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        • A detailed look into my January 2019 budget. Don't just blindly follow a budget. Understand the reasons behind your financial choices, and look at what your budget is telling you.

          January 2019 Budget Recap

          A detailed look into my December 2018 budget. Don't just blindly follow a budget. Understand the reasons behind your financial choices, and look at what your budget is telling you.

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          When thinking about your WHY, it should be something so important that it lights a fire under you. Your level of passion and dedication to your WHY should leave you feeling emotional.

          How to Close Out Your Budget Every Month

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        • My hope through this blog post, I can show you that MLM can be a legitimate source of supplemental income that has its perks over a more “traditional” career or your average side hustle.

          How MLM Has Changed My Life for the Better & How It Could for You Too

          Living on a budget is great. Unless, of course, it’s not. Because sometimes even living within your budget calls for more money than you’re bringing in.

          10 Legitimate Ways to Make Extra Income from Home

          Are you ready to save in the new year? Let's save more of our dollars by completing a different savings challenge for every month in 2019!

          12 Months = 12 Savings Challenges

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        • Does it feel like you just can’t get ahead when it comes to money? Even now that you’re earning more, there still seems to be nothing left over to help you get out of debt or save for the future? Your finances may be the victim of lifestyle inflation.

          Lifestyle Inflation: Getting What You Deserve

          A realistic view into my $400 per month meal plan! Get every recipe that I used in my January meal plan, my grocery lists, costs, and so much more! Read about how I am utilizing my Instant Pot to save time and money!

          January 2019 Budget Monthly Meal Plan

          Are you looking for ways to save money on your grocery budget? Try completing the Freezer Challenge, and start eating what you already have at home.

          Save Money Meal Planning: The Freezer Challenge

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          Being in debt while you are still working can be a nagging problem and even prevent you from saving for retirement. But carrying that debt into retirement can also be dangerous, and in some cases, even more so. When you are in retirement, you are working with a fixed income. The simple truth is, you can't afford to have a majority of your income eaten up by debt payments. To get the most out of your retirement, you need to make sure you have as much money as possible to fund the lifestyle you desire. Here are three types of debt you should work on eliminating before you retire. Read: How To Save For Retirement When You Are Self-Employed UNSECURED DEBT If you are living with a fixed retirement income, you might not be able to afford to make the extra payments on the money owed. If you are spending years in repayment, much of your fixed-income ends up going to high interest payments. Credit card debt can not only wreck your credit score, but it's also costly to pay off. For example, if you have a credit card with a $5,000 balance with 18% interest, it will take you roughly 84 months to pay it off. Not only that, but you will pay close to $4,320 in interest over that period. HOW TO PAY IT OFF It's best to come up with a plan to eliminate unsecured debt during your working years. An easy approach to paying off credit card debt is to list out your present debts, figure out which cards charge the most interest and pay those off first before moving on to the ones with less interest. Here is a list of articles that will help you come up with a plan to pay off credit card debt: Pay off Debt With the Debt Snowball Method How to Pay Down Debt Using the Avalanche Method How to Create a Plan to Pay Off Debt Taking advantage of balance transfers to eliminate debt faster might also be an option. You can transfer your total balance to a card with a lower interest rate than what you are currently paying to save time and money on interest payments. Read: Saving Money When You Have Debt – What You Need to Know STUDENT LOAN DEBT Student loans are often viewed as a "younger-aged" problem, but the truth is, more and more older Americans are finding themselves on the hook for educational loans. Not only is this debt they took out for themselves, but the major problem is when parents take out loans for their children's education. The process of being accepted for a Parent PLUS loan is minimal. There is only a basic credit check and no underwriting to determine whether the borrower has the income or ability to repay the loans. With emotions involved, it's easy to take on more than you can handle. You may not realize it, but in retirement, even a small amount can prove difficult to repay. Funding your child's education can be an emotional topic. I would love to help my son attend college without feeling financially stressed, but I won't sacrifice my own retirement to do so. Instead, I took another approach and started planning and saving early for his educational costs. Two weeks after my son was born, I opened a UTMA account. Throughout the year, I save my leftover change from my cash spending and invest it in his UTMA at the end of the year. I will save what I can during my working years, and I will help him as much as I can financially, but only to a limit that I can honestly afford. The truth is, helping my son pay for his education is important to me, but he also has more time than me to pay off his student loans. When I am a senior living on a fixed income, I will not be able to generate more money to repay these debts, and I can't replace the retirement savings that I take out for repayment. HOW TO PAY IT OFF When you are in a financial bind, there are different ways to you can repay your student loan debts that make it a little easier on your budget. For example, if you only have Direct Loans, there are Income-Driven repayment plans that allow you to make a monthly payments that is based on your income and family size. If you decide to use one of these options, you have to keep in mind that it will extend the period of time for your loan repayment. I recommend using these options if you are in a financial hard spot, but to make your time on these plan limited. If you can, I recommend sticking to the Standard Repayment Plan, which will pay of your student loans in the shortest amount of time while saving you the most money on interest. Read: Should You Consolidate Your Student Loans? MORTGAGE DEBT Many people who own homes or property take out 30-year mortgages in their early 30s and manage to pay off their loans by the time they retire. But what happens when you buy a home or property later in life? If you end up carrying mortgage debt into retirement, that will make what's already your greatest monthly expenses even more burdensome. Just like with people, the older a home becomes, the more money it costs to keep them "healthy." Dealing with a mortgage payment and the upkeeping costs of owning an older home during retirement can cause substantial income restrictions. If you work on getting rid of your mortgage payment before retirement, that's one significant bill you don't have to worry about. If you can pay off your mortgage before retirement, you can significantly decrease your housing costs, eliminate your biggest expense, and you can make your savings last much longer. If you can, try buying a home on the low-end of what you can afford and avoid refinancing your home, which usually extends your repayment period. HOW TO PAY IT OFF One way to tackle your mortgage debt is by making extra payments to your loan. Think of it this way, the more extra payments you make on your mortgage, the more each one of your regular payments goes straight to the principal balance. Try making an extra house payment every quarter or dividing your mortgage payment by 12 and add that amount to each monthly mortgage payment that you make. Just a word of caution. If you are thinking about making extra mortgage payments, make sure you talk to your mortgage company because they might charge prepayment penalties. When completing an extra mortgage payment, make sure it's getting applied to the principal balance of your loan and not next month's payment. It's critical to take steps to ensure you have an effective debt management strategy in place and to take early action steps to eliminate debt before you retire.

