Thursday, January 31, 2008

Fixed Costs Continue to Rise

I've recently begun to address some of our fixed costs to try to pare them down as much as possible.

Unfortunately, it seems that we are fighting a losing battle -- all our efforts have merely kept us in the same place we were a year ago. The chart at the top shows our monthly gas usage for the past year; even though we used about 2/3 the amount of gas for the month of January 2008 than we did for January 2007, it cost us a third more. Our gas bill, which usually runs around $85/month in the wintertime (we live in Tucson and keep the heat around 64 degrees in winter), shot up to $144, 169% of last year's cost. We cut our use by about a third by buying gas-efficient appliances and turning the heat down as much as possible, but we are paying about 2/3 more -- which means the cost of natural gas has doubled in Tucson. This is unbelievably frustrating! Although I suppose, on the brighter side, that it could be worse; if we hadn't upgraded, we'd be paying well over $200/month for gas this winter, which is unheard of in Tucson (our house is only 1200 square feet and we have a brand-new furnace and new gas stove). We usually save money on utilities in winter here, so it's especially hard.

Whether or not this is fuel-related I don't know, but the cost of groceries in Tucson has also skyrocketed. We buy healthy, whole grain bread and usually I don't balk at the cost -- about $2.99/loaf. I tried making the same in a bread maker a few years ago and found I hardly saved any money doing it, and if I counted all the loaves I messed up, well...I was losing a bit in the process. I noticed that my bread went up to $3.29 this summer, which is high but not horrible. Then, just last week, I went to the grocery store and my bread is now $4.29 a loaf! That's a 143% markup in just six months!

This comes just after I started using the Amazon Subscribe and Save Program. Basically, if I order an item to be routinely delivered, I get free shipping plus 20% off. I can choose 1, 2, 3 or 6 month intervals. Since my daughter has extremely sensitive skin, I can't buy a lot of regular soaps or diapers, and it's been killing me to spend $12/pack for non-chlorine diapers when the regular cost $9/pack for about 1 1/2 times as many. I pay close to double; fortunately, the "hippy diapers," as we like to call them, are close to the same price if I buy them in bulk via Amazon. Unfortunately, our savings here are going to pay our expanding grocery bill in other areas. I'm not sure what to do about this, except that maybe it's time to renew that Costco membership and start shopping on the other side of town again.

I will be pulling out the bread machine again. If I can still make a loaf of multi-grain bread for $3, I can save myself over a dollar a loaf now. Other staples have gone up as well. Maybe it's time to pull out my Japanese cookbook and switch to rice?

What are you doing to save money this winter? Leave a comment and share! I need all the help I can get. :)

Monday, January 28, 2008

Extra Cash -- How To Earn More and Spend Less As A Family (Part 2)

You know, I've spent several days really considering what I wanted to write in this post. After all, this is it; this is why I'm writing this blog, to talk about what it takes to save money as a family and how to avoid the pitfalls. Meanwhile, I'm trying, myself, to save money and avoid pitfalls.

In my first post about this, I talked about how truly difficult it can be to have both parents working without one or both taking on a second job. The cost of babysitters or childcare is a big problem. For those with family nearby who will watch the kids for free, well, I wish I were you. But for the rest of us whose family is in another city or state (or country), there are other issues to consider.

But I see the hole in my story, and actually it is the first thing we did when I started working, so it is my first piece of advice.

1. Stagger your hours. If you can work evenings and your spouse can work days, then you can trade off watching the kid(s). Most parents do this at some point or another, and my spouse and I traded off for nearly three years. Pitfalls include:

  • One parent who feels insecure about watching a very small child, or overwhelmed watching two or three. This sounds a bit silly, but the first time my husband left me alone with our first-born, who was two weeks old, I was terrified. Some families leave the role of watching young children to the mother, and the father may feel ill-prepared. Word of advice: get over it. And men? Never use the term "babysitting" when you're watching your own child. Please!
  • Stress on your marriage. I worked Saturdays, all day -- for three years. Even when Saturday was the only day I worked, it was hard not having a whole weekend with my spouse. We rarely got to do things as a family. It wasn't as bad when I worked nights, for some reason, probably because I worked a swing shift and was home by 9:30 p.m., but the Saturdays killed me. That being said, it can be done, but maybe not for too long -- after all, divorce is expensive too.

Despite the problems, this is the easiest strategy for most families. After all, your kids are with a loving parent, they are home, and the care is free. Even if your children go to daycare, there are really good reasons to limit their time there, and with 2 working parents, staggered hours are the best way to do it.

