am not sure if going back to full-time employment and getting rid of my side gigs would be better. I love the flexibility that I have – and working from home is… Read more »

bap
bap
6 years ago

One thing that I have done for many years is to treat my credit card like a debit card: I write my purchases in the check register as I make them. This adds a couple steps to reconciling the checkbook, but I don’t have to “find” money to pay the bill when it comes, because it’s already “gone” (in terms of my checking balance).

When paying the credit card, I note the actual amount of the transfer in the comments of the transaction, but don’t subtract anything.

Just something that makes my life less stressful.

partgypsy1
partgypsy1
6 years ago
Reply to  bap

I think I will need to start doing this, good idea.

Megan E.
Megan E.
6 years ago
Reply to  bap

I do this, but if people are still worried, another good idea is to download a free checking app (or use a paper and pen) and put down the total amount you have for the month (ie, $400 – groceries) and then put in every transaction. When it hits $0, you are done.

nicoleandmaggie
nicoleandmaggie
6 years ago

We dropped from two incomes to one when my husband quit his job. Now with potential job offer(s) on the horizon (see today’s post…) it’s kind of stark how much different it is just in terms of peace of mind to have more money coming in than we need. I miss not having to think about every little expenditure or to freak out when we have an emergency (like daycare closing and taking our 4.5K remaining prepayment with it).

Lisa Aberle
Lisa Aberle
6 years ago

I think the peace of mind is what I am really missing. We really have enough to get by, but not fund all accounts in the way we were before. I need to get used to it :).

k-ro
k-ro
6 years ago

Kids will do this to you! The time you used to be able to spend keeping your life organized is now consumed by the kids’ needs. It’s an true paradigm shift.

And it really doesn’t get any better as they grow — the demands just change from changing diapers to coaching sports team to attending band concerts! (Oh, and don’t forget about the many, many taxi services you’ll be providing!)

Enjoy the journey!

Jennifer B
Jennifer B
6 years ago

You said that you are so far ahead on payments on your house that you haven’t had a house payment in 4 months. Why were you paying ahead instead of paying down the principal? Paying ahead means that you’ll still have to pay all of the interest, just faster. Paying down the principal means that you’ll pay less over the life of the mortgage. And I’d point out that if you have not been paying towards the mortgage in the last 4 months and are still at the end of your bank account every month, you are in more dire… Read more »

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  Jennifer B

This is a good question. When we refinanced our house, I recall our banker saying that all extra payments would be applied to principal. As soon as the bank opens tomorrow, I will call and make sure that is what has been happening. If not, I will fix that, so thanks! I can see why it looks like we’re in dire straits, but I believe our main issue is adapting our process. For instance, one of my side gigs (which now contributes about 40% of our household income) has always gone into savings. We didn’t count any of that in… Read more »

Daria
Daria
6 years ago
Reply to  Lisa Aberle

If those extra payments have been applied to your principal, then you are NOT ahead in your payments, and if you have not made a payment in 4 months, then you are seriously in arrears and racking up late fees and starting on the road to foreclosure.

Diane C
Diane C
6 years ago
Reply to  Daria

Jennifer B and Daria – My thoughts exactly! Lisa, don’t waste a minute tomorrow following up on this and please let us know the result. I’ll be biting my nails until we hear back!

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  Jennifer B

Okay, here is the answer from the bank… Our mortgage is an in-house loan, meaning it was not sold on the secondary market. I am not sure what difference that makes compared to “normal” mortgages, but I am pretty sure our mortgage is subject to fewer regulations. Not sure, though. Anyway, any extra payments (whether it is a whole extra payment, or rounding up to the nearest hundred on a single payment) are applied to the monthly interest first and then all is applied to our principle. For example, if we make two payments in one month, the first payment… Read more »

Jane
Jane
6 years ago
Reply to  Lisa Aberle

We’ve always made a monthly payment on our mortgage, so I don’t know if we have this type of arrangement with our bank. I did, however, have a student loan that functioned this way and it was very annoying. In the future, my suggestion is to just pay once a month and not mess with all this nonsense. If you want to prepay a bit, just write the monthly check for however much you would like. Something just makes me nervous about not paying at least the minimum every month. You never know what they will do or if you… Read more »

Diane C
Diane C
6 years ago
Reply to  Lisa Aberle

Thanks for the follow-up, Lisa. I have long been in the “don’t pre-pay your mortgage, pay yourself first” camp. Your experience completely supports this position. First, the $1200 interest you “owe” is probably just the money you “saved” by pre-paying, so I wouldn’t sweat that too much. Next, I hope that your current circumstances allow you to see that it is vitally more important to amass savings than to prepay your mortgage. When you prepay your mortgage at the expense of saving, you lose out on both the magical benefits of long-term compound interest on your savings and the ability… Read more »

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  Diane C

My winter goal every year is to read through The Tightwad Gazette. Love that book! Of course, the ironic twist this year is that I need it more than ever – but I don’t have time to read as much :). I think I’ve read 30 pages so far. I’m still not convinced that prepaying the mortgage is not a good thing for us (I may do a post on it later, even though many posts have been done already). I follow EMH’s line of thinking for why we would consider paying it off early. When we were prepaying our… Read more »

EMH
EMH
6 years ago
Reply to  Lisa Aberle

We have been making extra payments on our mortgage to get ahead. Right now, we are almost a year ahead with payments. Our most recent bill had a due date of October, 2014. The math doesn’t work in our favor but emotionally, we feel more secure. We paid ahead because I am going to stay home with our child for a while and I didn’t want my husband to have any extra stress of being the sole breadwinner. He makes enough to cover all our bills including the mortgage but our lives are going to be stressful enough. If an… Read more »

Adam Hagerman
Adam Hagerman
6 years ago

Good luck Lisa! We all face issues like this and we all come out better because of them.