          3 Debts You Should Eliminate Before Retirement

4 Financial Moves to Make Before Having a Baby

February 23, 2017
Family & Money

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Preparing for a new baby is hard enough. Make sure your finances are prepared as well.

So, you think you are ready to take on the next chapter of your life? Having kids is a game changer, not just for personal reasons, but for financial reasons as well.

United States Department of Agriculture has recently released that a family will spend approximately $284,570 (with projected inflation) for food, shelter, and other necessities to raise a child through age 17. So are you wondering where all of this money goes? According to the study, the cost of raising a child are broken into these percentages:

  • 29% goes towards housing
  • 18% goes towards food
  • 16% goes towards child care or education
  • 15% goes towards transportation
  • 9% goes towards health care
  • 6% goes towards clothing
  • 7% goes towards miscellaneous expenses

After reading the full study, I was surprised to find out that the study does not include the costs related to pregnancy or college costs. With the rising cost of college, you can expect the cost of having a child will increase substantially.

Before having my son, I was completely unprepared on how much my financial situation would change. To me, the costs included small clothes and jars of baby food. There is a lot of financial preparation that needs to happen before having kids. In this article, I will lay out the financial tasks I completed before having my son. Now, I am not going to lie and say that you will have everything figured out before having your first child. That would be unrealistic.

  • Read: How Spare Change Is Helping Me Teach My Son about Money

There are plenty of things that will come up along the way that every first parent must experience. Hopefully, this article will give you the head start you need to start preparing your finances now so that things will be a little easier later.

UNDERSTAND YOUR HEALTH INSURANCE

There is no doubt that having a baby is expensive. Even with health insurance and an uncomplicated pregnancy, I was still left with a pretty big hospital bill. There is nothing more important than forecasting your expected costs early. Health insurance is a somewhat complicated subject. It varies drastically depending on which health insurance you have and even where you live. The best thing you can do right now is understand your coverage, and know what costs to expect.

Before having my son, the first thing I did was contact my health insurance carrier. Educate yourself and learn the vocabulary terms of your health insurance. Some vocabulary terms you might run into are:

  • Deductible
  • Out-of-network / In-network
  • Co-insurance
  • Copays

The best resource I have found to help you prepare for medical costs of having a baby is Nerdwallet’s Medical Bills 101. The most valuable information in the article is the list of questions it gives you to ask your health insurance provider. When you don’t know what to expect, knowing which questions to ask is difficult. Get a pen, call your insurance provider, and start asking questions.

  • Read: Yes I Am That Mom – And I’m OK With It

If you are uninsured, keep in mind that pregnancy is not considered a “qualifying event.” This means that you can not get insurance through the Affordable Care Act until after your child is born. When I found out I was pregnant with my son, I did not have health insurance. There are options out there if you are uninsured. For me, I was already planning on getting married and was able to get on my husband’s insurance at the time.

If you are under the age of 26, you may be able to join your parent’s health insurance plan as a dependent. If you fall below certain income restrictions, Medicaid might be another option for you. Make sure to check out Nerdwallet’s Medical Bills 101 for more helpful information about having a baby when you are uninsured.