My next solution for families in financial trouble is really over-the-top. It is controversial, and I would hesitate to talk about it except that it just simply needs to be brought up.

2. Have one parent quit working.

If you want to earn more and spend less, and you have small children, don't get a 2nd job -- quit the one you have. Really. Particularly for lower- to middle-class families, that second job might pay for a nicer car, but most of the money will go to childcare, emergency take-out dinners and the required niceties for work (dress pants, leather shoes, etc.) Take home pay ends up being quite small; you also miss all the milestones your children go through (first steps, first words, etc.).

Quitting work doesn't mean the same thing as giving up your career. Maybe you want to finish up a bachelor's degree, or work on a master's degree. You can keep up with your former co-workers by dropping in to chat occasionally. A lot of studies show that women (I don't know of any studies regarding men) who leave the workforce have a hard time re-entering - if they re-enter with the same, old set of skills they had when they left. Taking a class is a minor expense and can be crucial to keeping your working skills sharp for when those childcare expenses drop (the older the child, the cheaper the care).

I know there is a "culture" of stay-at-home moms (SAHMs) and working moms, and the media love to play off of the culture war. I personally was a part of a "mommy group" and was irritated when they considered me a working mother (the connotation was negative) -- I worked 6 hours a week on Saturdays, and my husband was with our son the entire time -- but this kind of either/or attitude was and is simply ridiculous. I actually dropped out of the group, the prejudice among them was so strong -- they were all "devoted SAHMs" who had given up their jobs deliberately. I know that writing about the financial aspects of this just plays into the hands of these helicopter-mom types, but please note I didn't say mom should stay at home -- I said parent. I know several stay-at-home dads and my husband and I have traded off over the past 5 years; sometimes I worked part-time and he worked full-time, sometimes it was reversed. It's just good to be flexible about this as a family (for a good read, try The Two-Income Trap by Warren and Tyaqi).

(Side note: A lot of people don't realize that the FMLA, or Family and Medical Leave Act, covers fathers as well as mothers. Dads are guaranteed 12 weeks of unpaid leave after the birth of a child. My husband and I staggered ours, keeping our daughter out of care for almost 6 months. I had short-term disability insurance and received 75% pay for 8 weeks; my husband's boss asked his co-workers to "donate" leave so he got three months at home with full pay. It was the best money we've ever made!)

3. Be creative with your job. This can mean asking your boss if you can bring your child or children to work with you (this complicates if you have more than one, and is hard around the toddler stage). I was surprised to find that the affluent non-profit I worked for in Washington, D.C. was fine with me bringing my son (he cried during a call to the Undersecretary of State -- I was mortified) while the children's section of a library I worked at not only did not let me bring my children, they tried to ban them from the area if I was there (I threatened to quit -- after all, it was a public area). You never know who will be flexible -- and who won't. Here are some other job ideas:

  • Work at home. You might be surprised that I didn't suggest this before I suggested one spouse quit, but that's because most studies show that a parent who works at home has very little time to watch their children, and they are better off in childcare with all the accompanying ABCs and art projects. However, it can be cheaper to find someone to au pair or watch the children while you are present. Working at home during off-hours is really the best option, both mentally and financially, but we've never been able to swing it. I think this option sounds better than it actually is in practice; most people I know end up needing to put their children in childcare, at least part-time, in order to do well working at home.
  • Involve your children in your job. This, of course, very much depends on the job. Sometimes children can be taken along. Other jobs naturally involve your children; I worked at my son's preschool as a substitute for a while. He got 50% off tuition and I got a small wage. While I only made $7/hour, once I added the tuition break to my wage, it bumped it up to $10.75-$13/hour. It wasn't a great amount, but I could come to work when I wanted, and I received a lot of free training about discipline and child development.

4. Be creative with your non-job. Some of these ideas work for really ambitious working parents, too.

  • Turn a hobby into money. This can be small or big; sell your creations on Etsy, like this person, or start your own business. A friend of mine was an avid fisherman; now he owns a little fishing gear business, employs his father, and his kids (aged 9 and 12) help out. He even hires my dad to fix boats for him.
  • Watch someone else's kids. I just started watching an 11-month-old baby for $8/hour. Since my daughter and the baby just play together, this is up on my list of easiest jobs. The only drawbacks are all the laundry I get done while sitting on the floor, playing with them (wait, did I say drawback?)
  • Fix stuff. A stay-at-home dad I know fixes people's computers and does small carpentry jobs for extra cash. A mom I know is a licensed hairstylist; she goes to people's homes (particularly the elderly who don't drive, or shut-ins) and does their hair.
  • Be creative with your property. BostonGal rents out her basement; we are in the process of turning our guesthouse into a vacation rental.
  • Join a food co-op. This is just another way to turn a hobby (gardening) into money, by selling your vegetables.
  • Blog. I am waiting for this to work out. Still...waiting....

