Category: Budgets

Stay at Home Jobs for Stay at Home Moms

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Having a parent stay at home with the kids is a decision that many families will contemplate. One of the main factors in the ultimate decision is often whether or not that family can afford for one parent to stay at home (which I did a post on here).

And sometimes, all it takes to make it work is a bit of extra money – whether to pay for essential expenses or just to have for extras. So I thought I’d list out some ideas for jobs that a parent can do while staying at home with their child or children.

But before you get too excited, its important to be realistic. These are great ideas to earn a bit of extra money. Unfortunately, none of these are going to make you rich or replace your salary, especially if you were in a professional, post-university level type job.

The reality is that if you want to earn that kind of money, you can’t also take care of a child full time at the same time. You just can’t – either your job or your child or (most likely) both will suffer. And anyone or job offer that claims you can make thousands of dollars with little effort, little  time and no skills all from home is 100% a scam.

Some of the ideas I list below could potentially make you a lot of money, but will require the type of time and focus that an out of the home, full time job demands and you would have to make a choice to get childcare or forgo that potential. However, they are also the type of jobs that you can do on a small scale to make that few hundred dollars a month to give your family budget some breathing room.

1. Multi-level marketing

One job that a stay-at-home mom can easily swing is a MLM (multi-level marketing) type job. This is a job selling a product (make-up, jewellery, supplements etc) to friends, family and later a group of customers directly. Its a growing industry with MLM companies Stella & Dot, Arbonne, Avon, Scentscy and many, many more gaining a lot of prominence and respect. However, while an MLM job can definitely make you some money to add to the family coffers, this is definitely not a job that is right for everyone. I did a post on this, check it out here.

PROS CONS
Very flexible Often involves a large start-up cost, and costs can get out of control
Can be a lot of fun if you are a social person Once you exhaust “low hanging fruit”, new customers may be hard to find
You can get great products for a good deal To make a lot of money, you need to treat it like a full-time job

2. Etsy

If you are crafty, Etsy can be a great way to make some money. The key is to pick a specialty (i.e., if you are a great knitter, instead of having a knitting shop, perhaps concentrate on just one or two things) and focus on being really good at it.

I found this great article that goes into more detail on how to make money on Etsy.

PROS CONS
Very flexible Often involves a large start-up cost
Can lead to a great small business Lots of competition
Creative outlet It can take a while to make money while you build your reputation

3. Photography

Pretty much anyone with a decent camera can be a photographer. Obviously, you can’t become a professional photographer overnight and charge $5,000 a shoot, but with the countless courses available both online and at various community centres, blogs and websites, I really think anyone can learn enough “tricks” to be a decent photographer and make some extra money doing family portraits for Christmas or to take pictures at birthday parties.

PROS CONS
Easy to get started if you have a decent camera Lots of competition, may take a while to build portfolio and referrals
Good creative outlet Not very steady or regular
Could potentially earn a lot if you build good reputation Good equipment is expensive

4. Home day care

Of all stay-at-home mom jobs, this one has the potential to make the most steady money. The trade off is that you have to be home (so a lot of the SAHM lifestyle that is the reason that many moms/dads want will need to be sacrificed) and you are pretty much working all day caring for other kids as well as your own. However there are ways to have both –  I know one mom, for example, who only does before and after school care – her own kids are school aged so she just walks all the kids in her care to school in the morning (she lives just a block away) and picks them up after, but has the school hours to herself.

PROS CONS
Can make a decent amount of money Can’t just hang out with your own kid – need to focus on caring for other children (which can be overwhelming)
Can expense a lot of stuff you buy for your kids Not very flexible
Your child has playmates during the day Lots of licencing and regulatory requirements that need to be met

5. Home Baker

If you love baking/cooking and have a signature dessert or dish, you may want to see if any local cafes or restaurants would like to buy your goods on a regular basis. You could easily prepare the batter or do prep like chopping or measuring of ingredients in the evening after the kids are in be and then preparing early in the morning. A local coffee shop that I frequent hires a university student to makes these amazing salted caramel brownies for them – she makes one large batch everyday and delivers them in the morning when they open. It probably doesn’t pay her tuition but maybe pays for books! Another option would be to have a home bakery business – all you need is a Facebook page – and offer to make goods for special events.

PROS CONS
Fairly small time commitment Early mornings may be required to have everything ready for delivery
Small start up costs Won’t make you too much money on a small scale
Fairly flexible Highly dependent on your location

6. Blogging

Ok, I’ll be honest, this is a very difficult way to make money. So far, I’ve made a whopping $1.54 from Amazon Affiliates sales but this blog costs me $26 a year to maintain so I’m actually in the red (ironically), so its a good thing my only intention with this blog was for me to have a creative outlet and not to make money.

However, for those interested, the way bloggers make money is from Amazon affiliate sales (you recommend items that can be bought at Amazon that are linked back to your blog account and you get a commission), advertising revenue (which is dependent on your site traffic) and if you get good enough that people or other sites pay for you to write for them. While its a bit of a long shot, if you are a great writer and have a unique perspective on a popular topic to really make yourself stand out, you may be very successful.

PROS CONS
No start-up costs Can take a long time to many any money
Very flexible Requires a large time investment
Great creative outlet May be hard to come up with content

7. Dog walker

While you have a baby you can wear in a sling or carrier, this might be a good option to get some exercise and make a few dollars as well. Depending on the area, you could make a good $50 a day walking dogs. It gets complicated when you have to push a stroller or have a toddler that naps during prime dog walking times, but its something that pretty much anyone can do and can do immediately.

PROS CONS
Small time commitment and very flexible Not easy once you have a child that can’t be worn
No start up costs Location dependent for how much you can charge
Get exercise You will cap out on how much money you can make very quickly

8. Consulting

This is another area where you can potentially make a lot of money with a small-ish time commitment, however you need to be a subject matter expert or professional whose expertise is in demand. Again, though, any project you take on will likely need several consecutive hours of commitment so you may need to have a sitter or family member who would be willing to help out during those times.

PROS CONS
Can be a great way to make a lot of money in a short time Need to be a subject matter expert or lots of experience
Can pick and choose when you want to work More like a part time job (will need to put in several consequtive hours in a row when on a job)
Keeps your skills sharp in the event you want to return to work full time May end up taking up more time than you want to devote

Disney World on a Budget

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The happiest place on earth!

The happiest place on earth!

One of the most fun trips we’ve had as a family was when we were moving back from Australia to Canada five years ago and we decided to do a two day lay over in Los Angeles, California. We decided to get a hotel next to Disneyland and go there for a day. Our son was only 2.5 years old but we had an amazing time.

The memories from that great day made us want to make a trip down to Disney World one day and we decided that it would be great to escape a week of the bitter Canadian February and drive down.

But when I started researching the trip it hit me that Disney World is EXPENSIVE and the costs can quickly get out of control. So I wanted to make sure that I did all I could to keep those costs in check (though, but I also learned some additional things that I could have done better along the way.

1. Consider driving. As a family of 4, flying is starting to get expensive. Flight from Toronto to Orland would have cost us over $2,200 plus taxis to and from the airport. Also, while the hotel we stayed at had a shuttle to the parks, it wasn’t very frequent and having a car gave us the freedom to go to the parks at our leisure.

Meanwhile, driving down cost us about $300 in gas (yay for the drop in oil prices!), about $20 in tolls and $68 in parking (parking at Disney World is $17 per day). We also had a “Peace of Mind” service done on our car ($75) and because we were driving down to the US, we bumped up our liability insurance coverage amount (though I actually ended up with a credit to my account because it turns out that having winter tires saved us 5% off our premium and that offset the additional liability costs).

