When we made the decision to have kids, we knew that it would be a huge financial undertaking. We live in a high cost of living urban area where you generally need two incomes to survive. I thought we were doing OK until a discussion on a blog got me thinking. Then recently, a friend confided to me that her family was in a huge financial crisis. They are not spendthrifts and I’m pretty sure that her husband makes the same or slightly less than I do. While we’re not stressing over finances (yet?), our incomes and expenses are similar enough to make me nervous.
My friend and her husband went through a long period of under-employment just as they started a family. Even if you don’t go for designer maternity clothes or a fancy nursery, having kids will stretch anyone’s budget. They moved to another city to escape a high cost of living area but this move meant a greater distance from family and friends. She also quit her job to stay home and is pretty adamant about not returning to work. I am pretty sure that they started relying on credit cards to make ends meet.
Once the husband found a job, their situation stabilized. However, they had zero savings, credit card debt and her student loan debt in addition to regular living expenses. In situations like this, one major car repair or unexpected medical expense became a major set-back.
In contrast, we’ve generally made better choices and have been luckier than my friend in terms of finances. Neither of us have student loans. We did not start a family until we had substantial savings. I continued working after having kids. We can also rely on family for some much-needed help with childcare.
I guess I’m worried because there are two ways of viewing our different financial outlooks. Either the oilandgarlic household is doing OK because of a combination of smart choices and luck (no student loans, no periods of under-employment or unemployment, outbidded on overpriced homes during the real estate bubble) OR it’s all an illusion because kid-related expenses are only beginning to catch up to us. In other words, my friend’s current situation is a crystal ball into our future.
Despite getting off to a better start, I worry about increasing childrearing costs, higher medical premiums and general cost of living increases in gas, clothing, and food. Other new expenses are avoidable but are saving our sanity, like gardeners, cleaning help and a part-time nanny. Very soon, I will have to crunch some numbers to see if our expenses are exceeding our incomes or if it’s more in my head. I do know for sure that we can’t save much right now and I wonder if this is how it started for my friend until it snowballed into credit card debt and desperation.
Do you ever feel like you’re one mis-step away from disaster? Do you live on one income, just in case?