Good Question: Making ends meet with little ones
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Question: We are a middle class, two-income family, with three children and are having difficulty meeting all expenses. How can we better manage our money?
Answer: Raising children is expensive. A new report from the U.S. Department of Agriculture estimated it costs $235,000 to raise a child from birth to age 17. This figure is up 3.5 percent from 2010 and does not account for education expenses after high school.
There are ways, though, to better manage expenses and plan out a livable budget.
First, to have a livable budget, you must have a budget. Budgeting can be an overwhelming task, but it is critical if you want to better manage your money.
To start a budget, do a thorough inventory of income and all expenses. Consider all monthly expenses, including your mortgage, utilities, unsecured debt payments, like credit card bills, cable, car payment, child care, everything you pay on a monthly basis.
Next determine all other expenses, like grocery shopping, entertainment, basically anything else you spend money on. If you are finding it difficult to identify these other expenses, track all expenses for 30 days. There are a couple ways to go about doing this.
One way to track expenses is to note everything each family member is buying. You can carry a small notebook and every time you make a purchase, mark what it is and how much it costs. Another way to track expenses is to stick an envelope in your purse or pocket and put all purchase receipts in the envelope. If you purchase something you don't get a receipt for, jot it down on the outside of the envelope. Total your receipts on a weekly basis (or you can total at month's end) and that will give an idea of where your money is going.
After you track your expenses, you can identify areas where you need to cut back. For example, if you're spending too much money on food outside the home, like lunches or dinners out, start to figure out how you can do that less or for less. Try to limit your eating out to one meal a week and make plans for meals at home. Plan weekly menus and do the grocery shopping in one day. Often times, you're more likely to cook at home when you know what you're going to make and that you have all the necessary ingredients.
If you find your grocery bill is eating a gigantic hole in your budget, consider ways you can cut back. Shop the sale ads and if you can add a coupon on top of a sale item, you can usually achieve decent savings. When shopping for produce, try to buy what's in season or, in the summer, skip the grocery store and shop a farmer's market. Avoid convenience items, like pre-chopped vegetables or boxed meals, which are usually more expensive.
When raising kids, it's important to plan for periodic expenses. These expenses can range from sports registration fees and dance lessons to the presents for the multiple birthday parties your kids get invited to attend. This could easily amount to a $1,000 a year, per child in added costs.
Try setting a miscellaneous expense fund. Start with depositing $50 dollars a month and increase the amount whenever you can. You might not be able to set aside enough money to cover all miscellaneous expenses without dipping into your money budgeted for monthly expenses, but having some money set aside is better than none at all.
Identifying budget challenges and planning ways to tackle them will help you better manage your money.
Raising children is expensive, but it does reap great rewards.
First Published July 8, 2012 12:00 am