The drive took us two days each way requiring two extra nights at a hotel, however we had a free night voucher to Marriott when we signed up for a Marriott Visa points card and we picked smaller cities where hotels were just cheaper (for example, on our way back we stayed at a Marriott in Louisville, Kentucky for only $89 with breakfast included) as our stopping points.

roatrip 4

Road trip nap

2. Consider staying outside of the park. Don’t get me wrong, staying at a Disney resort in the park must be awesome. But we learned the hard way on a trip to the east coast of Canada last year that we NEED two rooms in order to keep our sanity on these family trips (the kids would crash at 8PM and we would be stuck with nothing to do and nowhere to go) and a Family Suite at a Disney resort (which was a room with a separate bedroom) would have cost us over $3,800 for just 5 nights. Note this was the price I was quoted only a month before our intended travel time – perhaps it would have been cheaper if I’d planned it earlier.

However, Marriott (and other chains) has a line of hotels that have apartment style hotel rooms with a bedroom, living room and kitchenette for a fraction of the price (about $1,000 for 6 days) but because my husband travels a bit for work and he always stays at Marriott hotels and accumulates points, we had enough for 3 free nights by the time we left for our trip so that really helped us save money (we paid $600 in total for the 6 nights we stayed there). Plus breakfast was included, so that was another savings.

One thing that I DID learn though, is that if you stay on the resort you are entitled to a discount on the park tickets (up to 50% off!) but the $500 (yes, tickets for 4 days at the park for 2 adults and one child cost us $1,000 USD!) I would have saved didn’t make up for the higher cost of the room. This may be something to consider though, if you are going with just one child or are totally ok with sharing a room as a family.

Not bad for a "budget" option!

Our hotel – not bad for a “budget” option!

3. Buy your park tickets in advance – but be careful where you buy them! I was under the impression that I could get some awesome deals on the park tickets online somewhere. However, there are only a few legitimate sites (here is one I checked out) where you can buy tickets but I wasn’t able to get better deals than from the official Disney site at the time I was buying them. I also discovered the best deals on tickets are for those people who stay at one of the Disney resorts (though you don’t get the automatically – you need to arrange this yourself).

My mistake was that I started looking to buy them way too close to our trip date – I should have started looking several months in advance. Also, prices for tickets go up in February – so buy them before to ensure additional savings! But do be careful where you buy your tickets – there are a lot of scams out there.

4. Make a budget for souvenirs – and stick to it! One thing that struck me about Disney World and Orlando is that its half stores and restaurants. And boy, do people spend their money – and its not just for the kids! I’d say more than half the people (adults included!) I saw were decked out in full Disney clothing, hats, drink containers and clutching some sort of Disney toy/accessory. The boutiques and restaurants were packed every day (note: if you want to eat in a restaurant at the park, make reservations in advance) and we were there during the off season! Its easy to spend a fortune, so I definitely recommend a budget. I told myself that I’d budget $100 for souvenirs and told my oldest son that he could pick two things that were $20 or under each. We also decided only to get lunch at the parks and that we would eat breakfast (free) at our hotel and go off the resort for dinner (much cheaper).

Mickey hats were a must :)

Mickey hats were a must 🙂

5. Bring your own camera. Disney has photographers everywhere (and set up at great picture locations) and can take your picture for you with their camera AND yours. All the photographers took pictures with our camera and when I compared them to the “official” ones, they were very comparable. Which is great because an “official” Disney picture costs $15 (to download or to have printed).

6. Take a day off. Even though we stayed in Florida for six nights, we only bought park tickets for four days. This saved us almost $300 (though the more days passes you buy, the cheaper the price per day) but my main reasoning was that it would get overwhelming to go to the parks every day and that it would be nice to have a day off to just relax at the hotel, hit the pool with the kids and see what else Orlando had to offer. This ended up being a great idea because one day that we were in Florida the forecast was for rain – so we spent the morning by the pool and then in the afternoon (when it rained) we caught a movie.

We had a great trip but there are definitely things that I would do differently in the future – namely, start planning WAAYYY earlier! It can be very overwhelming and leaving things to the last minute can make the trip more stressful and not allow you to get as much out of it as possible.

If you are planning of visiting Disney any time soon, check out this other great blog I found when I was researching.

Bon voyage!

Is organic food worth it?

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For most families, food is arguabley one of their most important (and often largest) budget categories. We need to eat to live, yes, but food is also a source of pleasure and has direct links to our health.

Since being on my “extended mat leave” (as I like to call my current stint as a stay-at-home-mom), one of the things that I’ve been reading a LOT about is food. And I’m not the only one – food seems to be a major topic of conversation and focus of a lot of media and social media these days. As a mom and conscientious person, I wanted to find out what kind of food is the best for my family, the environment, the economy. And there is a TON of information, both good and bad, out there.

One of the main food topics out there now is organic food. Now, I’ll admit – I TOTALLY bought into the whole “organic is better” thing for a long time. I would almost always choose the organic option when I could, I had a green basket of organic fruits and veggies delivered to my house…I honestly thought that I was doing the best for my family. I thought – hey, if I can afford it, why wouldn’t I buy organic? Isn’t my family’s health the most important thing? Because one thing that organic food most definitely is, is more expensive.

But when I started to look into it more and learning more about food in general (organic, conventional, GMO, farming methods etc) I started to realize that maybe its not that cut and dry. So I started looking into the reasons that I and others started buying organic to see if they were actually supported by real, scientific evidence.

Reason 1: Organic food doesn’t have pesticides (and we all know that pesticides are bad right? They KILL pests!).

Since I’m Canadian, I went right to the source – the Canadian Food Inspection Agency. Here is what is considered organic by them: “An organic product is an agricultural product that has been certified as organic. A product can be certified if it is produced using the methods outlined by the Canadian Organic Standards.”

Hmm…so what IS permitted for food to still be considered organic? Here is what the CFIA says:

CAN/CGSB-32.311, Organic Production Systems – Permitted Substances Lists, includes the following substances lists:

  • Crop production including fertilizers, plant foods, soil amendments, crop production aids and materials, and weed management
  • Livestock production including feed, feed additives and feed supplements, health care products and production aids
  • Processing and sanitation including organic ingredients, non-organic ingredients and with organic ingredients, processing aids, cleaners, disinfectants and sanitizers, and pest control substances.

Oh – so organic farming also allows for pesticides, fertilizers, feed additives, health care products and disinfectants? How is that any different from conventional farming? The fact that they are organic or natural pesticides doesn’t change the fact that they still kill pests. Natural or organic pesticides aren’t safe by default just because they aren’t synthetic.

From my reading I did learn that conventionally farmed food does have higher pesticide residuals than organic (a large study showed that about 38% of conventional foods had pesticide residue vs 7% of organic foods). However, in most cases for both conventional and organic, the residue was negligible.

That said, I decided to look at is how harmful are pesticides in general to people? Yes, they kill pests, but what affect do they have on humans? I came across this pesticide residue calculator which will show you how much you can safely consume. For example, a child could to consume 154 servings of apple in one day  without any effect even if the apples have the highest pesticide residue recorded for apples by the USDA (I haven’t been able to find anything similar for organic pesticides so I can’t comment on their relative safety). Even still – there is currently no evidence that people who eat conventional foods have a higher risk of diseases like cancer or that organic foods can prevent it.

And lets not forget that organic foods aren’t without risk – like e.coli poisoning (due to use of cow manure as opposed to synthetic fertilizers) which can – and does – cause death (like for the 5 people who died from eating organic spinach). To be fair, you can get e.coli poisoning from conventional foods as well – I just wanted to point out that just because its organic doesn’t mean it is automatically risk free.

