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Budgeting Tips When Starting A Family

Starting a family as newlyweds can be tough. You already have a lot on your plate with establishing your career, paying off student loans, putting in overtime to ensure a promotion, creating connections. The last thing you need is to think about mortgages, setting up a college fund, and paying the bills.

If you’re newlyweds who are starting a family early in your life, don’t be discouraged. It certainly is doable without sinking yourself into mountains of debt or scrimping on a nice life for your kids. All it takes is some creativity and innovation to make sure that ends meet without affecting your quality of life. Even small amounts can go a long way. It might sound cliche but when you’re doing your monthly budgets, you’d be surprised just how far buying your daily coffee at Starbucks can save you if you make it at home.

I have listed down some of the best budgeting tips I did when I was starting out my own family at 25.

1. Create A Budget Plan (50/30/20)

One of the most cardinal rules of spending is the 50/30/20 rule. The idea here is to divide your income into 3 parts:

  • 50% of your income should go to your basic essential needs. This includes rent/mortgage, utility bills, groceries, transportation, and tuition fees
  • 30% of your income can go to your wants. This includes eating out, shopping for new clothes, vacations, and life upgrades
  • 20% of your income may go to savings and investment

Start every month with budget allocation. For example, if your shared monthly income is £4 000, you need to allocate £2 000 for basic essentials, £1 200 for your wants, and £800 for savings and investments. Try to instill strict boundaries and make sure you stick to your budget.

2. Downsize

Usually, whenever couples start a family, they will tell you to buy a house right away. Don’t. Buying a house prematurely is one of the biggest mistakes that you can make. In fact, most newlyweds and starting families won’t need a lot of space for the next few years. You want to keep your baby close to you so you’ll likely be sharing just one room. 

For the first six years of my marriage, we lived in a two bedroom flat in Brighton. We had two babies, a five-year old and a three-year old. We converted the smaller room into a nursery and the bigger room into a masters bedroom that transitions into an office during the day.

I also know that baby stuff requires a lot of storage space, space that a two bedroom flat just doesn’t have. That’s why I invested in self storage in Brighton to keep all of the baby stuff plus all of my and my wife’s non-essential but important stuff in. By downsizing, you get to save up on rent. Your savings can go to a bigger down payment for when you actually need to buy your first house.

3. Invest What You Can

While it is highly recommended to have investments, you shouldn’t put all of your eggs in one basket. Investments may have a chance of earning interest, but there is also a chance for it to decrease in value. Take the stock market for example. You can double the value of your portfolio in 10 minutes and lose your entire funds within 10 seconds.

Follow the budget plan of putting in no less than 20% of your monthly income in investments. Having said that, it is extremely important for you to have some investments. There are multiple investment options you can try out, from real estate to VULs to the stock market. If you’re feeling brave, there’s also the very volatile cryptocurrency market.

4. Generic vs Branded

It might seem like an easy decision but in parenthood, this is a big deal. You must know, firsthand, when to buy the generic versus the brand name. For instance, baby clothes that they will grow out of after two months? No use spending hundreds of pounds on them. With baby food, however, you want only the best. Spending an extra £10 on your child’s sustenance is way worth the extra spend.

5. Say No to Brand New!

New parents often get excited at the news that they’re carrying an offspring. More often than not, this pushes parents and even grandparents to go on multiple shopping sprees. While there’s nothing wrong with being prepared, there’s no reason why you should buy everything brand new.

There is absolutely nothing wrong with buying from garage sales. You can buy stuff like a crib, a stroller, and even some baby proofing items from parents who just finished that phase of their parenting life. 

Send an email to your friends or post on your Facebook wall that you would appreciate any hand-me-downs they can spare. I am sure that they would also be glad for the opportunity to get rid of the items from their garage/attic. It’s also a great chance for you to throw a gender reveal party or a baby shower.

6. Try Freelancing

Sometimes, our monthly income really just isn’t enough to make ends meet. Generally, I would advise looking for a job that will. However, that is only in an ideal world where the job market is easy to enter and get a job in. While you start looking for a better paying job, it wouldn’t hurt to dabble in freelancing. Being a freelancer during your free time will help you earn some pocket money, which you can use for your own enjoyment or as an additional budget for your family.

Starting a family when you’re financially unprepared is tough. I’ve been there and one thing I realized looking back is that it was our poor financial decisions that further dragged us into debt. I hope it doesn’t happen to you. Best of luck to your family!