Budgeting For Baby - Be Proactive
Today's show featured Christi Posner, a Credit Counsellor for The Credit Counselling Society and lead writer for mymoneycoach.ca. Christi is a new mom and shared her experiences and advice for dealing with debt, managing your money, and preparing for maternity leave. Although especially true for couples thinking about starting a family, her strategies are relevant for anyone looking to re-evaluate their finances and take a proactive approach to money management.
The best advice for dealing with any situation, is to be proactive. Plan ahead, be prepared, and know your options. If your future goals include starting a family, begin the process early. It may seem eager, but the more prepared that you can be for a new baby, the better. Christi explained that,
once I stopped dreaming and would come back to reality, I would realize that [a house and kids] wasn't where we were right now and we weren't where we wanted to be.
She admits that her turning point was when
We wanted to get married and we wanted to have a house and a yard and everything. We couldn’t afford any of that with all our debt. So, that’s where we really had to start.
Christi suggests starting a savings account dedicated to your goal; look into your benefit options at work and through the government, get your debts in order, and create a budget. Planning for the future will get you where you need to be financially and reduce any unneeded stress when that time comes. The same rings true for individuals looking to buy a house, make a career change, or simply go on a vacation; be proactive.
Christi breaks down her approach into three simple stages:
- Create a Budget
- Balance the Budget
- Live the Budget
This begins with asking yourself the hard questions. Do you know where you money is going? Why are you in debt every single month? Are you living beyond your means?
Also know that your expenses are going to change during maternity. Some costs will go down. You may be driving less so you might save on fuel costs. You may spend less on clothes and entertainment. Christie even found she could save money on her cell phone plan because she was able to use wi-fi while at home. But recognize other costs will go up. Christi talked about her personal experiences and what costs surprised her along the way.
Make It Automatic
When your baby arrives, bill payments and savings accounts will not be the first thing on your mind. Christi suggests that right before your due date set up automatic bill payments and transfers to your savings account.
we knew that we had to put our budget into action on auto-pilot because paying bills and saving money wasn't going to be on the top of our minds as new parents.
I agree with this approach and recommend this strategy for anyone looking to save their money. The budget that you created ensures that you have money in the bank and having that money filtered out automatically, will help to avoid missing payments or opportunities to keep your finances on the right track during any circumstances.
To learn more, listen to the show or read the full transcript of today's podcast below.
- The Credit Counselling Society
- Christi's budget calendar
- Follow Christi on twitter
- The Secret to Budgeting: Part 1
Christi's Baby Budgeting Articles:
FULL TRANSCRIPT show #27 with Christi Posner
Doug Hoyes: Welcome to Debt Free in 30 where every week we take 30 minutes and talk to industry experts about debt, money and personal finance. I’m Doug Hoyes.
Today we will talk about debt and money and personal finance, but to start we’re going to talk about pregnancy. What? No, don’t worry this show always gets a clean rating on ITunes. Today the discussion will be about financially preparing to start a family.
It’s great that we have kids when we’re young, because otherwise we wouldn’t have the energy for the 2 am feedings and diaper changes. But the disadvantage of having kids when you’re in your 20’s or 30’s is that you’re still young, so you’re probably not well established financially. You haven’t been in the workforce for 20 years, you probably just bought a house so you’ve got mortgage debt; you probably just bought a minivan with a loan, so cash is very tight.
So, how can you financially prepare before your bundle of joy arrives? I don’t know. I’m a guy and both of my sons are teenagers so my memory of those early days are somewhat foggy. So, today my guest has a much more recent experience with starting a family, so let’s hear what she has to say. So, let’s get started. Who are you and what do you do?
Christi Posner: Hi Doug, my name is Christi Posner and I am a Credit Counsellor for the Credit Counselling Society. I’m also a lead writer for mymoneycoach.ca, which is a website that helps people learn to manage their money and learn about credit and learn how to pay down their debt and save money.