There are many ways to make extra money as a family, even if the difficulties of finding childcare are ever present. For the lucky, a flexible job can allow extra time for hobbies, making homemade food (cheaper) and still fitting in trips to the park. For everyone else, some life changes may be in order.

That's what kids do; they change your life. Those who try to avoid it fight a losing battle. Best to move on, cut back on costs, and occasionally remind your senator that daycare still costs more than a university education.

Monday, January 21, 2008

I'm Not Crazy

Here's an article, appropriately named The Childcare Crisis, about childcare costs that show that I was actually underestimating the cost of childcare in an urban area when I quoted $1800/month:

Wendy Brauner's rent clocks in at $1,800 a month -- what some might consider a great deal in San Francisco. But don't think Brauner is living the high life. With a son, 3, and another almost 6, she was spending $2,750 a month on child care until her oldest started kindergarten last fall -- nearly 20% of her household income.

"I was writing a check for $17,000 to the preschool and wondered why it sounded so familiar," she says. "Then I realized it was a few hundred off what I paid for my first semester of college at Wellesley. It's just an enormous outlay."

I get that. Even with just one child, child-care costs were a major chunk of my own family's monthly expenses until our daughter, Harper, started kindergarten. The tab never came close to the $3,200 a month we spend for shelter, but that was mostly because, as a freelance writer, I can shuffle my work hours as needed. And that saves money -- a lot of money. In part-time day care, Harper never cost us more than $900 a month.

Still, it's a serious budget item. And we're among the lucky ones. The cost of child care in this country is one of those little secrets -- like leaky diapers and colic -- that parents just don't share with friends who are expecting.

Sunday, January 20, 2008

Extra Cash -- How To Earn More and Spend Less As A Family (Part 1)

One of the problems that couples with children face is the extreme cost of childcare. This interferes with a family's finances in ways couples without children (or Double Income No Kids -- DINKs) never have to face. I am always slightly amused and irritated by financial experts who recommend a 2nd or 3rd job to people in debt, because this kind of plan actually sinks a family with children further into debt. Here's why:

  • Kids require more than just daycare -- that cost is straightforward. Let's just say you have your child in daycare, and the daycare center is open 7 a.m. to 6 p.m. (standard hours) and you can leave your child there that entire time for a set cost -- say $450/month, which is middle of the range for Tucson. An extra job is after hours. This means that you must find a sitter for those hours, and we've never managed to find someone to babysit for us for under $7/hour, and that's dirt cheap. I remember babysitting as a teen to the tune of $2-3/hour, but trust me -- those golden days are over. First of all, it is now illegal to leave your child with anyone under the age of 13 (I babysat for extra money at 11 and 12 years old). Second, kids are simply more saavy these days, and they ask for more. We usually don't use high school aged sitters, however, because our kids are so small, and college kids don't go for less than minimum wage, but even the few times we let a high school kid watch our son (before we had 2) we still paid $6/hour and stressed about it the entire time.
  • Anyway, so if you take on a 2nd job, say from 5 p.m. to 8 p.m., you will pay $21+ for a sitter. Then there is dinner. A couple without kids might get away with a sandwich eaten over the sink, but kids need nutrition. But just for fun, let's say you go the cheap route -- .89/box macaroni. Watch to see how much that costs you.
  • Kids need attention, and that means you, not the sitter, not the minimum-wage-earning daycare worker, but you.Parents who are away from their children for great lengths of time tend to spend more on their kids to make up for it. It is very, very difficult to resist this urge. After a long workweek, who wants to fight with a child in the middle of Target over a 99 cent toy? It's only a dollar, really, but it's just that sort of thing that adds up over time.
  • Next, parents who work long hours and must put their children in excessive care (most daycares have a limit of 10 hours a day, so excessive is anything over that) find that their children have behavioral problems. When my husband and I had our son in daycare full-time (about 40 hours/week, or four 10-hour days), we found that most of our time at home consisted of disciplining our son. Instead of being able to enjoy our weekend, we had to enforce rules that the minimum-wage-earning daycare worker didn't. We have well-behaved children; we are not much for corporal punishment, but time-outs, early bedtimes and long talks about listening filled our weekends. This is not a solitary experience; several studies have shown that a lot of daycare = more difficult children. Parents who don't enforce the rules on the weekends experience other problems, such as injuries, that happen when kids are out of control. Even the co-pay on an emergency room visit is expensive.