I ALWAYS recommend incorporating “fun money” in a budget. So many people fail at budgeting because they feel too constrained. Fun money allows them to get creative with their budgeting spending while still following through on the entire budget.

Financial Samurai
Financial Samurai
6 years ago

Everything is rational no? To take a 2 month overseas trip means you have the money to take the trip. Sounds like a great adventure to me!

El Nerdo
El Nerdo
6 years ago

I have very little to contribute to this except a very marginal note on a small point that stood out for me. You say you have no time to work more because you need to help the kids do their homework. I mean, I know you have to do a lot more but this is just about homework. I get it that the kids are new to the country/ the culture and might need a bit of help. I also don’t know how old your kids are so I have no idea of what they need. But also I’m always… Read more »

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  El Nerdo

First, love the article! I have read it before…maybe you have shared it here. Can’t remember. As the kids have been grasping more of the English language, I have spent less time helping them with their homework. (They are in kindergarten and third grade, by the way.) Right now, they are much “needier” in every way than other kids who are their chronological age. Once they are feeling more secure and safe, they will probably develop more independence. I do feel like we’ve adopted toddler twins some days, but it’s going well. I can tell I’m getting older, though, because… Read more »

Carla
Carla
6 years ago
Reply to  El Nerdo

My parents didn’t help me with my homework and look were it got me (absolutely nowhere). I would have killed for a little bit of help in certain subjects.

Holly@ClubThrifty
6 years ago
Reply to  El Nerdo

My kids aren’t in school yet, so take this with a grain of salt.=)

I think I will be hesitant to help my kids with homework because I know I have a tendency to do things for them instead of helping. I can’t help it….it’s just the mother in me!

On the other hand, I will want to check their homework before they turn it in. That way, I can see where they may need help and try to help them.

I don’t think that either approach is better or worse, however. Parental involvement is almost always a good thing!

El Nerdo
El Nerdo
6 years ago
Reply to  El Nerdo

Yeah I’ve posted that here before– it’s one of my go-to texts for whatever reason these days. Anyway I had this idea after I wrote that– instead of just helping you could “model” homework, i.e., you all sit around the table “doing homework.” Maybe the kindergarten kid is too little for this but my memories of kindergarten include long bouts of concentrated activity– I loved puzzles and drawing and building with legos and practicing my letters (ha ha, I was strange). Anyway, here a crazy idea: you set your pomodoro clock with extra-long breaks (they are kids after all) and… Read more »

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  El Nerdo

This is quite intriguing. I need all the multitasking, time maximization pointers I can get!

El Nerdo
El Nerdo
6 years ago
Reply to  Lisa Aberle

Alright– good to know. I love solving problems ha ha ha. So, a final note– you could consult w/ the teachers about the length of the pomodoros+breaks. The official duration is 25/5 with longer breaks during the workday, but that’s designed for grownups in a work or study environment. http://pomodorotechnique.com After they finish their homework and they’ve spent enough time with mommy you can do like all old-school moms and say “go play outside!” (ha ha ha) while you finish your own work (you have a big yard, yes?). Buy them a soccer ball and you won’t even have to… Read more »

Squirrelers
Squirrelers
6 years ago

It seems like things can change more and more these days, with people staying in jobs for less time as well as other bigger picture dynamics in play. Really, it’s important to realize that there can be those potholes, and also recognize that even if we’re driving a smooth road now, the road ahead could have potholes. Best to be prepared when it comes to our money!

M
M
6 years ago

Adding my poetic cents. I actually hit a pothole this afternoon. I was jarring for a moment but it didn’t derail my driving one bit. I made it home just fine. It wasn’t a sinkhole or anything nor did it trap my forward motion.
Lisa, Perhaps an allegory to your life right now?
BTW: What an awesome choice adopting your kids!

Lynn
Lynn
6 years ago

I just have one question ? Whay bank holds your mortgage and let’s you go 4 months without a payment ? Even if you are payments ahead. Every mortgage I have had required a payment monthly , even if I was make extra payments.

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  Lynn

The same bank that still refinanced our house when the appraisal came in at less than our balance. Yikes!
It’s a community bank and seems to have different rules than any other bank I’ve dealt with. I am not sure what their auditors think of them, but…

Holly
Holly
6 years ago

El Nerdo, your suggestions sound great in theory, but I don’t know how practical that is for younger children. My oldest are in K and 3rd, and their homework doesn’t take long. (Most days one 25 minute session would be more than enough.) However, if I would like to review other work that came home, discuss their art projects, talk about their days, etc., those are all things that can’t be done without devoting time. In the winter, when it’s dark, it’s mostly indoor play after supper. There’s a little time for me to squeeze some work in, as long… Read more »

El Nerdo
El Nerdo
6 years ago
Reply to  Holly

Yes, I suppose there will have to be some trial and error as with every practical situation, but it beats foreclosure, no?

Nick
Nick
6 years ago

Kids can definitely put the spanners in the work. We’ve decided to only have one child and although we spend a lot of money taking care of our son we always manage to save 50% or more of our income. Once we accumulate a substantial amount of money we might consider having another child. I agree, making as much money as possible before you have children is the key to financial success.

fredd3
fredd3
6 years ago
Reply to  Nick

Yes, but don’t wait too long – it’s hard to keep up when you’re older! 8^D

partgypsy1
partgypsy1
6 years ago

I am definitely having a hard time with this. Maybe 8 years ago, felt like I was making good money and had more room in the budget. Adding another kid, working at the government long enough the step increases are every few years, and our wages have been frozen for the past 3? years? At the same time my husband’s earnings have not increased. So while our wages are the same, the cost of living not drastically, has gone up every year, everything from property taxes to groceries. We no longer have that extra breathing room in the budget and… Read more »

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