Reason 2: Organic food is more nutritious

Now I always had my doubts about this one, though I guess I can see why some people may think this. But while there have been some studies to suggest that some organic fruits and veggies are marginally more nutritious, the main study that supports this has been criticized for being funded by a group that supports the promotion of organic farming and focused on only the positive results (where they found foods that were more nutritious) and not the negative results of the study (where they found foods to be less nutritious). In fact, most studies (such as this one done by researchers at Stanford University) show that there is very little nutritional difference between organic and conventional produce and meat (though studies have shown that organic chickens have higher levels of Omega-3 than conventionally raised ones).

At the end of the day, most experts agree that just eating fruits and veggies is important and that even if some organic foods are a bit more nutritious, their cost doesn’t make up for that tiny benefit.

Reason 3: Organic food tastes better

This is an argument I hear all the time and I was always a bit sceptical because in general fruits and veggies have a high range of tastes. Some seasons a particular fruit or veggie could be amazing and some poor. Plus taste is subjective.

But people certainly seem to think that food tastes better if they are told its organic (in a Swedish study, almost 50% of people given the same coffee, one labelled organic and the other not, said the organic labelled coffee tasted better). However, no study has been able to definitively prove that organic actually tastes better nor can people tell if they are eating organic or non-organic food.

Reason 4: Organic farming is better for the environment

This was one of my main reasons for supporting organic – hey, if there are no fertilizers, no pesticides, then DUH, it MUST be better for the environment, right?

Except we’ve already established that fertilizers and pesticides (even some with non-organic ingredients) ARE allowed. Now, its true that many are more eco-friendly than conventional. However, organic also doesn’t allow for GMO crops – and one of the whole points of GMO is to use less pesticides, fertilizers, water etc.

What made me question the eco-friendliness of organic was this point: organic farms have lower yields (anywhere between 20-50% depending on the type of crop!) and this means more of our forests, nature reserves and rainforests are being mowed down to meet the demand. And to me that is awful (though it was pointed out to me, which I verified, that the main culprit of rainforest destruction is due to palm oil production). Combine that with growing world populations and overall growing food demand, shouldn’t we be trying to make the most of the farm land we already farm? And this is where I think conventional farming is doing its part.

*** One thing I wanted to add to this section is that organic standards prohibit the use of antibiotics and added hormones to their meat. While this remains the most valid reason for me to buy organic meats (especially the antibiotics which are contributing to our current crisis of antibiotic resistant super bugs), its worth mentioning that in Canada, only beef farmers are allowed to use hormones (and many choose not to) and many conventional meat/poultry farmers opt out of using antibiotics. This is usually clearly labelled. So while this is guaranteed with organic meat, its not the only option.

Look, I’m not saying that conventional farming is amazing for the planet – but when I realized that organic is no better for the most part – and can actually be worse – for the environment due to shunning of GM technology and requiring more land to produce the same yield, it lost a lot of its appeal for me.

Reason 5: Organic farmers treat their animals better

This is also a real reason I would choose organic eggs or meat. For example, I  was under the impression that all organic eggs came from free-range chickens (meaning they can run freely inside AND have access to outside), but learned that its actually not a requirement (it really depends on which certification they receive). Yes, some organic eggs come from free-range farms. But most that I’ve seen are only free-run (means they are in one large pen and not locked in cages) and you can buy conventional eggs that are free run or free range anyway. So the only difference is the feed that they get (organic eggs hens are fed organic grains). In general I have found that the whole system of certifying eggs organic, free-range, free-run etc to be very confusing because there are different certifiers and all have different standards. The best advice regarding eggs choice would be to find a brand that meets the criteria you are comfortable with (and can afford) and buy that.

As for meat farming, I think its very unfair to assume that just because an animal comes from a conventional farm they are badly treated. Organic meat requirements are that animals are treated “humanely” – and the requirements are quite strict. However, this doesn’t mean that by default conventional ones don’t treat them that way – their standards are also very strict. Of course there will always be a few “bad apples” and farms exposed for inhumane treatment. With regards to this, the only way to know is by visiting the farms themselves and educating yourself on what humane really means.

Reason 6: Organic food is GMO free

Ok, this wasn’t really a reason for me, but it is a reason I see cited by many people. This is true – organic food is GMO free – but the question is, does it matter? I’ll admit “genetically modified” does sound scary and Frankensteinish, but what does the science say, is it ACTUALLY bad for us to consume?

And the answer is that that there is no documented evidence that genetically modified foods are in anyway harmful to human health. NONE. At most some anti-GMO bloggers (because they are rarely actual scientists, farmers, researchers or doctors – you know, the people who understand and know what they are talking about) make claims that GM foods “might be harmful” or “potentially cause health problems” but aren’t able to show any proof of this. They use the “evil doings” of Monsanto, a company that produces GM seeds and develops the technology, as a reason to avoid GM foods. But whatever their business practices are (and I’m sure they have some questionable/immoral ones) this doesn’t a) mean that the technology behind GM foods is bad nor b) does it in anyway prove that organic is better.

Not only that, but GM technology is helping farmers be more efficient, use less pesticides/herbicides and have their crops less vulnerable to the effects of climate change. To me, this is a huge plus for supporting conventional farming.

So WHY?

So WHY are organic foods sales soaring? How is it that is has become a $30+ billion industry in the US alone? The answer: marketing. Here is an excellent breakdown of how good its been. Whole Paycheck, Whole Foods alone made $13 billion in sales in 2013. I think that because people are much more concerned about the environment and their health now then they have been in the past, there is a huge appeal in all things natural and the organic idea definitely caters to that.

Also, I feel like there is a lot of food shaming happening – people, especially moms I think, are guilted into thinking that  they are being selfish for NOT buying organic for their families and that is ridiculous. .

Conclusion

So what do I think (if you can’t tell already)? Since this is a personal finance blog and I try to encourage people to be smart about and mindful of how they spend their money, I think that at the end of the day, for me, organic foods just aren’t worth it. When all things are considered, I still don’t think that the benefits from organic foods or farming methods justify the premium that they cost, especially since in Canada conventional foods are just as healthy and the industry is constantly working to improve its standards of quality and eco-friendliness.

That said, I’m not suggesting people shouldn’t buy organic. People should have the right to spend their money on whatever they like. I spend a lot of money on designer shoes and handbags compared to some people – but I budget for them and I can afford them. So I’m not going to judge someone for paying $0.87Ib for organic bananas when the conventional are $0.57lb if they can afford to do so. Nor will I judge someone for choosing organic chicken/beef/pork because they like the certain extra effort made to make the animals comfortable. Everyone has different priorities and they should make the choice that best aligns them with those priorities.

Also, while now I do avoid organic (because why pay more?) as a rule, there are some organic food brands I really like and I will continue to buy them. And I will continue to read and learn about both types of farming and will constantly be re-evaluating my choice.

So I hope that who ever reads this, their guilt about not buying organic will subside and those who have been straining to afford to buy organic realize that they don’t have to and that it doesn’t make them bad parents.

***Updated to discuss a point that I forgot to mention before.

Bon apetit!

 

 

Want to learn more? Here are some fantastic resources!

Canadian Food Inspection Agency –> great for learning about Canadian food standards, what they really are and what they mean.

Nurse Loves Farmer -> excellent blog by a farmer’s wife who explains farming processes and has a ton of knowledge about GMOs, pesticides and general farming issue.