Doug Hoyes: Very cool. Well, thanks for being with me, Christi, and I will put notes to that website you reference and everything else we talk about in the show notes over at hoyes.com. So, you had your first child in 2014. So, when was your son born?
Christi Posner: He was born in July of 2014 on a beautiful summer day. So, he’s about 8 months old now, yeah.
Doug Hoyes: So, you’re still at the very early stages obviously with a young child at home. Why don’t you walk us through a bit of your history then? Tell us how you got started in the whole credit counselling thing. Give us a bit of your life story.
Christi Posner: For sure. I always knew from a young age that I wanted to be a mom. My mother asked me what I wanted to be when I grew up one day and it was a mom. That was my answer.
So, I knew that as I went through university and I got my Bachelor of Human Ecology and learning how families handle their stress and their money and their time and learning all about that. Come 2010 when I graduated from university I applied to a position at the Credit Counselling Society as a Credit Counsellor and it ended up being my dream job. I was really lucky to come out of university and work for such a great company.
So, during university, and as I’m growing into my 20’s and starting to establish myself, I would continually dream about what having a family would look like. I had a boyfriend and we were starting to talk about those kinds of things. And I would dream about our little kids playing around in the house one day and running through the yard and that kind of thing. But once I stopped dreaming and would come back to reality, I would realize that wasn’t where we were right now and we weren’t where we wanted to be.
When he became my fiancé we were living in a condo at the time where we had to walk up three flights of stairs just to get to our condo, and I couldn’t imagine being nine months pregnant or carrying car seats or kids up those kinds of stairs. We didn’t have a yard to play in. We weren’t physically where we wanted to be. We weren’t married yet and we were in a ton of debt from university. I used to work for banks and credit card companies and I had really tempting staff rates and I had racked up a lot of debt before I became a Credit Counsellor and really got myself together.
So, we decided that if we were going to have a family one day, we were going to have to start working towards that goal. And we wanted to get married and we wanted to have a house and a yard and everything. We couldn’t afford any of that with all our debt. So, that’s where we really had to start. So, the hard conversations and the arguments and everything started happening so that we could get our debt in order and reach our goals essentially.
So, we started by creating a budget. We had to sit down and take a real hard look at where our money was going, why were we going into debt every single month? And was it frivolous spending? Were we living beyond our means? We had to figure that out. So, we took a hard look at our money, we wrote it down on a spreadsheet on our computer and we also tackled our debt by consolidating it together, his debt and my debt together and we found that if we stuck to a budget, a realistic budget, we were going to be able to pay 25% of our take home income towards our debt. And we did. And in two years, we paid off over $30,000 of consumer debt together.
By that point we were then able to see that there was a chance that we could get married one day. We actually could afford a wedding and by the time that we became debt free from our consumer debt, the housing market had actually improved and we were able to sell our condo for a profit. So with that profit we made a down payment on a house with a yard and then here we are four years later and we’ve got a cute little baby boy and we’re very, very happy.
Doug Hoyes: Very cool. So, you said you did some analysis to see what was happening with your spending, why you were in debt. Obviously, I understand you were going to school, you had student loans, things like that, but you said even after you were done school you were still in effect running a deficit every month. So, why was that? What was causing that?
Christi Posner: Back then I had no concept of a budget. I usually spent money whenever I needed it, or whenever I wanted to spend it, or I felt like it, and I usually had to dip into my credit cards to make it to the next payday, and it was really hard to keep track of my money, because at the time I was working three different part time jobs while I was attending university, so my income was changing every time I got a paycheque. So I just spent until there was really nothing left to spend.
Looking back now, I can see that my expenses added up to more than the money I was actually bringing in. Once my fiance and I sat down and actually looked at what our income was, and where our money was going every month, we were then able to start making some positive changes.