PLAN FOR MATERNITY/PATERNITY LEAVE

Does your work allow paid time off for having a baby? This is the first question you need to have answered. Some workplaces may or may not have an official maternity leave policy, and even if it does, it might not be paid. If you are compensated for taking time off, it might not mean it’s fully paid. Luckily, I was able to get six weeks paid maternity leave through my work. At the time, my husband was able to use some vacation for paid time off. If you are not happy with the length of maternity time you get off, don’t be afraid to ask if you can also use paid vacation time as part of your maternity time.

When planning for time off, make sure your bills and all other essential expenses are covered. When planning for my son, I was able to calculate how much our essential expenses were going to cost, and subtract them from our expected income at the time. It’s never too early to start crunching numbers to figure out exactly where you stand on finances during your time away from work.

If you are lucky enough to get paid time off for maternity leave, keep in mind that the money you receive is just like any other paycheck. You will have to pay taxes on it just like it was your regular salary.

  • Read: How to Find Extra Money Hidden in Your Budget

CREATE A NEW BUDGET

It only makes sense that your finances will change after you bring your baby home. There are new costs that must be added to your budget such as, diapers, childcare, and extra food. Now is the time to take a close look at your current budget and create a post-delivery budget that you can stick to. Can you afford the extra costs? If not, take some time to look over areas where you might be able to cut back. The first place I was able to reduce expenses was in our food budget. Taking the time to cut costs now, will save you some money in the future.

It’s so easy to go overboard when buying things for your new baby, but remember, they grow fast. So, splurging on designer baby jeans and that high-end stroller might not be worth it. I was able to save money by shopping second-hand, and it was the best decision I could have made. You may not realize it now, but your new baby will probably only wear the clothes you buy them once or twice before they outgrow them. So buying used is a smart way to go.

Creating your new budget with a baby in mind is done using the same steps as a pre-baby budget. Here are some step-by-step guides to help you get started:

  • Personal Budget Categories (Organizing Your Budget)
  • Our 2017 Budget Binder (A Plan for Every Dollar)
  • How to Create a Budget (When You Really Don’t Want To)

START AN EMERGENCY FUND

If you haven’t already, now is the time to start an emergency fund. I will be the first one to tell you that children have accidents, and it’s time to start anticipating unexpected expenses. The general rule of thumb is to have at least three to six months of living expenses. Though this is a solid number, if you are just starting out, I recommend having a smaller goal of $1,000. For me, saving money is done in baby steps. It’s easy to get overwhelmed and discouraged when your savings goal seems unreachable.

  • Read: How to Build an Emergency Fund (Step-by-Step Guide)

Expecting your first baby is exciting, but it can also be overwhelming financially. The first thing I looked into when I found I was pregnant was health insurance. It’s so important to know and understand your coverage so you can get an accurate estimate of what you will pay for out-of-pocket expenses. Make sure you understand your maternity leave options and the coverage you will receive when you take time off work. Look over your existing budget and create a new one to prepare for your new baby at home. Finally, make sure you lessen the stress by making sure you have money set aside to cover unexpected costs.

As a new mom, it’s frustrating to figure out how to handle having a baby at home. You will find yourself asking questions like, “Am I doing this right?” “What do I do now?” and “Are you sure I should really be doing this?” Make things easier by being prepared financially.

How did you prepare your finances for your first child? Let me know in the comments below?

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kumiko Ehrmantraut

kumiko Ehrmantraut

A little about me: I love helping women take charge of their financial lives. As an Accredited Financial Counselor, I love teaching about money management and realistic budgeting. Away from the computer, you can usually find me behind a camera lens or coloring with my 4-year-old son.Want to share your financial journey with me? Tag @thebudgetmom on Instagram or give me a shout-out on Facebook. I WANNA SEE IT!
kumiko Ehrmantraut
kumiko Ehrmantraut

kumiko Ehrmantraut

kumiko Ehrmantraut

Latest posts by kumiko Ehrmantraut (see all)

  • Lifestyle Inflation: Getting What You Deserve - February 15, 2019

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Filed Under: Family & Money, FRUGAL LIVING, Kids & Money Tagged With: BABY, FAMILY, KIDS

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Comments

  1. Jennifer says

    March 6, 2017 at 7:12 am

    A great financial solution for new parents. Great post. Thanks

    • kumiko Ehrmantraut says

      March 8, 2017 at 8:16 pm

      Thank you Jennifer!

  2. Ranga says

    March 11, 2017 at 3:40 am

    This is a great list Miko and I know this is out of topic but part of the financial planning can also come by cutting down on spending in areas such as toys/clothes where applicable.

    For example, when kids are growing up, it takes hardly a few months before they grow out of their toys/clothes, looking at refurbished or used clothes can be a great way to cut the costs which could help in creating some some savings.

    • kumiko Ehrmantraut says

      March 11, 2017 at 1:56 pm

      Thank you Ranga!

About Kumiko Ehrmantraut

Hello, I'm Kumiko, but everyone just calls me Miko. Welcome to my blog, The Budget Mom. I am an Accredited Financial Counselor® , and mom to a rambunctious 5-year-old boy. Come along with me as I strive to live a life I love on a budget that I can afford. Read more about me.

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