Scientific American article on conventional vs. organic farming

Genetic Literacy Project –> great resource for science based health news and current issues

Science Babe –> a blog by a scientist who busts common science and health myths

BC-SPCA  –> Good document that shows requirements for SPCA certification of animal treatment in British Columbia and is very similar to Canada Organic standards (for all of Canada – BC is has the strictest requirements compared to the other provinces). I couldn’t find a direct link to Canada Organic.

 

 

 

Easy Money Saving Challenge

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Is one of your resolutions for the new year to get your finances under control? If so, the first thing I highly recommend doing is starting a budget. And I have a great series especially geared to beginners – but really, its totally applicable for anyone who wants to start a budget and get a control over their money.

Check out Part 1, Part 2 and Part 3. Part 2 comes complete with an Excel template to help get you started! Alternatively, I also have a template which is geared towards families for whom childcare is a big expense here.

But for something a bit more tangible, I’ve also created a quick and easy Money Saving Challenge to motivate you to start SAVING!

All you do is save the dollar equivalent of the calendar week we are in. You can set up an automatic transfer OR simply take the money in cash and put into a jar.

Here is what it would look like – check out how much you would have saved by the end of the year!

Easy Money Saving Challenge

Easy Money Saving Challenge

 

Obviously, this isn’t a life changing amount of money. But its still significant enough to do something special with – dropping a sum like that on your mortgage could take months off your amortization. You could use it for a family trip (or romantic getaway for you and your partner) make a big ticket purchases you’ve always wanted. Or you can just keep it for a rainy day and have that peace of mind that comes along with just having it there in case.

Up for a bigger challenge? Here is what it would look life if you doubled the amounts:

Accelerated Money Saving Challenge

So what are you waiting for? This week is super easy – start by saving just $1. 

 

 

Why you need to contribute to your child’s RESP – NOW

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Nothing bugs me more than people not taking advantage of free money. But people do it all the time. Many Canadians are not taking advantage of their company defined contribution pension plans (where companies will match a percentage of the employees contributions) and another place that this occurs is with RESPs.

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My son “graduating” from pre-school. Hopefully the first of many graduations!

 

What are RESPs?

RESPs – Registered Education Savings Plans – allow parents in Canada to contribute a certain amount of money every year to save for their child’s education and get a government match of 20% of the amount they contribute, up to $500 per year (so to get $500, a parent would need to contribute $2,500), with a life time maximum of $7,200. Many provinces also have their own additional grants as a way on encouraging parents to contribute.

Although unlike with RRSPs (Registered Retirement Saving’s Plans), the money you contribute is after-tax money and is not deductible. The interest and any earnings on the plan though are not taxable until it is taken out and the idea is that it will be taxed in your child’s hands when they are a low-income student.

Why you should start contributing ASAP

The cost of university tuition and fees has been outpacing inflation since 1998 and the cost of four years at university for a child born in 2012 is expected to be over $100,000 if the pace remains the same. Combine that with the Government of Canada saying that currently over 2/3rds of all jobs require some sort of post-secondary education, those who won’t have one will be at an even bigger disadvantage then they have been in the past. So in order to give your child the best start at adulthood, you would want them to be able to get a good job AND have as little debt as possible holding them back, right?

However, the main reason you want to start contributing as soon as possible is because you want time to be on your side:

1. You can get up to $500 per year – however, you can only make up for ONE year when you contribute. So if you don’t contribute for several years, that matching amount will be lost for good (though you can contribute every other year and make up for the year before). To ensure you get the maximum of $7,200 this means you need to be consistently contributing $2,500 per year for 14 years.

2. You may be too late. You can only receive the grants up until the year that your child turns 17 – however, there is also a rule that says if you haven’t contributed by age 15, you won’t get ANY grant money for ages 16 and 17.

3. It is an automatic 20% return on your investment – even if you just left the funds sitting in cash, an RESP will earn as much as a much higher risk investment without the risk. But invest all those funds into a low risk investment, like a mutual fund or even GICs, you will get an even higher return.

4. Its easier on your budget. Putting aside $100 or $200 every month from from birth to age 17 is much more doable for families than the $1,000 or $2,000 per month they would have to contribute to make up for it if they start contributing once their child hits their teens.

5. Compounding. Your child’s RESP will continue to accumulate in value even if you don’t contribute for a few years. For example, say you contributed $2,500 the year they were born but didn’t contribute anything else except the $100 per year that is required for the four years before your child turns 16, even at a conservative rate of return of 5% here is how much money you would have:

Year Starting Balance Contribution Grant Rate of Return 5% Total
1  $               2,500  $        500  $            150  $        3,150
2  $         3,150  $                      –  $            –  $            158  $        3,308
3  $         3,308  $                      –  $            –  $            165  $        3,473
4  $         3,473  $                      –  $            –  $            174  $        3,647
5  $         3,647  $                      –  $            –  $            182  $        3,829
6  $         3,829  $                      –  $            –  $            191  $        4,020
7  $         4,020  $                      –  $            –  $            201  $        4,221
8  $         4,221  $                      –  $            –  $            211  $        4,432
9  $         4,432  $                      –  $            –  $            222  $        4,654
10  $         4,654  $                      –  $            –  $            233  $        4,887
11  $         4,887  $                      –  $            –  $            244  $        5,131
12  $         5,131  $                   100  $           20  $            263  $        5,514
13  $         5,514  $                   100  $           20  $            282  $        5,915
14  $         5,915  $                   100  $           20  $            302  $        6,337
15  $         6,337  $                   100  $           20  $            323  $        6,780
16  $         6,780  $                      –  $            –  $            339  $        7,119
17  $         7,119  $                      –  $            –  $            356  $        7,475

That’s right – just that initial contribution of $2,500 would lead to almost $7,500.

But now imagine that you DO max it out – THIS is how much money you would have for your child:

Year Starting Balance Contribution Grant Rate of Return 5% Total
1 0  $               2,500  $        500  $            150  $        3,150
2  $         3,150  $               2,500  $        500  $            308  $        6,458
3  $         6,458  $               2,500  $        500  $            473  $        9,930
4  $         9,930  $               2,500  $        500  $            647  $     13,577
5  $      13,577  $               2,500  $        500  $            829  $     17,406
6  $      17,406  $               2,500  $        500  $        1,020  $     21,426
7  $      21,426  $               2,500  $        500  $        1,221  $     25,647
8  $      25,647  $               2,500  $        500  $        1,432  $     30,080
9  $      30,080  $               2,500  $        500  $        1,654  $     34,734
10  $      34,734  $               2,500  $        500  $        1,887  $     39,620
11  $      39,620  $               2,500  $        500  $        2,131  $     44,751
12  $      44,751  $               2,500  $        500  $        2,388  $     50,139
13  $      50,139  $               2,500  $        500  $        2,657  $     55,796
14  $      55,796  $               2,500  $        500  $        2,940  $     61,736
15  $      61,736  $               2,500  $        500  $        3,237  $     67,972
16  $      67,972  $               2,500  $        500  $        3,549  $     74,521
17  $      74,521  $               2,500  $        500  $        3,876  $     81,397

Why you don’t have any excuses to NOT contribute

If you are in Canada and you have a child that is less than five years old, you have NO excuse to not contribute to the RESP. This is because every child in Canada, no matter what household income they come from, is entitled to received $100 per month every month until they turn 6 years old in the form of the Universal Childcare Benefit.

So to FULLY take advantage of the government matching plan and get the full $500, you would only need to fork over an additional $108 per month. This is not a lot of money and I bet that most families would be able to find room in the budget to accommodate this. Lower your cable or phone package, hunt for cheaper insurance plans, shop at the discount grocery stores, buy the store brand diapers. Keep maximizing your RESP contributions at the forefront of your mind when making other budgetary decisions. If you need to finance a new car, if you are picking a model that makes it difficult to maximize your RESP contributions, you are picking a car that is too expensive.