Doug Hoyes: So, the key point is, you had to write down where your money was going every month so you could figure out where your money was going. And you discovered that it really was a case of just spending more than what was coming in. And because you had access to credit, well you put the spending on the credit card and it’s all good. And it wasn’t until you took a step back and actually crunched the numbers and said, oh wait a minute my ultimate objective here is to own my own home, have a family and there’s no way I can do that if I’m digging myself into debt. And that’s what caused you to step back and say okay we’ve got to actually watch where the money is going and that was really the first step for you then, reducing your expenses to below your income?
Christi Posner: Yes exactly. And we had to make sure we were not living beyond our means anymore.
Doug Hoyes: Great. You had to be sure you weren’t spending beyond your means anymore. That’s a great spot to end the first segment. So, we’re going to take a quick break and be back with more tips from Christi Posner.
Doug Hoyes: Welcome back to Debt Free in 30. My name is Doug Hoyes and my guest today is Christi Posner who is a Credit Counsellor. She is also a writer and she is a relatively new mother. And she’s been walking us through what it’s like to get financially prepared to start a family.
And so before the break, she told us that the first step is to write it all down; make a budget. You need to see your numbers in front of you and that has two components. Christi said, well you have to start by looking at the income; what’s going to be coming in when you’re on maternity leave and she had some good suggestions there in terms of looking at what maternity benefits you would qualify for, what other government benefits, what’s your employer going to do and so on and then obviously taking a look at your expenses.
And Christi when you were talking about expenses, part of your analysis was to figure out what expenses I have now and what expenses are going to change. So, can you give us some examples of that? You talked about it a bit before the break. What expenses did you see that actually went down when you were planning for maternity leave and when you went on maternity leave?
Christi Posner: Some of the expenses that I was surprised by, I thought that our fuel would stay relatively the same but the fuel for our vehicles went down significantly because I’m home most of the time. So, that’s one place that we found we were going to save money.
And another one was our cell phones. I’m on my cell phone quite a bit and I used quite a bit of data while I was in the workforce and my cell phone plan, because I am home with Wi-Fi, I didn’t really use any data, so that went down significantly as well.
Doug Hoyes: Did you actually change your cell phone plan? Or it just went down because you weren’t being charged the same overages.
Christi Posner: I changed my cell phone plan because I didn’t require the same amount of data that I was using while I was working. So, we made a change and significantly reduced that cell phone plan.
Doug Hoyes: That’s a very good practical point then. Take a look at what you’re paying on your cell phone now. And that’s an area where 20 years ago, 30 years ago, nobody had a cell phone because they didn’t exist and now they’re tied to our hip at all times. But you’re saying okay a big chunk of my bill was data. If I’m at home, I link into the Wi-Fi, I don’t need it. No sense continuing to pay for three megs a month if I’m not using it.
So, those are a couple of the things that went down. You mentioned in the earlier segment about clothing. Did you reduce your clothing expense or did that go up? I mean obviously you had to start buying clothes for your son, but did your own personal clothing expense change or how did that work?
Christi Posner: They definitely did. My priorities changed really quickly when we were looking at our maternity budget. Because when you want to have a family, that’s where your money is going to go and if you have to choose baby clothes over spending tons of money on my own clothes, that’s perfectly fine. I feel like I used to spend money just because I had it, which isn’t the way to manage your money. Just because you have money doesn’t mean it needs to be spent. It’s kind of my new mantra that I think of.
Doug Hoyes: That’s very good.
Christi Posner: So, oh yeah the clothing expenses certainly went down as well as going out. I don’t go out as much anymore. So, I don’t need as much entertainment expenses. So yeah, there were a lot of changes.
Doug Hoyes: It’s kind of hard to be hitting the bars when you've got to go to bed at 7:00 at night, so I understand that.
So, those are the expenses that went down, what expenses went up? So, obviously there’s the obvious ones, well I have to start buying diapers, I have to start buying wipes. Do they still have diaper genies? Is that still a thing? Do they still have that or am I -
Christi Posner: Yeah, they do.
Doug Hoyes: Okay, cause I loved that thing.