Ok, so your kid is in daycare, you have a good sitter and you found a second job for both parents, with a combined extra income of $22/hour minus your sitter. You're finally getting ahead a little, although the kids are slightly misbehaving and living on macaroni and cheese dinners. You take off a little time for that checkup with the doctor, and find that your child has high cholesterol and it's exacerbating his/her asthma. Co-pays on the meds are over $50/month, and that's just the beginning.

Kids need proper nutrition. Give a kid sugar cereal for breakfast, cafeteria food for lunch and a mac-n-cheese dinner, and you get the following problems:

  • Childhood Obesity
  • Early onset of type II diabetes (check any newspaper to see diabetes skyrocketing in young children)
  • ADD/ADHD and other disorders (sometimes but not always linked to diet)
  • Lead Poisoning (yes, an iron deficiency leads to lead poisoning, which retards childhood development and requires therapy, nutrition intervention, and a whole host of other things that translate into even higher costs).
  • Heart disease, kidney disease, high cholesterol and high blood pressure

Sound depressing? It is. The main thing children need from their parents is the one thing hard to give -- time. No amount of extra cash will make up for a parents time. Even a parent working just a regular full-time job will find it hard to meet the needs of a single child in the hours remaining. One responsible adult in the family needs to be around to make meals and/or lunches, spend time helping with homework (school age) or playing and reading stories (little ones). If both parents are working, and at least one has a lot of energy, it is possible to make this work, so long as both parents are trying. If one has a flexible job, that's even better. But add a second job to one parent, and you invite exhaustion and illness in the adult, and you may even risk the future of your child.

So, for a family in debt, what are the options?

Wednesday, January 16, 2008

Want Solar? Move Now!

One of my favorite PF Bloggers, BostonGal, recently unveiled her large purchase for 2008: solar panels for her house. I was pleased to read about her choice. One reason I enjoy her blog is that she tends to take the long view, and by long, I mean looonnnngggg, as in 30 years long. A lot of people commented that solar panels was a frivolous purchase, which surprised me, because solar panels cut energy costs for years and years. For someone like BostonGal, who consistently tries to cut her fixed expenses, a purchase that will pay off in 10 years and lower her cost of living then, if not now, makes perfect sense.

Anyway, in another display of utter senselessness, Congress has passed an energy bill that is unfavorable to solar energy. With energy independence in the forefront of so many people's minds, this kind of choice makes me shake my head and hold up my hands in disbelief. I tend not to talk politics in this blog -- it is about personal finance, after all -- but it does frustrate me to see bills that make energy improvements more difficult for homeowners. Last but not least, I invested in solar power, and after the bill's announcement I was puzzled to see one of my solar stocks (SunPower) plunge by about 30% (the other one, ironically, was less favorable according to the finance experts and it continues to hold steady gains). I knew SunPower had a high price to earnings ratio, and I hesitated because of this (SunPower's P/E ratio is 477; Evergreen Solar's P/E ratio was about 12 when I purchased it, although it is currently unavailable), but the herd mentality took over eventually and I bought a small amount of SPWR stock.

So, if you look at the article, you see that subsidies for solar power will expire in 2008, so BostonGal is ahead of the curve yet again. I just wish we had started watching our finances earlier; if we had, we could be installing our panels right now, too! All I can do is watch and hope that Congress, with the pressure of an election coming, acts to extend subsidies to solar. (Some people think the drawing back of solar subsidies is a good thing; see BostonGal's post on that here.)

Energy Bill Troubles Solar Industry
NEW YORK -The omission of renewed investment tax credits for solar energy in the wide-sweeping energy bill signed by President Bush late last month has put the future health of the U.S. solar power industry in question.

The bill includes more stringent mandates for fuel economy and energy efficiency, but it doesn't extend the investment tax credit for companies specializing in solar power systems. That credit, which amounts to 30 percent of the value of qualified residential or commercial solar equipment, is set to revert to 10 percent at the end of 2008 unless it is extended.

The Coffee Shop Around The Corner, Part Two (The Fight)

"Anyone can start a business. You could too, you know." Of course, I did what anyone would do -- I started dreaming again. I could see the coffee shop, with a little section for kids to play in, and with the little shelf of author-signed books for sale. I could see the art on the wall, and the bags of coffee, and the cookies on the counter. And I made the mistake of opening my mouth to talk about it.