But even if you really can’t afford to maximize the contributions every year, remember anything you contribute is better than nothing, especially earlier on.

Still struggling? How about asking grandparents and aunts and uncles to make a contribution to RESPs instead of buying pricey toys for birthdays and Christmas. Use any money your child received for baby showers, baptisms, bar mitzvah’s or other milestone events as contributions. This is what we do – my parents don’t buy my kids expensive presents – they make a contribution to their RESP every year instead and its helped us ensure that we get the full $500.

What if my child DOESN’T go to university?

First of all, the RESP money can be used for pretty much any post-secondary program. This includes universities, colleges and various post-secondary education programs outside of Canada as well. So there is a lot of choice.

But here are your options:

1. Leave the RESP open

The RESP can stay open for 36 years, which gives your child a chance to change their minds (trust me, the novelty of working as a bartender will wear off when they start serving people who are younger than them and that more money).

2. Change the beneficiary

You can also transfer funds to another RESP beneficiary (such as a sibling). If you have an individual plan, you may have the option of naming another beneficiary. If you have a family plan, you can use the earnings and certain federal and provincial grants to pay for the education of another child under the plan (certain fees may apply though – you need to discuss this with your RESP provider).

3. Transfer the money to your RRSP

You might be able to transfer up to $50,000 of earnings tax-free from the RESP to your RRSP under certain conditions.

4. Close the RESP

The contributions you made are yours to keep and you get them back. You do have to return the grant money from the government, however if the RESP has been open for 10 years and the beneficiary is at least 21 years old and not continuing post-secondary education, you can keep the investment earnings. Please note that a 20% fee and income tax will apply. If you have a group plan, you cannot get the earnings back as these are shared with the other plan members to increase their payments.

5. Transfer the money to a Registered Disability Savings Plan (RDSP)

It may be an option for you to transfer the RESP funds into an RDSP if the beneficiary of the RESP has a severe and prolonged mental impairment that can reasonably be expected to prevent the beneficiary from pursuing post-secondary education.

So get saving – remember you have until December 31st to contribute to make the year count.

 

 

A Smart Mommy’s guide to Budgeting for Christmas

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Piggy bank with christmas hat isolated on white background

It’s officially 97 days left until Christmas but I know that Christmas shopping and all that hoopla is still far from anyone’s mind. Heck, we just had the first day of school and most of us are focusing on Thanksgiving and making it through Halloween.

But I want you to start thinking about it NOW to make sure that Christmas is what it SHOULD be. And what it should be is about spending quality time with family and other loved ones and for Christians especially, about celebrating the birth of Jesus. It should be a time of peace, gratitude and fun, not stress, disappointment and exhaustion.

So, here is my step guide to planning and budgeting for a stress-free Christmas.

1. Make a list of your Christmas expenses.

Christmas expenses should include everything that you extra you incur because of the Christmas season. Be it taxis from your work holiday party, to tipping your daycare provider, to decorations, to gifts, you need sit down and list it all out. From there you will have to prioritize and decide what is a must expense (presents for your kids) to what you don’t need (a new dress for your work Christmas party).

2. Set a budget for your Christmas spending

Next you figure out what your budget for Christmas should be and how to allocate it.

To determine what your budget for Christmas should be, you need to determine what you can afford to save/spend over the next 4 months without it affecting your overall budget. The best way to determine this is by looking at your Life category and see what you can realistically set aside for Christmas. If what you can realistically save is $100 per month, THAT should be your budget.

You should absolutely NOT go into debt or cut into your debt repayment or savings categories just to satisfy a Christmas expense. Did half of your Christmas lights get destroyed by a flood in your garage? Oh well – be creative with what you have or even hit up your neighbours to see if they have any spares.

3. Set a budget for each child.

Once you’ve determined what you will be spending on presents, I would further set a budget for each child. I believe older children should have more because what they want is usually more expensive, and lets face it, the younger they are, the more entertained they are by the wrapping paper than by the actual presents anyway. Plus, I would rather get one or two nice gifts that will be used a long time (like a game console) over a bunch of little things that will be discarded before the day is over.

However, I do like to get even the youngest of babies SOMETHING – I know my oldest would have asked a LOT of questions about why Santa didn’t get the baby anything. This is a great time to buy some “needs” for younger babies and mask them as Christmas presents.

4. Plan ahead

I like to start my shopping early – like NOW early – for one, there is a much better selection of things and it makes it easier to stick to my budget. Try to suss out what your children would like – chances are that what they want now vs 3 months from now will not change too much – and start looking for deals. Go on-line, look up retailers and see if any of them have sales coming up. Plus, when you know a) how much you are going to spend and b) what you are looking to get you can keep your eyes open for those items when doing other errands. I got a cheap video game for my older son at Costco the other day when I was doing grocery shopping.

I’m usually done by November and it lets me focus on just enjoying the season and having fun without the stress.

5. Get creative!

I’ll be honest – I prefer to spend my Christmas budget on family more than on other things. If I can cut corners on other expenses, I will. Here are some good ways to do this.

  • Do you collect Air Miles or other rewards? If so, check your balance – I’ve redeemed points for gift cards to use as teacher/daycare provider gifts.
  • If you like baking, consider doing a baked-goods gift basket – you can get cute Christmas themed tins and boxes at the dollar store. Perfect for gifts for your neighbour or as a hostess gift for a party you are attending. If you don’t like baking, you can still do this almost as cheaply by buying treats in bulk and dividing them up, or even buying the ingredients in bulk and layering them in mason jars like this.
  • Encourage a Secret Santa for gift exchange with your extended family. Buying gifts for everyone from grandma to Aunt Jane can get pricey, even if you don’t spend a lot. Trust me, everyone will appreciate this!
  • Avoid getting hair cuts, facials or anything else that requires excessive tipping around the holidays (extra tipping over the holidays is a pet peeve of mine).
  • Make a list of gift ideas for your kids and have it ready if you get asked by other family members for ideas or if they would want to pool together for a special gift.
  • Consider doing Lay-by purchases – this is when you can set aside an item in a store (but not take it home) by putting down a deposit and then paying off the balance weekly for a specified amount of time – this could be a good way of spreading the cash outlay.
  • “Pad” the amount of presents for your kids with cheap stuff they love but you like to limit. Someone once mentioned that they would only ever get their favourite sugary cereal at Christmas and I loved that idea. My son LOVES Lucky Charms, but I think its total garbage and rarely buy it. So buying him a box at Christmas will take care of a gift AND I know he’ll love it.
  • Sometimes effort and thought over a gift can be much more meaningful and appreciated than an expensive gift. I remember reading about one mom, who was strapped for cash, got some inexpensive wooden boxes at a craft store and filled one for each of her teenage children with items from their childhood – things like their old report cards, photos, items of favourite clothing etc that she had kept over the years but had just been sitting in her attic. They apparently loved them, and now as adults still have those boxes and continue to add special items to them.
  • Do you have other ideas? Leave them in the comments section below!

Is multi-level marketing right for you?

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Network-Marketing-Companies

I recently did a post on whether or not one can afford to be a stay-at-home parent and I mentioned that one way would be for the parent staying at home to get a part time job or a MLM (multi-level marketing) sales job on the side.

Multi-level marking (or “network marketing” as its sometimes called) is a selling strategy used by some companies where their sales people are compensated by selling the company’s products via a commission as well as the sales of other salespeople that they recruit. While there has been some criticism of MLMs being “pyramid schemes”, many of these companies are truly legitimate and require you to sell at a consistent level (and providing coaching to your “downlines)” in order to be rewarded for their sales – so you can’t reach a certain level and then just coast. It has become a multi-billion dollar a year industry and there are new ones popping up all the time and joining the ranks of Avon, Mary Kay and Tupperware.