Christi Posner: That’s not something, a route that I went. We actually did a full analysis of the cost of disposable diapers versus cloth diapers and while we’re not big fans of the fun of cloth diapers I will say, we decided to go that route because financially it made sense. We ended up spending a couple of hundred dollars on a set of diapers that is going to carry us through not only our first child, but any other children we may have versus spending a 100 and some odd dollars on diapers every single month.
So, that was another area that – when we looked that that budget we saw we’re in a big deficit if we’re going to go on a maternity leave income, we had to make some hard choices and that was one of the ones we made, was to cut out the disposable diapers -
Doug Hoyes: And are you washing them yourself? Do you have some service do that? How does that work?
Christi Posner: Oh in Winnipeg we don’t have a service like that available so yes I am washing them myself. And it’s not as bad as the horror stories you hear, it’s really not.
Doug Hoyes: Wow, you’re tougher than I am cause I know changing diapers was – it was never the fun thing, the happiest days of my life were when my sons were toilet trained, let me tell ya.
So let’s get back to our discussion about expenses.
Your point on diapers is that you actually crunched the numbers, and figured out what it would cost to buy disposable diapers and compared that to the cost of buying cloth diapers and washing them yourself, and you decided it was worth it to go with the cloth diaper alternative. So, even though that resulted in more work for you, it was a significant saving.
So what about other expenses? Were there any expenses you actually had to save up for?
Christi Posner: First we had to save up to actually furnish the nursery. So we had to buy a crib, a change table, a rocking chair, and we actually found a nice dresser on Kijiji for a steal of a deal. Once our son was born we realized that we still weren't as prepared as we thought we were going to be, because as parents you will never have everything you need prepared. There are always going to be moments where you'll be thinking "I need to go get this, I don't care how much it costs." It's going to save my sanity, so I need to buy it right now.
So some of those things that we didn't actually expect that we had to buy were things like formula. We had to buy that to have it on hand when I wasn't available to feed our little guy at home. So that was an expense that we didn't think that we'd have to buy. We always thought that I'd be able to pump enough milk for when I was away, but you can't always prepare for things like that. We also recently started introducing solids to our son. That was something new recently. Within the first six months of when he was born there wasn't really much of a change in our grocery budget because he wasn't eating solids, because he was breast fed. But once we introduced the solid food we had to buy the ingredients which started to increase our grocery costs as well. We found it was more cost effective to buy our own ingredients and make our own baby food, rather than buying the ready made food generally, but we did have to have some ready made food as well for when we are on the go. Now we are buying things like bowls, spoons, cups, those sorts of utensils for baby. Next up we've got to purchase a car seat, so there are these on-going expenses that always come up for us. So what we are doing to prepare for it is we are constantly transferring money every payday into a baby savings account, so that we always have funds available for these unexpected items that come up.
Doug Hoyes: So there’s all sorts of things that came up that you don’t even think about, and you’re right, things like car seats; unless you’ve had to buy one you don’t know what they cost.
You talked about things that happened before your son was born. Wind the clock back a bit for me and tell me what advice you would give to new mothers and fathers in the very short period of time before your first child is born, say a week or two before birth, what are some last minute planning tips you would give to new parents?
Christi Posner: One of the best things that I did just before I went into labour, was setting up automatic bill payments and also setting up automatic transfers to our savings accounts so that our budget was on auto-pilot.
We first had to make sure that our maternity leave budget balanced, so that our expenses were equal to our new income that was going to be coming in and not more than our income that was going to be coming in. Once that was done we knew that we had to put our budget into action on auto-pilot because paying bills and saving money wasn't going to be on the top of our minds as new parents.
We made sure that all of our bills, our water bill, our cable bill, the electricity bill, all those bills would be automatically pulled out of our chequing account. I know that the sound of that scares a lot of people, because they are worried that if the money is pulled out automatically, what if the money is not there, then I'm going to be charged another forty dollar insufficient funds fee, and I'm going to be going further into debt. But, I have to say that if you have taken the time to create a balanced budget and you are actually following it you don't have to have that fear anymore, because the money will always be there.
