Swimming the Financial Currents With Kids in Tow
For a moment, I lay paralyzed in my bed as sweat rolled down my forehead and milk leaked from my breasts. The green glow of the clock screamed 3:17 a.m., but I heard nothing.
I sprang from my bed and flew to the room next door. I approached the crib, and tears of relief flowed down my face. “Thank you, God!” I whispered when I heard my three-week-old baby breathing. I backed out of her bedroom and closed the nursery door. Next, I snuck into my son’s room and stole a kiss on his forehead before heading back to bed.
My husband rolled over, “Is everything okay?” he murmured.
“Yes, the kids are okay,” I whispered as I nestled into the covers. Minutes later, my daughter awoke, demanding to be fed.
The next day, I relayed the story to my mom, and I asked when I would stop worrying about the kids like this. She responded, “Well, I sleep a little better now that I don’t have to wait for the garage to close for the last time in the night, but I don’t think I’ll ever stop worrying about the five of you.”
Prior to having kids, I didn’t realize how terrifying it feels to have a little person depend on you for everything.
I view raising my children as one of the greatest blessings that I have received, and the last thing I want to do is to put my children’s wellbeing at risk.
But I had just quit my job, my husband is still in school, and my freelance writing brings in about a quarter of what I used to make at my regular job. Sometimes I ask myself if I’ve lost my mind. I don’t know if I’ll be able to pay for their college education or for the extracurricular activities that I enjoyed as a kid.
Reduce Big Expenses
In 2015, Rob and I spent a total of $61,000, and more than $18,000 of that went towards raising our son. No, I didn’t spend the rest of it on the two of us. A big chunk – $19,000 – was spent on home renovation as we prepared our living space to accommodate the three – soon to be four – of us.
Now that we’ve added a second kid, we should expect to see more money going out the door, right? In our case, no. Despite adding a second child, we expect our expenses to drop to $32,000 per year. Since I will stay home with our kids, we will cut our $14,000 childcare expenditures to zero.
Based on national averages and our previous spending (multiplied by two), we expect to spend around $8,500 on kid-related expenditures, including food, clothes, medical care, dental care, diapers, toys, and a toddler soccer league (we’re not going crazy with extracurriculars just yet).
We also saw savings from optimizing our lifestyle. In 2014, we purchased a $65,000 fixer-upper that sits within a few miles of Rob’s school, our church, several parks, and the grocery store. The house is in a lower-income neighborhood that some might feel is too run-down for their tastes, but the decision to purchase this house means that Rob can bike to school and our transportation and housing costs combined fall below $10,000 per year.
Build Income Streams
Next year, we expect our gross income to be around $50,000 to $60,000. While this falls far short of what I used to bring in, it’s more than enough to meet our current expenses. Since neither Rob nor I will works full-time, it’s fair to ask how we will earn all this money. The short answer is that it comes from diversified income sources that we’ve built up over the past several years.
These days, we rent out our basement and a rental house; I consult on quantitative marketing analytics; I write; and Rob earns a stipend and sometimes works as a handyman. Once we started to see opportunities to make money outside of the traditional job setting, it became easier to capitalize on the opportunities that presented themselves.
WITH A NARROW BUFFER BETWEEN INCOME AND EXPENSES, WE NEED A CLEAR PLAN FOR ANY MONEY THAT DOESN’T GET SPENT.
If a worst-case scenario happens, I want to be sure that my kids and husband have the financial means to carry forward with their lives. This means that Rob and I carry life insurance, long-term disability insurance, healthcare, home, car, and umbrella insurance. We’ve calculated our basic financial needs, and we gladly pay for enough insurance to meet those needs.
We hope to give our kids a head start in life, but we believe that the best head start we can give them isn’t a trust fund or a fully-funded college experience.
Instead, we want to give our kids good quantity and good quality time while they are young, in the hope that they become confident and capable adults later on. I do not wake up in a cold sweat anymore. As we continue on this journey, I am beginning to feel more and more confident that our kids will be okay.