Lots of women are doing this. I know a Nurse Practitioner who is very high up at a children’s hospital who sells Arbonne. A friend of mine who sells Stella & Dot is also a Manager at a large consulting firm. I myself did it for two years as a sales rep for Stella & Dot (though officially sales reps are called “stylists”) and it was a great way to have some fun and make a bit of extra money – which was my goal. But being a business school graduate and CPA, I also knew what to do to make sure I didn’t lose money on it.

stella & dot stylist

However, before you call your Avon lady or Stella friend and ask how to sign up, there are some things you need to keep in mind in order to make sure this is right for you.

1.  You get out of it what you put into it

After hearing a recruiting speech, you may have visions of white Mercedes, Pink Cadillacs or amazing vacations dancing in your head, but the truth is that success in a MLM job is directly related to the amount of effort (read: WORK) that you put into it. In reality, while you may be told that you “only” need to sell at two shows per month to make hundreds of dollars in commissions, or “only” need to recruit 1 person per month to qualify for all those extra incentives, the truth is that the people who make a lot of money in these companies are ones who treat it like a real job and put in the same number of hours that a “real” job would. Sometimes, this is a LOT of hours; they are constantly sourcing hosts for their parties, chatting up recruits and attending these sales shows.

2. Set realistic goals and expectations

My friend got me into Stella & Dot when she asked me to host a party. I checked out the website and really liked the jewellery, so I said sure. Then I had such a great time at the party (and loved getting some great freebies out of it), I thought it would be fun to do. I liked that it got me out of the house occasionally and I liked that I was getting some real sales experience. I also did “earn” quite a bit of free jewellery and enough money to treat myself to a nice pair of shoes or dinner out every month (on average). That was my goal though. I didn’t want to spend too much time, effort or money on it (especially the last part).

If your goal is to pay for your kids’ private school tuition or to pay off your mortgage in the next year or even replace your salary all the while being a full-time stay-at-home-mom, then you will be sorely disappointed. This is not the silver-bullet solution to making a ton of money while staying at home. Its a great option to earn a little extra on the side OR a potentially lucrative-ish full-time job if you are great at sales and want flexibility.

3. Treat it like a business

If you sign up to sell products for one of these companies and your goal is to make money (as opposed to feeding an accessory/skin-care habit with a discount which is a reason many people do it), you need to realize that this is a business and you need to treat it as such.

As a sales rep you will earn a commission on everything you sell plus a “bonus” based on whatever your “downline”/recruits sell. But this IS NOT profit or what you are really earning. You also need to spend money on membership fees, samples, shipping and taxes as well, which needs to be deducted from the commissions you earn.

So say you make on average $500/month in commissions (with Stella & Dot for example, this would require about $2,000 in personal sales). But you spent $1,500 on samples plus another $200 on fees (membership fee, website fee, shipping) when you started out. That means that you are not making a penny in profit until the 4th month of “work”. And in the meantime, the company may have released new products which you will be encouraged to buy.

Therefore it is very important that you set yourself a strict budget on how much you are willing to spend, both initially and every time new products are released. Make sure you keep your receipts for gas used to drive to and from parties, for coffee/lunch dates with your team or potential recruits and of course, for all samples or supplies you purchase to run your business. It also means you need to spend time on calling potential hostesses, working on your sales pitch and get to really know the product you are selling.

Its very, very easy to spend a TON of money on the samples that you “need” to get your business going and later to make sure what you have is fresh and up to date but it can quickly get out of hand and I know MANY, MANY people who are clearly losing money.

4. Remember, the company is making money off of YOU too

I signed up for a Facebook group for Stella & Dot when I was selling with them and there would often be disgruntled stylists complaining about how its “unfair” to pay more for shipping than customers or annoyed that the product credits they earned didn’t get them enough new samples or whatever.

I would often remind them that while we like to think we are employees of the company, we are in fact, a different level of customer as well. I, personally, was ok with this and understood that this is just the way it works. I know that when I bought samples at 50% off, they are still making profit margin on that. Otherwise, it would be a bad business model.

Another reason I wanted to mention this is  because I want to caution anyone doing this type of selling to remember that these products are not super amazing, unique, special or that better than other products sold in stores. They are consumer goods and they have great marketing campaigns, but you aren’t doing anyone a major favor by introducing them to these products. They may claim they are better for you than other products, or they are better quality or better value or whatever, but you need to take this with a grain of salt. Also, some are borderline unethical, especially anything to do with weight-loss, like this product (please don’t go into an MLM that requires you to prey on women who are already dealing with low self-esteem/body image issues just to make a few dollars).

Of course you need to like the products (heck, even LOVE the products) and like using them, because you shouldn’t be selling something you don’t like or believe in, but PLEASE don’t become brainwashed into thinking they are the be-all and end-all of all products.

For example, while I really like most of Stella & Dot’s jewellery and think that the quality is good, I don’t think it’s superior to a lot of similar stuff. Yes, I’ve had pieces wear incredibly well and some break after minimal use, I’ve had good and not so good interactions with their customer service (but on the whole, it was excellent) and there have been collections I loved and some I didn’t really like. Just like many other brands I like.

Similarly with the make-up and skin care companies like Arbonne. I like some of the products I’ve bought from them but some I wouldn’t buy again. I also don’t like how they focus their sales pitch entirely about what is NOT in their products vs what IS in them (but don’t get me wrong, it’s a good product and I know a lot of people who love it).

5. Its not as easy as it looks

Direct selling is hard. Its scary, even. You also need to develop a thick skin and resilience to the word “NO” – because you will hear it a LOT. On average, you will need to contact 10 people for every 1 that will agree to host a show. And a good chunk will chancel, sometimes on the day of. Then, you will need to remind your hostess that for every 4 people she invites, only 1 will come.

NO images

Its tough because if YOU really love the product, at first you will find it unimaginable that others don’t. You will find it uncomfortable to approach people to help you by hosting shows and after you tap out on the “low-hanging fruit” – ie. your family and friends, getting new business is not that easy.

You will have events where you sell nothing or very little. You will have months where you will sell nothing.

6. Do some research before you join

Even though it might be tempting to sign up right away (the consultant trying to recruit you may need to hit certain targets by end of month for example and may entice you with free products), make sure you are ready and really understand how the commission/pay structure works and if it works for YOU. One thing I really liked about Stella & Dot is that I got a straight commission on whatever I sold. If I sold $20 in jewellery, I got $5 in commission. If I sold $2,000 I got $500 and once I sold more than $2,300 the commission amount went up. I didn’t have to hit any targets or sales goals to keep earning commission and that worked really well with me because some months I just didn’t have the time to be able to do many (or any) shows. However, I know that some companies DO require a certain sales volume, so if you aren’t sure you can maintain it, don’t do it.

On the flip side, take the “horror stories” you read online with a grain of salt as well. I think some women join with unrealistic expectations or without considering how much money can really afford to invest in a business like this and are disappointed or feel “tricked” into joining. They like to point fingers and call it a scam, but in reality, like many investments, you need to do your research and need to be realistic about your potential outcomes.

7. Maternity leave & MLM aren’t a good idea

Now, I DID continue with my Stella & Dot venture while on maternity leave but sometimes I wish I hadn’t. First of all, you do need to declare all your income to Service Canada every two weeks (it can be a bit of a pain to determine what you are actually earning since the commissions you earn need to be netted against your expenses, but those don’t necessarily coincide with your commissions earnings), then they will deduct what you earn from your maternity leave benefit, which kind of defeats the purpose of the mat leave benefits. If you are earning good money though, it may not matter to you to lose your benefits, but I think for the majority of people doing MLM, its not worth it. One thing I do want to note is that the reason I continued was because I liked the social aspect of it – the parties gave me an excuse to dress up, put on make-up and have some fun.