I am, in some sense, a practical person, as I mentioned before, and I am aware of the failure rate of businesses. I am aware of the fact that espresso bars are not exactly new material, and that I can go to any Barnes & Noble and get a cup of coffee and browse about a thousand books if I feel like it. I know that. But I can't help my heart dreaming about it, right? It just does.

My husband, not surprisingly, says very little, but I feel the tension in the air (my mother has started and lost two businesses). And I say, "I don't plan to run out and try this tomorrow, but it's one reason I started the personal finance blog. If we can pay off our debts, and save some money -- if I can prove to myself that I am responsible enough to do those things, and to do them slowly and systematically -- then, and only then, would I look into writing up a business plan and seeing what might come of it." My husband is silent. The minutes go by. Then he says, "You do know most businesses fail within their first year?" Silence descends.

Then the fighting started. I argued that I was smart enough to know businesses failed, thank you very much, and all I wanted was him to respect the fact that I was capable of doing such a thing, that the one thing that would make me consider divorce is the constant squashing of my ideas. He argued that he couldn't be expected to agree and support all my crazy ideas, because so many of them were improbable. I pointed out that my entire life had been improbable, from going to university to flying to a remote Japanese island and learning the language in a year, running my first marathon, marrying him and having two kids! Moving cross-country! Traveling 5,000 miles with an infant and a 5-year-old! I do six improbable things before breakfast!

Silence.

Then I dropped the big one. After all, I say, I gave up a lot to get married. I will never travel again, not like I'd hoped to. I can't skip off to any interesting job I want. I am, for all intents and purposes, trapped here. So why must I also trap my mind? Can't my mind, at the very least, be free to travel to improbable places? Spend improbably money? There's a place in this world for people like me, right? The dreamers?

The silence lasted all the way home.

To be continued in a later post...

Tuesday, January 15, 2008

The Coffee Shop Around the Corner

Last weekend, my husband and I got into a fight. It was a big fight. It happened in the car. Neither of us raised our voices. It was about money.

Money is in the top three reasons why couples split up, but "money" is a very broad term. What does that mean, exactly? Do couples split up because they make too little money for their lifestyle, or too much? What about the decisions on what to do with the money?

Our fight was not, in the literal sense, about money. It was about my dream of owning a small business, which costs money, which puts *our* money at risk, and which I can't talk about in front of my husband without him starting to wheeze a little around the edges.

To his benefit, I have to admit something here: I am a dreamer. There's a reason why I decided to stay home, and it's not the Y chromosome. It's because the 8-5 workweek -- and the mentality that comes with it -- makes me feel like a hamster at a wheel. It makes me feel small and insignificant and tired. I am a creative type, really. I write and take photographs and design another website, which I publicly claim (for better or for worse). I'm not a great artist, or a great writer, or a great anything. It is, however, what I enjoy doing. I keep hoping I'll make money at it, but I don't, and I just keep doing it anyway.

My husband is a very prosaic sort of person, the kind who would never take a vacation because he would just forget it was an option. I work in order for vacations to happen, and it never fails to amaze me when I eagerly inquire how much vacation time he has and he says, "I don't know." I have never not known. How can you not know? How can you not look, every two weeks, and say (to yourself) "Another .6 days! Woo Hoo!" Or whatever your vacation rate is.

Anyway, I am a dreamer, and among my dreams of publishing a book, or making money writing anything at all, I also like science and would like to go back to school for a science-related degree. I like to travel, and periodically try for a job with the foreign service. Or, when I'm feeling really wild, I cruise Dave's ESL Cafe, looking for jobs teaching English, and wonder how I can trick my husband into going along with me.

All the while he plods along, getting up every morning and going to work, putting a small amount of money in savings every week, paying bills and looking for better jobs and better work. Here's the rub, though; I don't look for "better" jobs, I look for "more interesting" jobs.

It would seem that a slow mover like my husband should really be the author of a personal finance blog instead of me, but I look at money the way I look at a job; it can be the vehicle to attain certain freedoms, like nicer vacations, early retirement, and a decent car. I would sell this house and everything in it, cancel my debt, buy a van and travel through Mexico for a year in a heartbeat, but I do have a practical side that feels responsible for my student loans and my children's education. I get it. I may not be good at it, but I get it.

