SAHM: Money Matters

>> 11.05.2012

I have written just a bit about how we came to the decision that I would stay home with Ada. First, a post titled Budget and Sacrifice and then some answers to follow-up questions. Still, one of the most common questions in my inbox is about how -- specifically -- we figured out our budget when we decided I would stay home.

And I'm not going to simplify it into a single, compact, Pinterest-worthy post. I will tell you first that it was a lengthy process spanning years, in fact. We knew we wanted kids and that it would be nice if I could stay home, at least for the first few years. So we starting tossing ideas around almost five years ago.

Nothing was terribly detailed at that point. But it was a start.

At first, I just wrote our each expense and the amount in a notebook. Pen and paper. Over and over again until I got it right. All kinds of things we spend our money on elude us -- it's insane. Once I was certain I had them all, I divided these expenses into categories:
  • "fixed" (meaning they cost the same each month)
  • "variable" (meaning they change for various reasons)
  • and "luxury" (meaning we could cut entirely if necessary).
To help illustrate: Some examples of fixed expenses are mortgage/escrow, car/insurance payments, student loans, etc. Variable includes groceries, entertainment, health, etc. And then luxuries like cable, gym memberships, and clothing allowances.

KEY: DO NOT HAVE SELECTIVE MEMORY FOR WHERE YOUR MONEY IS GOING. All those coffees and dinners out do add up and you will be doing yourself a disservice by choosing to forget them during planning.

After a while, I started keeping track of our expenses in Excel. (I'm pretty sure this method developed around the time I was doing lots of budgets as a marketing coordinator at one of my first jobs.) I developed a spreadsheet where I could track our spending, but also project and play with different scenarios.  

Note: None of these numbers reflect our actual budget or how we adjusted amounts specifically in any way. Please save judgement.

Like a best-case scenario:

A no-frills:

A (temporary) worst-case:

By playing around with various scenarios and deciding what concessions we could easily make, we got a better handle on how much money we needed to come in every month. Where each of those dollars was going. And exactly how low we could go in an emergency, because as we have learned this first year, high ticket items like car engines and furnaces like to break down when money is already tight.

For a long while, no matter what scenario we tried, it just didn't look like we had enough money to live on one modest income. At that point, I started to open my mind to a variety of options, including continuing full-time or perhaps engaging in part-time work. I would say it even impacted our decision of when to try to have children. We wanted to figure out a situation that would work for our family.

And this should go without saying, but staying home or working or doing a mix of both or even something entirely different is a decision that is highly individual to each family. It's also based on so many factors -- both financial and professional -- it made our heads spin.

The world kept turning, though. And as the years passed on, we got closer to the time when we wanted to start our family. So, the next step was assessing the $$$ in our bank accounts and then making a plan for action. But that's a post for another day.

Those of you who stay home or are considering a change, was budget crunching your initial step as well? How do you budget -- old school, Excel, or an even more tech-savvy method? And did you have as much fun playing with the numbers as I did?

And if you have questions you'd like to see me address in this series, just leave a comment or email us at writingchapterthree [at] gmail [dot] com.

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