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“This” being the super-expensive co-sleeping robot; the constant takeout Thai; the fancy bouncy chair; the college savings funds; the extra ticket charged to my airline credit card; the doctor bills and higher health-insurance premiums; the school trips; the car seats; and, most pressingly, a home of our own.
My flash of fatherly agita was a result of everything piling up at once after my baby’s birth. The never-ending credit card swipes made me feel like I’d never again have control over my finances.
“Big events—getting married, having a kid—trigger couples to look up from their lives and say, ‘Wait a second, where is [the money] all going?’” said Sarah Behr, a San Francisco-based financial planner, in an interview.
During a time when you may be on parental leave, earning a reduced income (or no income at all), keeping a hawk’s-eye view on your spending could help you avoid racking up credit card debt or depleting your savings.
We needed a plan. Our immediate goal was to get a handle on our expenses, despite our brains being especially sleep-deprived. Beyond that, though, I wanted us to become more conscious of the million places our paychecks were going—and to see if, through some slight nudges, we could put those dollars toward a goal we cared about.
Establishing a financial baseline
Given my chosen profession (writing about money all day), my ever-practical wife told me to give her a concrete number: How many dollars can we spend, and how many can we save, in any given month without going into debt?
She was on to something. When you’re figuring out which spouse does what with the family finances, you’re better off sticking to a role that brings you satisfaction rather than splitting the tasks evenly, according to Kristy Archuleta, associate professor of financial planning, housing, and consumer economics at the University of Georgia (PDF). One partner is likely more naturally fiscally oriented than the other.
But assigning roles is just the beginning. You still need to be on the same page. “The caveat to this is that both partners need to know what is going on financially,” Archuleta said in an interview.
Whatever I came up with, then, would have to pass muster with my wife.
Creating a spreadsheet of pain
I started a spreadsheet with two tabs. The first tab listed how much money we expected to earn that month, along with all of the costs we knew we would have (from rent to streaming services to ideal savings for the down payment on a home of our own). A quick scan of our credit card and bank statements gave us a good inventory of where all our money was going. That left me with a “spending number” that was, frankly, a little depressing.
That’s where the second tab came in. Through the Google Sheets app on our phones and desktop computers, we logged everything we bought when we bought it (from a $400 Airbnb rental to $2 coffees), which we automatically subtracted from our “spending number.”
Throughout the month we had the perverse pleasure of seeing our “spending number” get cut down like switchgrass and wither away toward nothing. The goal was to complete the month before our “spending number” dropped to $0. (Any money we had left over went into the house fund.) It was like watching a doomsday clock for our finances.
I know—it sounds like a total pain. This might seem like the worst time in the world to set up some makeshift budgeting system that won’t help you feed your baby nor put them down for a nap. A budget won’t clean out the diaper pail. Manually entering your actual spending (including cash) into a spreadsheet is probably more unpleasant than letting your credit card charges pile up on a statement you never read.
But that’s a feature of this process—not a bug.
The benefits of cash
One positive aspect of using cash or a check instead of a credit card is that you can feel the money leaving your bank account. Research shows people not only spend less with cash (PDF) but also reap more pleasure from what they buy (PDF). The pain is what makes it memorable.
Using credit comes with a bunch of benefits, which often include fraud protection and rewards, so don’t cut up all your cards just yet. Using my spreadsheet echoes the pain you would feel using a wad of cash.
Where to begin?
Try my plan for a month to see how it fits. If you can do this before your kiddo is born, that’s even better. In the short term, the spreadsheet should let you gain a sense of how much of your money is coming in versus going out. In the long term, it could help you curb any bad spending patterns you might notice, or push you to reach a savings goal.
Long-term financial maintenance
You might think my plan sounds too complicated, but I found it more straightforward than using You Need A Budget, Wirecutter’s favorite budgeting app. Despite YNAB’s excellent customer service, I just didn’t have the time or mental wherewithal to set up my profile, link all of my credit cards and bank accounts, and then categorize hundreds of transactions.
I also didn’t want to pay for a YNAB subscription ($80 a year), at least not right now. The point of this experiment is to not spend any more money than I have to. But we’ll likely switch to a budgeting app after our reset is done—once we’re meeting our savings goals, and once our kid is sleeping more than three hours at a stretch.
The big payoff
I’ve found communication and empathy to be key during this process. My wife didn’t want me grilling her over lunch dates with friends, and I didn’t want any guff when I spent way too much money on an espresso machine. So we agreed to reserve judgment under one condition: Neither of us would spend more than we had allotted ourselves for the month.
“There’s a tendency for couples to focus and argue about the small stuff,” said Illinois-based certified financial planner Tom Nowak in an interview. My wife and I have largely avoided that by remembering why we’re saving in the first place. (Constant dalliances with Zillow keep our eyes on the prize.)
We both want to live in a house of our own one day, and we know every dollar we save isn’t being frivolously spent by the other person but rather being used to lay the foundation for our house fund. We’re on the same team.
This ad hoc, nerdy spreadsheet system has helped us save an extra few hundred dollars each month. But it has also, unexpectedly, bound our family more tightly together.
Source: NY Times – Wirecutter
Keyword: A Simple Trick to Reset Your Post-Baby Budget