So setting up automatic bill payments and also setting up automatic savings was the other thing we did to prepare financially before our baby was born. We set up automatic transfers from our chequing account into our different savings accounts every payday to save up for things like Christmas gifts, house repairs, emergencies, baby things. So we had all of those things going automatically which really helped us through.
Doug Hoyes: Set up as many of your bills as possible on automatic payment, and have a savings account to help you through.
That’s great advice, Christi, thanks for joining me today, I’ll be right back to wrap it up here on Debt Free in 30.
Doug Hoyes: Welcome back. It’s time for the 30 second recap of what we discussed today. My guest today was Christi Posner, a Credit Counsellor, a writer and a new mom.
Christi gave us a lot of great advice on preparing for a new baby and she gave us lots of practical advice on budgeting, reducing expenses and being prepared for the start of a new family. That’s the 30 second recap of what we discussed today.
So, what are my thoughts on Christi’s advice? Well, I thought she had a lot of great advice. I liked her approach to preparing for a new family and in fact her approach works well for any upcoming life change, whether it’s getting married, starting a family or moving to a new city or even retiring. Her starting point for preparing for a new baby is to get a handle on your expenses. She advises you to write it down and then start examining where you can cut expenses to build up your savings. That’s good advice.
Christi also suggests that you go to the employment insurance website to find out what level of maternity benefits you will likely quality for. That helps with your future budgeting. There’s also the universal childcare benefit of a $100 per month for children under the age of six. And as I’m recording this, the government has announced that it will be going up to $160 per month and will be reflected on your July 2015 cheque. That’s a few extra dollars to factor into your budget.
I also liked her advice to consider what expenses you can reduce when you go on maternity leave. Christi found that she didn’t need a big data plan on your cell phone because well she’s home with her baby she can use the Wi-Fi at home. So, she pro-actively changed her cell phone plan in advance. That’s another key point. Don’t wait until after your baby’s born to make changes. You’ll have other things on your mind. So, if you can do it now, that’s the best strategy. Be pro-active.
She found that her cost for her clothing went down when she wasn’t going to the office each day and her fuel costs also dropped. That’s good to know because that also gives you some extra room in your budget. Of course some expenses go up. We talked about diapers on the show and that’s obviously a new cost. She also mentioned that initially their food bill didn’t change much, but now that her son is gradually starting to eat different types of food, those costs go up. Even if you make your own baby food there is still a cost and that should be factored into your budget.
I also fully agree with her advice on automatic bill payments. Instead of worrying about when your hydro bill and other bills are due, set them up as automatic payments so they’re automatically paid. It’s easy and you have no worries.
To summarize, make a plan, be proactive and you can be as ready as possible for your new child.
That’s our show for today. This show is on the radio every week and also available on our website and on iTunes. So, please go to hoyes.com for a full list of participating radio stations and details on how you can download the show to listen on your iPod or Smartphone.
Full show notes are available on our website and I’d love to hear your comments which you can leave right on our website at hoyes.com. That’s h-o-y-e-s.com. Thanks for listening, until next week, I’m Doug Hoyes. That was Debt Free in 30.
Let's Get Started Segment
Doug Hoyes: It’s time for the Let’s Get Started segment here on Debt Free in 30. I’m Doug Hoyes and my guest today is Christi Posner, a Credit Counsellor and author. And Christi, we’ve been talking today about getting prepared to start a family, financially.
So, what do you do, what advice do you give people if they are about to go on maternity leave or they’re thinking about starting a family and they have debt. You don’t know how you’re going to get by ‘cause you’ve got debt, you have the new family coming, what’s your thought process in terms of advising people like that?
Christi Posner: So this happens a lot, like your baby was due like yesterday and you have a ton of debt and you don’t know what you’re going to do about it, especially with your income changing.