So one of my dreams is to own a coffee shop (or a youth hostel, but I think the coffee shop would be easier). Of course, I came to this dream about 15 years too late; if I had started a shop when I graduated high school (1994) instead of now, I would probably already be financially free to a certain degree. But at 18, I was terrified of starting my own business, and everyone said "college!" and so off to college I went. I lost a lot of money, but I had a good experience. And experience is what living is all about, right? (I keep telling myself this as I write the loan checks)

Anyway, so my DH and I took the kids up to Mt. Lemmon, which is just north of Tucson, to play in the snow. We always go to Summerhaven, the little town at the top, and walk around and buy overpriced hot chocolates. It's just a weekend treat that we do every couple months, and I don't feel guilty about our $2.50 hot chocolates at all. We tend to stop at a little shop called The Living Rainbow, and we go in and goggle all the cool stuff.

The Living Rainbow is one of those quirky little shops where you can find things you just don't see anywhere else. For example, I can buy a t-shirt that says, "This generation plants the seeds; the next generation gets the shade," and by purchasing it, I ensure that one tree is planted. There are also fighting nun action figures, beads that melted in the Mt. Lemmon fire five years ago, and "unicorn" tarot cards. I love it.

The owner always remembers us -- my first child weighed nearly 10 pounds, and so did hers -- and this time, I stopped to chat with her, which I hadn't done in a very long time. I asked her how long she had owned the shop, and she said, 29 years. I was surprised! She looks very young. So I asked her how she had started it, and she explained that, 30 years previous, her husband had walked out on her and her two sons, aged three and one. She had no money, so she started the shop with just a few items, and everytime she sold one thing, she would use the profit to buy two more. She was so embarrassed by the fact that the shop was practically empty, that she put up a sign for "information," and would talk to and try to answer tourists' questions. When I asked her about her boys, she said that they stayed in the shop with her most of the time, although the town had a babysitting co-op that she participated in as well. I murmured my admiration for what she had done, and said that I sometimes thought of starting up a business but had always been too afraid, and at that she looked me in the eye and said, "Anyone can start a business. You could too."

To be continued in the next post.

Wednesday, January 9, 2008

Having a baby, or how to lose $5,000 quicker than if you went to Vegas

In 1998, I finished my undergraduate degree in English Lit. and was offered two choices. Choice 1: take a job as an insurance salesman and be a bane to my friends (I had to take an test asking if I would feel comfortable trying to sell insurance to guests at a dinner party. I knew the right answer, but said "no" anyway). Choice 2: take a job teaching English in Japan. With $42,000 in student loans, I went to Japan.

Surprisingly enough, I actually paid off $8,000 in loans in just 2.5 years. Then I met the love of my life, flew home, and had the cheapest church wedding on record (we actually made money on the wedding -- I plan to put our method in a post very soon). We went to Washington, D.C., where my husband had been stationed as a Marine, and after a couple of frantic months I landed a salaried position working for a think-tank in downtown D.C. I had excellent benefits, we lived in a tiny apartment, had one paid-for car that got 42 mpg, and paid most of our bills (such as yearly car insurance) in bulk. We paid off another $2500 loan in just 4 months. Then I found out I was pregnant.

I knew, somehow, that babies cost money, so for the next 8 months I put approximately $750 a month in savings. We saved over $5,000 during that time. I didn't get paid maternity leave, so only planned to take 6 weeks, but $5,000 was more than enough to cover that. Plus, my husband was still working, and we planned to stagger our leave, with one of us home with the baby for the first 3 months.

Late in my pregnancy, we decided to move. First off, our rent was going up over a $100, making our tiny apartment $1000/month. Next, having a baby in a 480 square foot apartment seemed a little claustrophobic. Finally, we wanted a place with a washer and dryer (luckily we had this foresight, as I couldn't handle stairs for nearly two weeks after the surgery and our laundromat at the old apartment was in the basement). We found an excellent place within walking distance of the metro station; the market was dropping, so the usual monthly rent of $1475 had been reduced to $1200. Even better, an intern at my work needed a place to stay short-term, so we got a two-bedroom apartment and she paid a third of the rent for it. We patted ourselves on the back; we now had a place over twice as large, and were paying the exact same price.

My first child, a boy, was born in February, 2002. I had a difficult labor and ended up with an emergency c-section, which was fully covered by my excellent insurance. I had to expand my leave to 8 weeks in order to recover from the surgery, but still, we were well covered.
We thought.

Then it happened. I decided to check out childcare -- you know, it wasn't for a few months, but I thought I should get an idea of what was out there. You parents out there, you know what is coming, don't you?

