Setting Up a Family Budget

Now that there's a baby in the mix, it's time to get a better handle on the cash you have to spend and save. Here's how to make a family budget — and how to stick to it.

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Let’s face it, budgeting isn't anyone’s idea of a good time— but not having a strategy for managing your money is like hitting the highway without a GPS. Saving dough can be particularly tough for parents-to-be, who may be tempted to splurge on all sorts of baby gear, and for a new mom and dad, who are usually too overwhelmed and exhausted managing life with a baby to even think of managing their finances.
But the pay offs of planning are huge, so read on and get started on making your family budget.
Look at the big picture. Expertssay budgeting is hard for new parents because they are so focused on the short term instead of the long term. But think about what you’ll need down the road a bit: Whether you’re saving for a mini van, a bigger place to live, or your cutie’s college fund, sticking to a plan iseasier with a goal in mind.
Set up something simple. If you don’t have a system, you won’t stick to your budget. One popular option is an Excel spreadsheet, which keeps a running tally of your expenses and is easy to read — especially if you color-code the rows. Or try an online program: Mvelopes, which uses the old concept of envelope budgeting, has an app with alocation-based feature that recognizes where you’re spending money (like the grocery store), and subtracts it from your virtual food envelope. There’s also YouNeed A Budget (YNAB), which lets you download transactions in any format you like into pre populated categories, or you can DIY with categories you create.
Figure out the dollars coming in and going out. Look to your pay stubs and bank statements to determine your monthly net income. Review each fixed bill (mortgage, car payment, insurance, utilities) and then add an amount for food. (As a new mom, you may be strapped for time and be more tempted to get takeout or packaged foods, so bump this number up a little.) A good plan for most families is a 50/30/20 budget: 50 percent for housing, bills, and groceries, 30 percent for fun stuff (gifts, vacations, dinners out), and 20 percent earmarked for savings.
Add your baby into the expenses. If you work, child care will take the biggest bite from your baby expenses. Gear isnext — from the stroller to the diaper bag to the teddy bear. And don’t forget everyday essentials like diapers, wipes, and feeding necessities (formula, baby food, or nursing bras). To save money, think about scratching the least important items from the list and borrowing or buying second hand gear instead. (Make sure any item you borrow or pick up at the thrift store meets current safety standards.)
Plan for the future. It’s never too early to start thinking of your baby’s higher education. But first you’ll need to pay down any credit-card debt you have, build up anemergency fund (six to nine months of living expenses, say experts), and contribute to your retirement, via an IRA, 401(k), or other plan. After all that, you can turn your attention to building that college fund. The firststep: Meet with a financial planner at your bank to set up a 529 college-savingsaccount, which lets that money grow tax-free.
Practice down sizing. Plan onbeing a stay-at-home mom? That means you’ll live on one pay check. Before you take the plunge, practice living on one paycheck for a while and use the secondone to pay off debt or save.
Check in from time to time. Everyfew months revisit your family budget to see where you can make a few tweaks. You might be ready to strike formula from your budget once you wean your baby,and, in a few years, your child care expenses may go down once preschool starts. The birth of a second baby is another prime time to revisit your budget.