So, one of the things that we did when we were looking at our maternity leave budget - once we wrote everything down, our income and expenses - and we saw that there was a deficit and we weren’t going to be able to make it, we made sure we were on the same page. We didn’t want to end up, after all this hard work of paying down our debt, we didn’t want to end up back in debt a year later once I’m done the maternity leave. That was our goal. So we needed to make that budget balance.
So, some of the outside of the box ideas that we started looking at were if we can look at increasing our income; if there’s a possibility that you can make some income, even while you’re home on maternity leave, it’s worth exploring. Sometimes people will babysit another child or sometimes people will do a home business, deliver papers or there are different ideas. But, it’s important that you look at what are the rules when you’re on maternity leave that you need to follow in terms of how much income you can earn and then see, is it worth it? Is this something that I can do? Maybe there is some contract work that you can do here or there.
Doug Hoyes: That’s a key point what you’re saying, because if I end up taking on a full-time job while I’m on maternity leave, I’m no longer eligible for my maternity benefits. So, you’ve got to be very careful of what the rules are.
Christi Posner: Right.
Doug Hoyes: Okay, so that’s very good advice. So, looking at ways to increase your income if possible would be one step. What would be the next steps?
Christi Posner: Yup. Other things that we did, we looked at – being realistic with ourselves, it wasn’t something that we were going to be able to do, increase our income too drastically while we were on maternity leave. My husband could possibly do some overtime. That was one other option just to get some extra income here and there.
But we also looked at saving up in advance. So, if we had saved up in advance because we knew we were going to be pregnant one day, then maybe we have that reserve that we can top ourselves up during maternity leave for those 12 months and give ourselves a little bit of extra income.
Doug Hoyes: And that obviously means you’ve got to start in advance. You’ve got to be putting the money away while you’ve got it. And so you have to be living as frugally as possible before you’re going to end up needing the money.
Christi Posner: But if you’re not there anymore and you don’t have that time left, like I said this is something that happens often. So if you’re due or you got a new baby and you’re in debt and you don’t know what to do because you just can’t make it month to month anymore, what you should do is get help from a professional, someone that you can trust like a non-profit Credit Counsellor or like a trustee that can help you to look at your current situation and look at your debt and help you find ways to make it.
So, there are a lot of options out there that are worth exploring in terms of debt; whether it’s finding a structured plan on how to pay down your debt with a more affordable monthly payment, with lowered interest rates. There’s a lot of different options out there and that’s what these people are there to do, is help you, look at your budget, see if it’s realistic, see if it’s manageable for you and also help you create a plan for your debt so that you can make it month to month and you can enjoy that time with your family and your new baby.
Doug Hoyes: You raise a good point, having a new baby is something you’re not used to. By definition, if it’s your first kid, you’ve never had one before. That’s a stress in-and-of itself. You’ve got the sleep deprivation and all the other things that come with it. You really don’t want the debt piece layered on top of that because that’s just going to make it worse and worse, obviously.
So, your advice is tackle it head on, get a handle on the numbers and obviously you’re a big fan of writing it down, tracking expenses, knowing where you’re at. And then if you’ve got a deficit that you can’t solve on your own, then you’ve got to go and talk to the professionals.
So to finish up, Christi, what’s your number one piece of advice for new parents?
Christi Posner: My advice would be to create a budget, balance the budget, and live the budget.
So create a budget first. The one that I use and have used for years and years and years is available on the home page of mymoneycoach.ca.
The second step is to balance that budget. Make sure that your expenses match your income. Include a realistic debt repayment plan in your budget so that you can become debt free.
Finally, live the budget. Do it as simply as you can. Put that plan into action, put it on auto-pilot, because it's been really, really great for this new mom.
Doug Hoyes: Perfect. That’s a great way to end it. Keep it simple, track your spending, chip away at the debt. Thanks for joining me, Christi. I really appreciate it.
Christi Posner: Thanks so much, Doug.