As a new parent, one of the biggest struggles we face is factoring in the expenses of a new baby within your pre-existing budget. In addition to the joys a baby brings to your life, there is also the small matter of the onslaught of needs a baby has. Baby gear isn’t cheap, and neither are all the other baby essentials you need regularly, which make your living expenses higher than ever. Times like these may make it tempting to max out your credit card, get another mortgage, or get a title loan on a motorcycle.
If you and your partner are both working, the extra income can come in handy, but we must also keep in mind that when both parents work, there are still more expenses to consider like day-care, frequent takeout meals, dry cleaning, maid services, or any other facilities you might pay for to compensate for your hectic lifestyle. However, there are measures you can take that will allow you to stretch your budget, save some money, and manage your finances without digging yourself deeper into debt.
Track your spending habits
The first thing you should do is to audit your expenses. This is an important step to do before you begin cutting expenses, as it allows you to get a better idea of your spending. An audit sounds like it is going to be a painful and complicated process, but it is actually quite straightforward. All you need to do is track your spending and see where exactly it goes. It may be a good idea to use the best free personal finance app, MoneyPatrol, to record and categorize your spending. It can often be quite the eye opener when you realize how much of your money is wasted on non essentials.
Curb your frivolous expenses
Once you have your spending categorized, you will see where your money is wasted on non essentials and frivolities. For instance, you might be paying for services that you don’t need or don’t utilize or can do without. For instance salon visits, gym memberships, eating out, cable TV, digital subscriptions etc. can seem like minor things but they add up to a whole lot. The important thing is to pinpoint the luxury expenses you can eliminate without too much inconvenience. It is important to keep in mind that you shouldn’t make too many major changes abruptly. Slowly acclimatize yourself to doing without certain expenses and activities to avoid too much of an upheaval in your life.
Assess your billing
Sometimes we are paying for things without realizing. For instance, you should look at services you may have subscribed to a few years prior. You may not realize that you have been paying more than you signed up for in annual price hikes. You should try calling your service companies and see if you can negotiate your bills. Making a quick call to the company and enquiring about promotions is also a good idea. Reach out to services like your cell phone company, utilities providers, insurance companies and even credit card companies and ask if you are eligible for discounts or promotions. If not, you can tell them that you are considering moving to a competing service provider. This will often result in the “customer retention” department offering you discounts and incentives to stay.
You are more likely to save money when you shop online. This may come as a surprising news but it is a fact. You still spend money, but you are less likely to impulse spend, and any purchases you make are usually more calculated and deliberate. It is easier to compare products, use coupons, or not exceed your budget. This is also valid for grocery shopping, and shopping for clothes.
Utilize credit card rewards
If you are busy or strapped for cash, a credit card can be a convenient way to pay for stuff. If you switch to a card that offers reward points on spending, you can let the points rack up against your spending and then use the collected points to subsidize your other shopping needs. You can use your spending audit, and figure out which cards offer more points on certain categories. For instance, some cards give you more reward points on certain categories like grocery, fuel spending, or at certain restaurants.
Consider going on a diet
Not a regular food and cutting calories sort of diet, but one where you cut expenses out almost completely. I think a better name to call this would be a spending fast. A spending fast is an excellent way to cut your expenses, but it can be drastic yet effective.
Basically, during a spending fast, your entire family is banned from spending anything for a fixed time period. You may begin with a week-long spending fast and slowly work your way up to longer periods. In a spending fast, you do not make any purchases whatsoever, but you can allocate a limited budget to be spent only on essential categories like medicine, or fuel.
You can customize the moratorium according to your family’s needs and finances. As new parents, you have to make sure that your spending fast doesn’t cut out essential items. Plan your fast and which you can absolutely not spend on, and for how long. Then make a list of all and any exceptions for the fast.
While a spending fast is an extreme measure, and can take its toll on your family, it is an extremely effective way to get your family’s spending and finances under control.
Living with a brand new baby and getting your finances in order at the same time may seem like a Herculean task. However, as outlined above, you can stretch your budget and maybe even save some money just by some clever planning and breaking down the task into small chunks. You should begin with doing a thorough spending and expenses audit, and then manage your spending habits as best you can.