At the moment, I’m still registered as a stylist, but as soon as my membership expires this August, I will be retiring from Stella & Dot. I had fun, but to be honest, I got a bit bored of it. It was a lot of fun while it lasted though and I would recommend it to many people.

The Family Car – How to make the smart choice

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car

When you have kids, you NEED a car. Having a car is probably second to only the washing machine as a possession that I would find it very hard to live without.

However, it can be very confusing to decide how to go about getting a car. Should you get a used car? New car? Buy it? Lease it? Take the one with a rebate or lower interest? And unfortunately, you can’t ask a dealer because they will tell you that you should do what will make them the most money at that time. All “free gas for a year!” promotions and “0%!!!!” have a profit margin built in to them so don’t be fooled that you are getting a “deal”.

At the end of the day you need to remember that a car is a depreciable asset and prior to getting a car you need to consider the following:

1) What kind of monthly payment can you afford?

This should include the cost of the car AND the insurance (and insurance will be different depending on the type of car you get). Most financial experts would recommend that a car should be paid off within 3 years, so it is a good bench mark to use when considering the price range of the car.

The best way to figure out what kind of car you can afford you should do the following:

Step 1 –  Take the price of the car and add all the applicable fees and taxes

Step 2 – Divide that amount by 3 to see how much you should be spending per year

Step 3 – Next, divide that amount by 12 to see what your monthly cost would be. Add the insurance premium you would expect to pay for that car.

Step 4 – Compare that to what you have allocated for your monthly car budget or stick it into the budget template and see what percentage of your overall budget it comes out to be. If the amount is higher, you most likely CANNOT AFFORD IT. Pick a cheaper car.

2. Should you buy or lease?

From a responsible financial standpoint, the general consensus is that buying is always a better choice than leasing in the long-run. The reason is that buying results in ownership and presumably you will have an asset at a time when you aren’t making a payment. If the average life of a car is 10 years and you pay your car off in 3, you will have 7 years of no car payments. That could be a HUGE savings, even if you factor in the higher maintenance costs associated with an older car.

Leasing means you will always have a car payment and nothing to show for it. Insurance is usually higher on a leased car, most leases still require a down payment (which you will have to come up with every time you get a new lease),  your payment has an amount for depreciation worked into the monthly cost AND when you return the car you can be hit with extra fees for going over your allowed mileage and “above normal” wear and tear on the car (and “above normal” is determined by the dealer). I had a friend who had to pay a $2,000 fee for above normal wear and tear on a leased Audi (apparently the rims were more scratched up then they should have been).

I think leasing makes sense if you relocate often and moving a car around would be inefficient/expensive. Also, leasing can sometimes be a better choice for those who are strapped for cash because monthly payments are often lower because they are often done over a longer-term. You also don’t have to worry about reselling it later on since the dealer takes that risk. Lastly, I guess if you are the type of person who always wants to have a new car than leasing is a good option but to me its in the same category as leasing a fridge or a TV and I think is just silly when you have kids.

3. Should you buy/lease the car with the rebate or the low-interest?

Again, its all about the math and the best choice is the one that has the lowest overall cost at the end of the loan. I recently read that zero interest, or a number close to zero, is “the crack cocaine of consumer financing, and automaker ads stress this to make the purchase of vehicles guilt-free”. And I know plenty of smart people who totally fell for this. “This car is ONLY 0.9% interest!” and then justify spending MORE money on a car because they think they are getting a better “deal”.

For example, say you are comparing two cars, each with a base price of $30,000.

Car 1 has a 0.9% financing rate for 5 years and Car 2 has a $5,000 rebate at 3.99% for 5 years – what is the better deal?

Car 1 vs Car 2

 

In this case, the car with the higher interest rate (but with a rebate) is actually the better deal.

But if you are buying and find that the two deals result in the same overall cost —say, choosing between a large rebate with a higher interest or no rebate but with a zero percent interest for five years—taking the rebate is the better strategy.This is because you get the savings right away via discount on the purchase price, whereas the interest savings on the 0% (or whatever the low interest rate is) are earned over the life of the loan. If the car is written off early or you want to sell it before financing is paid off, the customer with the rebate will be ahead.

4. Should I buy new or used?

This one isn’t as obvious. I’ve personally done both. My current car was purchased new. The one before was used.

Yes, used cars are often much cheaper (and have cheaper insurance) and if you get a good one, can save your family a lot of money. But they are also cheaper the older they are and older cars need more repairs AND you can never be sure that they were well maintained before you bought it. As a parent, this was very important to me – I wanted to make sure that the car I was putting my kids into was safe above all else.

The reason we ended up selling our used car (that we bought when it was 3 years old) was because we no longer felt it was safe (lots of trouble with the brakes and the engine spontaneously turning off) and the extended warranty that we had purchased (thank goodness, because a lot of the repairs would have been extremely expensive) was about to expire. I was disappointed because I actually really liked the car overall.

The reason we decided to buy new was that we just didn’t want to deal with that worry again and figured that the premium of driving a new car off the lot (that we would ensure was properly maintained) was worth it.

Happy car shopping!

Can you afford to be a stay-at-home mom? 5 steps to see if you can.

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my boys

Both times when I was pregnant with my boys, I used to visit internet forums where I could chat with other moms and moms-to-be. While we discussed many parenting (and many non-parenting) topics, one topic that dominated was whether or not to stay home after their babies were born.

Now, I’m not saying that all women should stay home and be stay-at-home moms. Some love their jobs and want to get back, some don’t want to lose their momentum in their careers and some just know they can’t afford not to. But all moms will want to take some time off after birth and many want to know how long that period can be – be it a month, a year or several years.

While in Canada we are entitled to a year of maternity leave and many can claim employment insurance benefits, it isn’t a given that everyone can afford to take this time off or if they should from a financial point of view.

So, if you are considering becoming a stay-at-home mom or already know this is something you want, this post is for you.

Step 1 – Update your budget as if you were a stay-at-home mom.

Like with all things financial, its all about the math. So the first thing you should do is delete or adjust the income of the parent that will be staying home from your budget (while I do refer to stay-at-home-MOM, I really mean “parent” since this also applies to dads who want to stay at home as well).

Kasia’s Basic Family Budget – updated template 

Step 2 – Analyze your budget

Next have a look at what this does to your housing and essential fixed cost allocation (so your rent/mortgage/property taxes/insurance). If this amount is now greater than 40%, you CANNOT afford to stay at home – at least not in the current home you are in – whether or not the amount you save on daycare is more than the income you were bringing in (I’ll do a post on this later – because unless you TRULY make a significant amount less than a reasonable daycare costs, this is very short-term thinking).

However, before you call your real estate agent, there are some things you should consider. Even if you are able to find a cheaper home, you need to factor in other costs associated with moving. And I don’t mean the moving truck and pizza and beer for the friends who help you move. But all the ongoing costs that you will incur because of living in a different location, (and not to mention the non-financial factors like amenities and quality of local schools etc).

For example, say your current rent is $1,500/month. You find a place thats $1,200/month and that amount puts you under the 40% threshold. However, you now need to get a second car because the new place doesn’t have public transit close by. Say that it will cost you $300 for a car payment and insurance. So essentially you are in the same financial position because your new car payment and insurance become essential costs.

