Managing your money is a challenge at the best of times. No matter how much you make, it never seems to be enough. The more we make, (sadly) the more we spend.
The challenge can approach impossible territory when you add children to the mix. How can you manage your salary when you have children? Like so many things, it comes down to proper planning, determination, and willpower.
#1 - Create a Budget and STICK TO IT
This goes for anyone, with and without children. The first step in properly managing your money is to create a monthly budget and then stick to it (that second step usually being the stumbling block). Meticulously track your spending for a month or two - every single penny - to get an accurate idea where your money is going and where you could make some cuts. Using that data, draw up a budget and input the dollar amounts for everything from rent/mortgage to clothes for the little ones, from entertainment to transportation.
A budget works if you stick to it.
#2 - Create an Emergency Fund (aka Rainy Day Fund)
Despite our best efforts and budgeting, into every life a little rain must fall. This is even more apparent for those of us with children. Dental work, unexpected growth spurts, tutoring costs, school trips, and on and on and on. Unexpected costs can and will pop up from time to time, and usually at the worst possible times.
In order to combat this, you need to create an emergency fund to help cover those costs without throwing your budget into chaos. Aim for anywhere from 4-6 months salary in the fund at all times - when you have to withdraw from it, endeavour to replace it as fast as possible and get it back up to those levels. You’ll appreciate having it there, ready and able to shield you from those frequent but random financial obligations that come with parenthood.
Add payments to the fund into your monthly budget. Place the money in a simple savings account with a decent interest rate (this is NOT an investment, so avoid any risk). Get an account without a debit card or internet banking capabilities to reduce the temptation and easy access. If and when you need the money, make sure it requires actually going to the bank and speaking to a teller.
#3 - Pay Yourself First
When you get paid (biweekly or monthly), your first payments should be to yourself. Make regular contributions to your retirement account (such as your RRSP in Canada or 401(k) in the United States) and the education savings account for your children (such as an RESP in Canada or 529 Plan in the US). You need to take steps for your eventual retirement and the post-secondary education of your children as soon as possible. Contribute as much as you comfortably can each month - and it might be worth it to make it a little uncomfortable (higher contributions mean more money down the road).
Set up automatic deductions through your bank and/or employer so you don’t even have to think about it. It removes the temptation to skip or reduce a payment.
#4 - Teach Your Children the Value of a Dollar
By teaching young children the value of a dollar, there will be (theoretically, at any rate) less pressure on you to spend money on the things they want (versus the things they need). Start giving a reasonable allowance to your children earlier rather than later. They can earn it with household chores, or you can simply give it to them with the understanding that when it’s gone, they don’t get anymore until the next week.
Your children will soon learn to earn and save for the things that they want. They will examine whether something is “worth” the money they spend on it when it is their own money. This is an important life lesson, and helps to reduce the burden on you and your wallet.
#5 - Clip Coupons, Watch for Sales, and SELECTIVELY Buy in Bulk
Coupons and sales can and should be on your radar. There seems to be some crazy stigma attached to using coupons these days, but it’s simple economics: coupons save you money. Use them.
Collect and read the flyers for grocery stores and stock up on non-perishables when they go on sale.
Watch for retail sales for everything from school supplies, to clothes and toys, and take advantage of the big sales events whenever possible.
Finally, consider whether membership in a bulk club like Costco is a good investment for your family (hint: it might not be). Costco is a great spot to stock up on some things (including gas), but not everything.
Managing your salary with children is probably more difficult than without, but it can work with proper planning and resolve. Decide what works for you and your family, and then stick with it and make it work.