The Ins and Outs of Family Finances

family ins and outs

By Julia Davidson

Julia is a CPA, CA with a background in corporate finance, accounting and financial restructuring. She is also the co-founder of Murray & Bee, a parent to parent marketplace for used baby and kid gear, which was created because she and her partner wanted to buy high quality baby product at lower prices and encourage sustainable lifestyles. As guest blogger, Julia has agreed to answer your budget related questions. Please email her at julia@murrayandbee.com

The Ins and Outs of Family Finances

When my son hit the three month mark and the adrenaline I was operating under wore off, we started to have some resemblance of a routine and I had a small amount of time to myself again. This was the first time I had a chance to reflect on life as a mom and the changes that had occurred. As much as I loved it, I started to look back somewhat longingly towards my time as a DINK. It was something I never appreciated at the time but as a Double Income No Kid family, my husband and I traveled, ate out whenever we wanted and didn’t think twice about buying each other birthday and Christmas gifts. We truly were DINKs in every sense of the word. Having a baby changed that, not only because it reduced our ability to be spontaneous, but because babies are expensive and for us when I stopped working to be with our son, our household income was cut in half.

During those first three months of maternity leave, I still was buying $5 fancy teas and my diapers at full drug store prices, but as I reflected at this moment, it became clear to me that while my spontaneous travel days may be over, if I ever wanted to travel again or be able to afford certain experiences for my children, we were going to have to make adjustments. Getting our family finances in order helped ease some of the new baby anxiety and allowed us to sit back and enjoy the ride of being new parents.

Below, I share my approach to a simple family budget and some suggestions to help you feel like you are living on a larger budget than you are.

All you need to do to make your budget is take the INs less the OUTs.

The INs – What do you bring in monthly?

  • Salary: If you are back at work, determine what your monthly income is. If you also receive a discretionary bonus, my suggestion would be to not include the bonus in your budget as it is hard to predict and shouldn’t be relied to live upon.
  • Top-Up & Benefits: If you haven’t yet left work, do your research to know the specifics of what your employer offers for parental leave top-up payments and benefits. Consider the frequency and timing of any top-ups or benefits so you can plan accordingly for your leave.
  • Employment Insurance: If you haven’t yet left work, determine if you qualify for EI under maternity/paternity leave and how much you expect to receive and at what frequency. Keep in mind there are specific rules for when and how you apply, so look at the rules in advance. EI Eligibility Criteria
  • Tax Credits: Effective July 1, 2016, the federal government replaced the universal child care benefit with the Canada child benefit. If you already receive the UCCB, there is no need to apply for the CCB but if you do not receive it, you need to apply. The following link will let you apply, read more about how this will affect your family and has a calculator to let you estimate what you might receive based on your household income.  Canada Child Benefit
  • Other INs: if your household brings in any other cash on a regular basis, list it here (ie: the salary of a non-benefit taking spouse, family financial support, income from a rental property, a side business etc…)

Add this all up (after tax of course) and you have the INs.

The OUTs – What are your expenses?

List all your monthly expenses – then categorize them as follows:

  • Household: List out all fixed household costs including: mortgage or rent, property tax, average annual maintenance and car payments
  • Savings: putting money into savings in the first few years of having children can be challenging because typically your household income goes down and your expenses go up. Try to do this. Even small dollars allocated to savings every month will compound overtime and help you in the future.   Savings includes contributions to your RRSP, TFSA and RESP for your child, as well as a regular savings account at your bank. If you don’t have any of the above set up, speak to your bank about doing so.
  • Other fixed costs: List any other recurring expenses you have, such as: child care, gym/sports, team memberships, cleaning or other maintenance services, bank fees, credit card fees, insurance 
  • Semi variable Costs: Some costs are not the exact same every month so put an estimate for these into your budget. These types of expenses include cell phone, cable, Netflix, music service, internet, utilities, car gas, medical/healthcare, groceries and public transport. If you don’t know how to start with an estimate, look at your historical bills and calculate an average.
  • Highly variable Costs: These are typically the expenses that provide the most fun in life, but they are also the ones you will need to cut back on first if you need to reduce expenses and you need to watch to make sure they don’t get out of hand. These expenses include: entertainment, gifts, clothing, dining out and the most dangerous of all – daily cash spending.
  • Exceptional Expenses Initially this should also be allocated towards savings, but these savings are for specific things that you will need/want in the medium term such as, furnishing a nursery or buying a new dishwasher.

 Add this all up after tax and you have the OUTs.

The Net:

On a monthly basis, subtract the OUTs from the INs and you now know what you have left over for a budget. If you do this and you get a negative number…. start cutting back the expenses where you can. For example, plan to eat out at restaurants less….don’t worry you won’t have time to dine out much with a new baby.

 Having a budget will give you comfort that you can live within your means, which means you can focus on your baby and family.  You can still indulge in baby gear while living within your means. It just takes a little effort and some planning ahead. Here are some tips and resources to living fancy within your budget. 

  • Tip #1 – Buy stuff used: many baby items used in the first year are only useful for a short period of time. Buying used can be a great alternative to retail and you can get high quality, well taken care of gear for a fraction of the retail price. Resource: Check out Murray & Bee for a great selection of used baby and kid gear. It’s the smart way to spoil your kids!
  • Tip #2 – Borrow from friends: If you have a circle of friends who have babies around the same time as you – you can share the items, lending them to each other as the need arises.
  • Tip #3 – Be careful buying in bulk: we know deals can be had if you buy this way but kids change diaper sizes, clothing sizes and interests very quickly so you better off to buy what you need for short periods of time. This will save you storage space too.
  • Tip #4 – Prioritize what you buy: Life isn’t a Pinterest Board – you don’t necessarily have to have the perfectly decorated baby nursery and every new developmental toy. The “baby” industry is like every other one, and companies would have you believe that you will be a better parent if you purchase their products. Don’t get sucked in! You can be a fantastic parent on any budget.
  • Tip #5 – Find inexpensive activities for your babies and kids: there are many options in T.O., including the following:

Don’t forget, your kids will be happy with a cardboard box, some old measuring spoons and the freedom to roam and explore in any child proofed area – so plan your baby finances ahead so you know the ins and outs of where to spend your dough.