Family Budget Tips:
Pay Attention to the Hidden Costs
When you start a family with your partner of choice, let’s be honest - there’s nothing quite like it. If you’ve found your special someone and a soulmate that’s worth the time and effort, your family obligations are definitely going to seem more like fun than a chore. Bearing that in mind, if we take a look at the practical side of things - this isn’t going to be an easy endeavor.
Provided you’re not rich by default, you’ll find that there are plenty of family expenses many people simply don’t think about. And that’s precisely what we’re going to discuss here, so stay tuned!
Expenses Young Families Face
So, you’ve decided to set out to start a family of your own. While that’s definitely brave and commendable, not to mention a rite of passage into adulthood; you should still be careful and think things through. Primarily because adult family finances are nothing to sn
eeze at. Sure, saving up money for a backpacking trip to Europe while you’re a broke college student may have seemed difficult back then; but it’s nothing compared to the stuff that comes afterward, additional hospital or health plan expenses - and more.
First and foremost - as you’re about to find out, raising a child is incredibly expensive. While mileage may vary here, relevant statistics show that raising a child from their inception to the moment they’re 18 costs upwards of $200,000 on average. That’s right, you’ve heard that correctly, and there are no typos there. If you want to do this right - you need to keep both eyes open!
Right off the bat, we need to address the single biggest obstacle to millennials starting their families before the age of 35 - student loans. When the time comes to pay them off later in life; they often represent a serious hurdle for starting a family.
You can defer your student loans--it’s pretty tempting to simply ignore them and wait for the payments to kick in. However, there’s a catch to this; your monthly payments will be significantly higher in the future - you’re still building interest in the interim period.
There’s a difference here, naturally. If you’ve got a subsidized loan, the government will take care of the interest while you’re still studying via a grace period. Conversely, you should try to pay off some of the interest if you’ve got an unsubsidized loan even while you are still studying. This will make the loan easier to deal with later on, and lessen the burden on your family expenses.
Even if you do everything you can to minimize your borrowing before starting a family, there’s one simple fact you’ll need to learn to deal with: at the end of the day, you’ll simply have to spend less money on a daily basis. Of course, there’s a difference between going overboard and having absolutely no quality of life. You don’t want to be on the opposite end of that spectrum either, splurging on stuff that you absolutely don’t need.
The key here, as you might have guessed it - is planning. You and your partner definitely need to be on the same page when it comes to household expenses. And, as tough as it may be on some people - you need to reign in your personal spending as well. At the end of the day, all funds are household funds if something goes terribly wrong. So, you need to take a look at the basic things you spend money on, and categorize them; stuff like utilities, subscriptions, eating out, social gatherings, groceries, etc. You should also check out our list of things that are free or inexpensive that you’re probably overpaying for.
Then, take a look at your combined monthly earnings and decide on a household budget. That way, you’ll have a baseline allowance that can be tweaked according to monthly needs. At first, you will probably have disgust towards planning your family expenses in such detail; but after a while, it will become something like second nature.
Most personal finance experts will tell you that the first step on the road to being financially secure is having an emergency family fund. Regardless of how secure your jobs seem to be, there’s absolutely no telling when a gigantic paradigm shift can happen in the economy. With that in mind, how do you start working on one?
Firstly, you should take stock of any potential sources of credit and cash. Generally, you shouldn’t open any new lines of credit if you can help it - but being aware of the limits of all the cards you already have is smart. Next up, there are two main sources of your emergency fund money: lump sums and petty cash.
Generally, you should try to set aside small amounts of money from your daily leftover cash and put it in your emergency fund; regardless of how small the amounts are, you’ll be surprised at how much they add up. Aside from that - try to use any kind of predictable lump some (commission, bonus, tax refund, etc.) for your emergency fund as much as possible.
Of course, when you do get a big bonus, you’ll be tempted to spend it on frivolous stuff right away; people often can’t help themselves when they’re just given a lot of money at once. However, try to limit yourself and put half or more in your emergency fund. Once you’re sure you’ve got a financial safety net of your own, you’ll be able to bear the hardships of saving money and avoiding too much credit far more easily.