Basic childcare in Washington D.C. for an infant under 6 months ran, at that time, from $1200 a month up. Oh, you're thinking, you must mean some kind of fancy, "let's teach our children math before they speak" kind of childcare.

No, that's not the kind I mean. I mean basic childcare, as in the kind where the workers look a little shifty but you cross your fingers and hope for the best. That was the cheap, $1200 a month kind, at least at the places near my work. It went up from there.

I'm sure I could have found childcare cheaper in the suburbs, perhaps further out from where we lived, for maybe $800-900 a month, but frankly, we wouldn't have saved much money that way. We would have had to purchase a car -- I rode the subway every day, which was fully financed by my work -- and between gas and insurance it would have cost us that extra $300/month -- and it would have added an extra hour to our commute each way. We were already putting in 10-12 hour days, and honestly, we didn't think we could take the stress of a trip into the suburbs after the workday was finished.

While these were interesting ideas in general, the cold, hard reality was not the cost -- it was the fact that we couldn't get childcare at all. Most places had a year waiting list; some had even longer. Childcare for infants under a year was at a premium; there simply weren't enough places equipped for babies, they could charge what they liked, and still people stood in line. I've heard since of people getting on lists as soon as they heard they were pregnant, losing the baby, and trying to get pregnant again quickly so they wouldn't lose their place in line. The insanity surrounding infant childcare is extreme in a way you simply cannot believe until you are in it.

We looked at our options, and our choices were bleak. One of us would need to stay home until childcare could be found, or we needed to move somewhere either childcare or cost of living (or both) was cheaper. I went back to my job, my husband took his 6 weeks off and we quickly found our money disappearing at alarming rates.

I received another $1000 in gift cards and cash after my son was born. My work alone gave us a whopping $600 check. But the expenses piled up; a car seat and stroller ($150), a breast pump ($275), and the simplest bed we could find, a moses basket ($60) added up to a whopping $485. That was before bottles and food and blankets and clothes and diapers...

Granted, we could have bought those things second-hand, but we were in Washington, D.C., a metro area that wasn't exactly family-friendly. I'd lived in areas where breast-pumps were constantly in the classifieds, but I never seemed to tap in to that crowd in D.C., so we ended up paying retail. Friends helped; I got a really great playgym ($50) from a shower that I used for both my kids, and our church at the time organized to bring us dinner every night for 10 days. Still, expenses kept piling up. We didn't buy a diaper pail and avoided a co-sleeper even though I was nursing, because co-sleepers started at $150 and diaper pails seemed to come with more gadgets than an airplane cockpit and couldn't be found for under $29.99. Our living room smelled of dirty diapers; our roommate, fed up with crying babies and smelly garbages, moved out. Our finances began to plunge.

We spent over $1500 the first 3 months of my son's life on stuff. To non-parents, that may sound completely unreasonable, but we honestly went into it frugally. It is just that there are so many laws, and so many scary penalties for not following those laws, that parents simply must comply. If you slip and drop your baby in the tub, you can be sued for child abuse and undergo an investigation -- thus $9.99 for a baby tub. Used car seats can have hairline fractures that compromise their safety, so we bought one new with a stroller -- $150 was a steal. The "safest" babyseat starts at $349.99 and only works until the child reaches 40 pounds. Our seat was an infant seat, and because my son was a big baby (almost 10 pounds at birth) he exceeded it within 3 months and we had to buy another seat for $150. Think we weren't looking ahead? We tried to use a "convertible" seat that is supposed to grow with the baby, but it was so large and bulky it wouldn't fit in our compact car, so we had to use an infant seat. In the end, we couldn't fit a seat in the car backwards that would fit my extra-large son, so after just 3 months we had to give in and actually buy a new car.

The new car, a Ford Focus, was as cheap a new car as we could get and we paid $11000. So now, on top of all the expenses of having a baby, we had a car payment (my one regret at this time is that we didn't buy a used car, but we were so overwhelmed we didn't think we could take it if we bought a used car and it was a lemon; ironically, we bought a new car and it was a lemon).

I went back to work and my husband decided not to renew his contract with the military, which was up in May. He'd saved up enough vacation he was able to leave the end of March. At first we thought we could make it on my salary, with him staying home, but with the roommate gone, the cost of the new apartment, the new car and the regular costs of a baby (diapers, wipes, food), our $5,000 was gone in the blink of an eye.

We had spent all we had and were sinking into credit card debt when my husband got a call back for a job in Tucson, Arizona. With a sigh of relief, I quit my job, we sold our ancient, tiny car to a relative and piled into the new one to drive four days across the country with a 4-month-old.

