Taking Control of your Family Finance: Pillar #1, Money Management
Guest Post: Desirée Dupuis, Partner Three Sixty Financial Group
Having a baby is life changing and when it comes to your finances a new baby will certainly affect your family’s balance sheet. Most families will be hit with a double whammy: not only do you now have a significant increase in your expenses (with diapers, formula, clothing, toys, and everything else a baby needs), you will also have to afford all of these additional expenses on less income! This is why cash-flow management is of utmost importance… sacrifices are going to have to be made.
For most people, much of the disposable income they had available to spend on themselves before they had a baby is now gone. So, in order to keep your bank account happy along with your relationship, you are going to have to get very real about your spending.
There is no secret to cash-flow and budget management: what goes out (your expenses), must be less than what comes in (your income). Now before you go out and spend every penny you have each month, you must make sure to leave room for things like additional life insurance that may be required, putting away money for your child’s future education, and putting money away into your short term and long term savings accounts.
Focus on the Expenses First!
If you want to be smart and pave a nice road for your family’s financial well-being, you will make sure that these ‘expenses’ are taken care of first, at the beginning of the month before even one dime is spent. This is the concept known as paying yourself first, which I am sure most of you have heard of. Once you have paid yourself first and have put all the necessary money away, then you can go to town and spend every last penny in your bank account by the time the next month or pay cheque comes around. Check out www.mint.com
to help you with your budget and cash flow.
Don’t Let your Bank Account Break your Relationship
Money is the number one thing that causes stress and strain on most relationships. This is why its really important to nip this issue in the bud and properly plan for it. The best thing to do is to be aware of what your budget/spending looked like before you had your baby and what it needs to look like now that the baby is here. My suggestion is to do your family budget together and come up with a plan. To do so, go through your expenses and figure out where both of your are spending your money in order to come up with comparable expenses (in terms of cost) that you are both willing to give up in order to allocate that money to your baby’s needs. For proper financial planning, you need a realistic plan and most importantly both of you need to stick to that plan.
Work with Cash Not Plastic
One way to do it is to take out a certain amount of cash that you are both allowed to spend per week, then its up to each of you to budget yourself properly through the week. Once your cash runs out, that is it, there is no pulling out the plastic! You can even turn this into a game, every week the person with the most left over cash is the winner and the other person owes them something like a chore, a favour, or perhaps something romantic. That left over cash can be put towards your mortgage, your credit card balance, or your emergency fund. The best thing to do is to keep the communication open and make it fun, this will help turn your family’s finances into excitement rather than stress.