3 August 2007

Moving from two incomes to one

If you've decided to move from two incomes to one so you can stay at home with your baby, you'll enter a period of review. Now would be an excellent time to overhaul your lifestyle and shift from the modern mainstream life to a more simple way of living. Before you are pregnant, and while you're both still working, make up a new budget. Try to live on one wage and use the other to pay off debt. This might be the first time you've really limited your spending and it will be difficult, but when you feel that it's getting too much for you, think about why you're changing your spending habits and how much you'll benefit from it when the baby arrives.

When you're pregnant, decide exactly when you'll stop working so you have a goal in site. If you have any credit card debt, try to pay it off while you still have those two pays coming in. If you only your mortgage to pay off when you stop work, you'll be in the best situation you can be in. If you stop work while you still have credit car debt, or other high interest debt, it might be wise to consolidate those high interest debts into your home loan.

When you stop work use the short amount of time you have before baby arrives to reassess how you shop and make some adjustments to help you save money. Sit down with your partner and make up another new budget. This will be the budget you'll live with for a few years, so think about it carefully. Both of you need to do it together. If you can save money on your grocery bill, you'll save a considerable amount as it will be ongoing saving. Read as much as you can about stockpiling and if you have the cash, invest about $200 - $300 in starting a stockpile. Buy those things that are on sale that you use frequently like toilet rolls, toothpaste, soap, bread, butter, canned goods, meat, flour, rice, pasta etc. And even if you don't add to the stockpile for a month, you'll save yourself going to the supermarket so much with your newborn.

If you have a second car,
sell it.

Review your expenses - now
is the time to be ruthless with your expenses and cut off all those extra monthly bills:
  • Stop dining out and buying takeaway.
  • Put expensive family holidays on hold for a few years.
  • Stop buying so many gifts. Make up a list of those people you feel you must continue to give to and keep it at that. Start making homemade gifts. You might feel a bit strange at first but most people love receiving something you've made yourself.
  • Stop buying magazines. Join the local library for a never-ending supply of books, magazines and DVDs.
  • Do you really need a mobile phone? If not, get rid of it.
  • Pay TV is a luxury you can say goodbye to until you're in a better financial position.

When baby is born, and if you're Australian, claim all the government benefits you are entitled to. I think the baby bonus is about $4000 now, make sure you claim it, and also look into parenting payments that will be ongoing until your child goes to school. Those readers in countries outside Australia, make sure you know what your government gives you when your baby is born, and after it in the form of family payments.

Remember that you'll only have real success with your new simplified life if you change your attitude to spending. You can't expect to live the way you used to, there are many things you'll give up. But I can assure you that after the initial shock of not having the things that used to take up your spare time and make things easier for you, you'll settle in to a new kind of living that doesn't rely on those things. And once you're used to your new life, I know you'll love it.

If you go back into the archives here, I've written about budgeting, emergency funds and change jars. They'll all help you save for your new lives. Don't be afraid of budgeting - it is the one thing that will organise your thinking about money as well as the money itself. And despite what a lot of people think, a budget frees up your money instead of taking it away. H and I have a tight budget, we do this voluntarily, and even though we live on the very small amount of $355 a week, we still save $150 a month, we still have holidays and we still have private health insurance. It can be done.

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