Five years later I am still battling the costs of having children, from my son's $50/month allergy meds to $300/semester "enrichment" classes to $40/month for judo. At every crossroad there is a cost; enrichment courses or cartoon afternoons? Childhood obesity or money for sports? My second child was much less expensive than the first -- we re-used those damned car seats -- but the costs are still there. Here in Tucson childcare runs around $500/month for infants. That's less than half the cost in D.C., but considering the University of Arizona tuition is $4800 and a year of childcare is $6000, it's hardly a deal.

So we wait, and pinch our pennies, and try to enjoy our children while they are little and try not to worry about money and try to avoid doing anything to compromise our children's futures... and the result is, I'm Tired in Tucson.

If you want to lose money fast, don't gamble. Just get pregnant.

(Photos from www.flickr.com creativecommons/babies)

Monday, January 7, 2008

New Year, Fresh Start


Goal
Originally uploaded by Obi-Akpere
I am not one to make New Year's Resolutions; it just isn't my thing. When I resolve to do something, I tend to start it right away, and picking an arbitrary date to make a resolution just seems...contrived. This year, however, this worst - of - all - married - financial - years, I was really happy to see the turn of the year. I thought, early morning on January 1st (after all, I went to bed at 9 o'clock on New Year's Eve with a terrible case of the flu), here's my chance to change the numbers. New year, new taxes, new choices. There are a few switches to what I've posted in the past, and I'll explain why.

This year, I want to get rid of two student loans. Most finance experts don't encourage paying off student loans before consumer debt, but we're going to ignore this advice for a few reasons:
  1. Right now we have our consumer debt on very low interest rates -- 4.99 and 5.99% for the life of the debt. This means we don't have to move the debt over to new cards every 6 months, and we don't have to worry about it.
  2. I'm having a surprising amount of difficulty tracking one student loan, which is currently at 5% interest. It should be down below $5,000 by now, but the school has made some kind of mistake and has very little paperwork to show where the money went. I was paying via ACH transactions and did not realize I had no receipts with this kind of payment! There's not much I can do about this, except absorb the $300 the school insists I did not pay.
  3. The second student loan is at a whopping 7.5% interest. If I took 10 years to pay that, I would pay triple the balance! We are much, much better at paying off consumer debt, and I will probably save money by focusing on the student loan first.
  4. Last but not least, we are following some financial advice, and that is this: pay off the debt that bothers you the most first. I am definitely bothered by the slow pace of paying off our student loans, and I am tired of the junk mail I get about refinancing! I am ready to get rid of some of the smaller loans. Incidentally, although our consumer debt is slightly less than my two smaller student loans, the interest rates -- and the psychological benefits -- win out. Read about how blogger Get Rich Slowly used the debt snowball to pay off $35,000 in debt in just 3 years!
Next, I have decided I don't want to save a $10,000 emergency fund. That should be my goal for 2009. We have been very successful at saving small amounts of money twice a month, and I think I want to take the snail's approach on this. We should be focusing on paying off debt, and just keep $1,000 in savings for emergencies.

While I want to shrink our emergency fund and focus on debt, I also want to add more to my IRA retirement account this year. This requires a small restructuring of my account, but since one investment has gone up 78% since I bought into it, I think it is worth doing some cost averaging and investing further. This is one goal that really frightens me, as it carries risk, but I think it's time we considered it.

Lastly, I want to find alternative sources of income this year. My husband's GI bill will end in May, and with me unemployed, I have to look at ways to add to our finances. Here's a few possibilities:
  1. A raise for my husband. This may be possible, but since he got a large raise (20%) last year, I doubt a raise will be forthcoming. We can keep an ear out, however.
  2. An at-home job for me. I really don't want to work an outside job right now; my daughter has health issues, and keeping her out of daycare is definitely helping. Some possibilities would be restructuring advertising on my blogs, filling out surveys, mailing letters, and renting out our guesthouse by the week.
  3. Either my husband or myself joining the National Guard. I hate the idea of doing this; I could be required to serve far from my children, negating any benefit we would get for my doing this. My husband is a former Marine and definitely does not want to re-enlist. I put it here because it is a last-ditch resort for us, and if all went well, I would only have to give one weekend a month, and wouldn't need childcare for my children.
I think 2008 is filled with some hard choices for us, but I am tired of living paycheck to paycheck, and watching our debt grow slowly over time. This year I am ready to fix things, and reduce our debt as much as humanly possible.