If you are still under the 40% threshold when you delete your income, great. Now lets consider your other budgets. You have to be realistic. You can’t cut your grocery budget from $800/month to $500/month and expect to stick to it unless you drastically change the way and what you eat. Similarly with utilities – if someone is at home all day, heat, electrical and water will all go up.

Same goes for your “Life” budget. If you have barely any money left over for life, this isn’t reasonable. I constantly hear from moms who think that they can live for free (The library has free activities! The park is free!) but forget that their children will still need clothes and WILL persist in growing out of them, that they will want to play soccer and go to the movies. That birthdays, Christmas will still require presents, washing machines will break, and pets will need to go to the vet . Make sure that you have at least 15-20% of your after tax income available to you for Life.

Next, are you still able to save for the future? I recommend that 20% of your budget goes towards debt repayment and savings. And I feel like once you have children, it becomes THAT much more important to have a good safety net in place.

However, if you are just planning on taking a couple months off for maternity leave (or even the full year) and not making an RRSP contribution for a few months is what will help you pay the bills, I don’t think its a big deal. But if you plan to be a stay-at-home mom permanently, skimping on savings or debt repayment is completely irresponsible.

Step 3 – Make sure your partner is on board

Losing an income and reducing your budget, even if manageable, will require a change in lifestyle. You need to sit down with your partner and make sure that they are on board. You may think that cutting the gym membership, canceling cable and not taking any more vacations is a small price to pay for being able to stay home with your kids, but your partner may not, or at least may not in the long run. Make sure that this is a decision you are making TOGETHER and its not something that YOU want and THEY are giving you. You don’t want them to resent being in a tighter financial situation or the burden of being the single income earner because this will eat away at your relationship. And you don’t want to be in a position where they can hold it over your head with “I make the money, so I get the final say” on every decision going forward.

Step 4 – Start planning – and saving – now

If you run the numbers and it really looks like you won’t be able to afford to be a stay-at-home mom, don’t despair. This is still a possibility, it just may not be one right away. But the sooner you start planning (and saving) to take time off, the better.

Start brainstorming ideas  to still contribute financially – perhaps you can work part-time, get a direct sales job or do some free-lance work if you are able.

Also, look into seeing where you can cut costs. Can you reduce your insurance premiums? Lower your cell phone plan? Stop getting your hair highlighted? If it is important to you to stay home there are some easy sacrifices that you can make that won’t impact your life as much but can be the difference in making becoming a stay-at-home parent a reality.

If you are pregnant, try living on just one income plus what you expect to get while on maternity leave and bank the rest or use it to get the essentials for baby. Is it doable? Easier than you thought or downright impossible? If you have already had your baby or your child is older, do a trial run. See if you can live off one income.

Step 5 – Be flexible and be aware

Spending time with your children is a precious and really, a priceless thing. But the end of the day it is good to be aware of what a major life decision like becoming a stay-at-home mom really means. Some people are ok with going into debt in order to take the whole year of maternity leave. To be honest, I judge this less than someone who goes into debt to buy a luxury car, renovate their kitchen or go on an all-inclusive vacation. Just know what you are getting into and make a plan as to how you will manage it.

But also be open to some compromise. Maybe you can’t afford to be a stay-at-home mom until your kids are in school but maybe you can for their first two years of life. Maybe you can’t take the full year of maternity leave with your first child but perhaps if you plan accordingly, you can with your second.

Lastly, and this is something that I know from experience, whether you end up staying at home or not, remember its the quality of time and not the quantity of time that you spend with your children that really counts.

Budgets for Beginners Part 3 – Sticking to Your Budget

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The hardest part of having a budget is sticking to it. So I’ve come up with some ways to simplify it.

PLAN your spending

At the beginning of each month, I like to think about all the “Life” expenses that we will have and want to make sure that we have enough money for them. For example, later this month I am attending a baby shower and I wanted to buy a special gift for another friend who is turning 30. I’ll deduct those amounts from the “Life” budget at the beginning of the month to make sure that I have that money set aside for when I’m ready to make the purchases. You may also set aside some money for a much larger purchase you want to make later in the year. For example, I wanted to buy this kitchen island cart from Crate & Barrel and it cost $600. That would have killed our “Life” budget if we applied it to one month, so we decided to post-pone buying it for 3 months and just allocated $200/month towards the purchase.

TRACK your spending

Just like a diet, a budget requires that you TRACK what you spend. There is no point in setting up a budget and not keep tabs on where you money is going.

My tip for easy budget tracking is to only track your  “Life” expenses on a daily basis. Food and transportation I’ll track weekly and I consider money in my housing, utilities, savings etc categories to be already spent. Its gone as soon as the 1st of the month rolls around. Its easy – you KNOW how much your mortgage or rent will be every month. There is no need to track it.

But there IS a need to track food and all other miscellaneous spending.

One method my husband and I used is our “Daily” method – basically we divided our “Life’ budget by 30 (or 31 depending on the month) and tried to stick to that. If either of us wants to spend more than half of the daily budget that day, we need to clear it with the other person to make sure we STAY on budget.

So say we have budgeted $1,200 per month to spend on “Life”. In June, that would be $40/day total or $20 each.

Then every day we would take 5-10 minutes and update a spreadsheet (using a Google doc is  great way to do this, as then you can both access and update the same one in real time). Add up the total spent, subtract from the balance from the day before and divide by the number of days left in the month to see what your remaining “Daily” balance is.

The reason this is a good strategy is because it will make you think about spending more than your daily allotment. So, with my example of $40/day, if I want to buy a pair of shoes for $120, that is like 3 days worth of our whole family spending. Now, that might be ok – we don’t NEED to spend $40 per day. Some days, we will spend less than $40, some days we won’t spend anything at all. But at least I know – and perhaps if I want to get those shoes I’ll be more conscious with my other spending to make sure the budget isn’t blown. I might skip that latte, arrange to meet a friend for a walk in the park instead of for dinner and make my husband lunch for a week so he doesn’t have to buy it.

Example: Budget Tracker example

Above is an example spreadsheet I created (I like to add little comments to my sheet to remind myself what I spent money on and so my husband knows too). You can replicate it for the other categories you want to track too, like food and transportation.

USE technology

Using the Excel or Google Docs spreadsheet is a good basic way to track your budget and spending. However, there are some great apps and websites out there that can help you. I really like Mint.com – it links all your banking, credit card and investment info to it and it updates it every time you log it. You can set your budget amounts and then allocate transactions to it – its pretty good at guessing (so when you buy something at a grocery store, it will automatically add it to the grocery budget)) though sometimes you have to adjust it (for some reason, whenever I went to this one coffee shop it would categorize it as “Hardware Store”).

Note: some people are uncomfortable to put all their financial information like that on a website for security risks. You need to do what you feel comfortable doing. I check my Mint.com balances every day so I’d be aware if something funny was going on.

CASH FLOW is king

One of the easiest ways to get off budget is to screw up your cash flow. If you run out of cash, you will go into debt. We NEED cash for certain expenses such as our mortgage, property taxes and any other expenses that are debited directly from our bank account. This requires a bit of planning regarding the timing of paying our bills. So will my bank account may LOOK healthy on the 1st of the month, a lot of that money may be required to pay those bills. So, sometimes as much as I’d love to pay off my credit card (which I always do in full) right away, I will often wait till just before its due. This avoids me going into overdraft  – which can get really pricey at $5 every time I go in plus interest. That being said, its a good idea to have overdraft protection in case you do forget a bill or miscalculate your dates, because an NSF charge is much higher AND will affect your credit rating.

So off you go! Next in the budget series will be a post on Making the Most Out of Your Budget.

cant afford cat