My husband and I had our first child in July, which is forcing us to look more closely at our spending. It’s amazing how expensive a new little person can be! Like many families, we are wrestling with the decision for me to go back to work or stay home with the baby. It’s a trade off in many ways; if I stay home, our finances would be very tight, as we are used to being a two-income family. If I go to work, the cost of daycare cuts my take-home pay in half.
After a long conversation, we decided we needed a better idea of how much money we really needed to live on each month. Cut out all the frivolous purchases – the “nice-to-haves” – only focus on the basics.
After searching around a bit, I was inspired by Ruth’s 31 Days of Living Well & Spending Zero series at Living Well Spending Less. I used her rules as a starting place – “no spending on anything outside of your absolute necessities, and eat from your pantry & freezer as much as possible.” Then, I adapted the specifics to work for our family.
The first step was to take stock of our spending. Since I update my Personal Finance Worksheet on a monthly basis, I already had all the numbers ready to analyze. Next, I took all of the spending categories and separated them into two buckets: fixed costs and variable costs. Things like rent/mortgage payments and other loan payments (car, student, etc.) are fixed costs – we pay the same amount every month. Nothing we can really do to change that in the short-term.
Other categories like groceries, restaurants, and clothes change every month; these are the ones I chose to focus on. I looked at our spending trends and decided which ones to trim back. The biggest culprit for us was groceries and household purchases. There, we tried to cut our costs by 25%, which was an ambitious goal. I set similar goals for other variable categories like restaurants and clothes. I also included $50 of “fun money” for each of us, as I thought going cold turkey on all spending might be too much as a starting place.
Then, I wrote each category name on the outside of an envelope along with the monthly goal. Rather than actually put cash in each envelope for the month (because I still want to earn credit card rewards), I got out our Monopoly set and counted out the fake bills. Every time either of us made a purchase, we planned to bring home the receipt to put in the envelope and pay the equivalent money back to the “bank.”
If there is any money left over at the end of the month in any category, it stays in the envelope as a bonus for the following month. If we overspend, we take that out of next month’s budget. Peter and I agreed that before we spend any other money, we need to run it by the other.
The next step will be to cull through the pantry, fridge and freezer to see what we have to work with, then pick some recipes to match. I’ll update you again next week on our progress!