In August we celebrated our son’s first birthday. We had a relatively small backyard gathering with 15 adults and 5 kids. All enjoyed the great weather and a beach themed party put together mostly by my wife with me in charge of the backyard maintenance, house cleaning and booze. Works better this way since if I were to organize it, kids would have a soccer ball and maybe a volleyball to play with while adults would have beverages and maybe some chips. Instead we had an inflatable kiddie pool, sandbox, all kinds of beach balls, tricycle, duckpin bowling and different toys keeping the kids entertained while adults snacked on home cooked appetizers and socialized. And I sure as hell wouldn’t be able to make the cake you see in the picture!
Once the dust settled, I thought it was a good time to reflect back to see how our finances were impacted during the first year of caring for our baby boy. I’ll keep this post focused just on the financial aspects but I will say that we are both ecstatic to finally become parents and, while challenging at times, we would not change it for the world!
I’ve written before about how something clicked when my wife became pregnant and I became much more aware of our lifestyle, the direction in which we were heading as a family, our finances and the need for some changes. Just the anticipation of this major life event actually triggered a series of lifestyle and financial adjustments. We de-cluttered the house, paid more attention to what we were eating, came up with a plan to be mortgage-free in just a few years and put it into action, re-evaluated all ongoing expenses cutting wherever possible (cable, cell phones, insurance, restaurants, shopping…). I even did something opposite of what most expectant parents do and downsized my car from a 4 door sedan to a 2 door MINI Cooper. Most importantly, we started frequently discussing where we are going and how we want to live as a family in the future.
One thing I always wanted to do but never did before the baby news, was track our spending. Theoretically I knew our approximate monthly burn rate and kept a couple of spreadsheets. The problem with spreadsheets is that they required manual updating which wasn’t something I wanted to do all the time. Also, while I knew what I was spending, I was ballparking what was happening on my wife’s side by observing the shopping bags entering through the door. You see, we have separate checking accounts and credit cards – a system that has worked for us for many, many years. While we do occasionally squabble just like every other couple, I can’t remember the last time it was about money, so we have no desire to change what works. Still, we would both benefit from knowing exactly where our money goes as a family.
I decided to open an account with Mint.com and it’s been a great tool to get a clear picture of how we are doing financially every month and over the years. I spend a lot of time in the Trends section which has all kinds of cool charts and data becoming ever more useful with each passing month as the transaction history continues to accumulate.
We’ve been tracking all our baby expenses in the Kids category which is further broken down into other categories that you see below. If we go to Costco and buy groceries along with a few items for our son, I will split the transaction to record what was purchased under the Kid category. While a few things might fall through the cracks I feel like the charts paint a pretty accurate picture of our child expenditures.
Charts that you see here cover the period from 9/1/2012 through 8/31/2013. Prior to that we spent about $700 on Baby Supplies and Diapers/Wipes in preparation for the arrival of our son. Big ticket items included a breast pump and a couple of yards of material for the curtains along with two gallons of paint to finish the nursery. We were extremely lucky to get a lot of things for free from family and friends. Crib, mattress and a rocking chair donated by friends that wanted to clear out their attic. Old dresser from grandma refinished to look better than anything we would’ve bought at the store. And of course the baby shower exploded into a fountain of gifts.
Note that I keep track of any gift cards in Mint as well. So if we get a gift card to Amazon and use it to buy formula or kids clothes, I will manually record each purchase in Mint as an expense and then offset it with a credit in the Income category under Gifts. We treat gift cards like cash and not as an excuse to buy unnecessary junk, so documenting each gift card transaction in this way makes sense because it’s money we would have spent anyway.
So without further adieu let’s look at what we spent in the one year after our son’s birth.
Babysitter and Daycare – my wife stayed home with the baby for the first 3 months. After that, our son’s grandma babyset for a couple of months full time until the baby started to get big and not as easy to lift. She has bad hips so at 7 months our son went into daycare. While we were paying grandma, our daycare expenses really went up once she could no longer babysit.
Baby Food and Formula – our son was breastfed until around 8 months but we supplemented with formula even before then. Once he became fully formula fed, our formula expenses skyrocketed.
Diapers/Wipes – we made a choice to use disposable diapers. We talked about using cloth but we would have had to upgrade our appliances and it was not something in our budget. And frankly, with all the other things that we already do ourselves by insourcing, reusing, recycling and conserving we feel OK to let this one slide for convenience sake.
Baby Supplies – includes things like the birth certificate, medicine/doctor, bath mat, bibs, bottles, sunscreen, baby gates, bicycle seat and birthday party supplies. In other words, it does not neatly fit into one of the other categories and it’s not worth to keep track of it on a more granular level.
Clothes and Toys – self-explanatory.
Kids Miscellaneous – we made a frivolous purchase of entering a photo of mom and the baby into an online contest. We knew that we were being silly even before typing the credit card number into the computer, but it was offset by a free magazine subscription that we wanted anyway so we went for it. We did not win… no surprise there!
Kids Activities – a trip to a museum shortly before our son turned 1.
Looking at the data it’s obvious that the most expensive part so far is paying for daycare. A whopping 72% of our spending was on daycare and most of that was incurred between 7 and 12 months of age.
Taking daycare cost out of the total we are left with $2,396 that was spent on other expenses from birth to 1st birthday. That’s $200 per month. Most family budgets should easily handle a $200 increase in monthly expenses. We barely even noticed the $200 bump since it was almost entirely offset by a decrease in other expenses, such as entertainment and travel. We simply don’t have as much time or desire to do a lot of things we used to do before!
Of course that’s not how it works and we actually spent close to $9,000 this first year. And that’s a “cheap” year for us since we’ll spend more than that on daycare alone from our son’s first to his second birthday. That’s just the expenses… My wife’s income decreased about 20% since we chose to have her stay home one extra day to spend more time with our son. With that come decreased 401K contributions as well.
Next year around this time I plan on doing another update to see how we fared. I already know that we will spend more, but how much more and how will spending in each category change?
Luckily, while it’s interesting to look at the numbers they all quickly fade each night as I drive home from work anticipating seeing my son’s smile and a hug as I walk through the door. “Priceless” is the word that comes to mind.
Readers, do you keep track of your child expenses in any way? How do they compare?