Kids are expensive! That little bundle of joy, who will steal your sleep for 18 years and will ruin your social life as you know it, will cost you around $245,000 from day one until they leave the nest at, hopefully, 18. With any luck, at age 22 they won’t come back to cramp your style by living with you after college for 3 years however, that seems more likely now than ever….great. If you’re like most American’s, you bite the bullet and take the plunge knowing these outrageous numbers but say phrases like, “Oh, we will figure it out once it happens.” Or, my personal favorite, “It’s an investment and we will make it work.” An “investment”? No. The definition of investment is “the action or process of investing money for profit or material result”. It can also mean, “an act of devoting time, effort, or energy into a particular undertaking with the expectation of a worthwhile result”. I like the second definition better when describing your future or current offspring but it’s still not how I would personally describe an investment. Here’s the problem with your little “investment”: you never know what you are going to get. Having a child or children is one of the riskiest and scariest undertakings of your life- planned or unplanned.
You have to worry about drug addiction, learning disorders, the rise of Autism, school shootings, vaccines, sickness, lack of money, the rise in terrorist attacks, and my favorite, OTHER PARENTS (they are the worst). Also, how the hell are you going to pay for it all? Our society is overworked, underpaid, and generally less happy than we were 50 years ago. So, after understanding the cost and knowing you may raise a narcissist you decide to take the plunge! Congratulations! You’re going to be working in that cube until you are 70 if you don’t change some things. If you can make a few lifestyle changes, not only can you afford your child and give them the life you always wanted to give them, you may be able to live off of one income or work part-time and spend more time with your family.
Let’s dig in…
You Drive New Cars
If you live anywhere outside of NYC and you have a child you probably need a car for basic survival and all-around ease. Parents seem to flock to car dealerships once they have a bun in the oven or shortly after the child is born. Your protector instincts kick in and that 2008 Accord that’s been paid off for 2 years is just not good enough for YOUR baby. Oh no, you need to go out and buy that brand new $30,000 SUV and finance $25,000 or more of the total cost. Your 2008 Accord has safety ratings of 4.5 out of 5 stars and it’s paid off. So why are you going into debt to buy an SUV when you’re current car is perfectly fine? If your child is your “investment” then you need to think of everything you buy in the same way. You should never have to finance a car. If you can’t pay cash for your car then you can’t afford it. If you can’t afford a car then you certainly can’t afford a child. It’s really that simple.
Do yourself a favor and keep your current car. However, if you must buy a different car, consider a 2010 Honda Fit that gets 35 MPG. You can find one of these bad boys on Craigslist with 60,000 miles for under $10,000. The unusual amount of room on the inside allows room for all of your kids’ crap plus your giant grocery haul from Costco. This little gem will run over 200,000 miles and will save you $20,000 right off the bat compared to the $30,000 SUV option. You will also have lower insurance cost, higher MPG, and lower cost of ownership over the life of the car by choosing the 2010 Fit. That decision alone will save you over $50,000 in 10 years. Plus, your 2-year-old does not care what kind of car you drive.
You Commute to Work in a Car
You have to work. I get it. Here’s the deal: If you live more than 5 miles from where you work and you drive every day to get there you are losing a lot of money. Have you ever done the math or even thought about how much it costs you to go to a job you probably don’t even like all that much? You’re away from your kid(s) and partner so you better make that time away worth it. Let’s take an average 25-minute 15-mile one-way commute to work. In 2016, the IRS estimates a $.54 cost per mile. Let’s assume you live 15 miles from your job. I’ll give you the benefit of the doubt and charge you $.40 per mile. This $.40 includes depreciation on your car, insurance, gas, repairs, oil changes, financing, etc. With these averages, you are spending $12 per day driving to work. That may not seem like a lot but let’s project that number out 18 years and assume an investment return of 6%.
If you didn’t commute to work 30 miles a day for 18 years, you’d save $89,008.28. This math takes the $12 per day of commuting costs (driving 5 days a week) over 18 years and has a 6% rate of return. This means if you would have invested the $12 per day at a 6% return for 18 years you’d have $89,008.28 in your investment account. Not too shabby! Let’s multiply that by two if there are two of you driving to work and you drive separately. You are now spending $178,016.56 for two people to drive 15 miles one-way to work over 18 years!! YIKES!! This number should scare the hell out of you and open your eyes to the way money bleeds out of you when you follow the ‘norm’ and try to keep up with the Jones’s.
Take your round trip mileage and figure out your own commuting costs. Be prepared for some serious shock and disappointment. So, what are the alternatives? Simple. Live close to where you work and cut your costs by 80%. This should not be a foreign concept to anyone, unfortunately, it is. People look at you like you are insane if you bike or walk to work, god forbid public transportation, or driving an older car! It seems as though the car and mortgage companies have tricked Middle-Class Americans into spending 16 hours a month in a financed car just to get to work. With these projected numbers you can argue that your commuting cost may be more important than your salary.
You are probably thinking, “The good schools are in the suburbs so we need to live out there so our kid can have the best future.” Wrong again. Students that attend schools with diverse populations are better prepared for the real world. Test scores are not the end all be all to your child’s future. Go to the school. Talk to people in the community. Make your decision based on your kid, not test scores.
You Go Out to Eat
Who doesn’t love a meal professionally prepared in a nice restaurant on a Saturday night with a glass of wine? What about the $11 salad for lunch at the office because you didn’t make anything to eat last night? Or, how about those Chipotle burritos I know you are eating one or twice a week? These indulgences need to be kept to a minimum when you are planning on or have kids. It’s just too expensive and will not make you any happier, I promise. If you’re a Millennial, the stats show us that you are spending more money eating out than you are buying groceries. This is a shift in consumerism that we have never seen before and I’m guessing it’s going to become a bigger part of our culture.
Let’s run some numbers and project them out 18 years just like we did in the previous examples. Personal Capital estimates it costs a 20-30 year old $386.09 per month on dining out. Let’s assume there are two of you. That means you are spending, on average, $772.18 per month on dining out (can that be right, who is doing this?!). I’ll give you the benefit of the doubt and say the two of you are spending $500 on dining out per month even that seems outrageous. Again we assume a 6% return on investment for 18 years and we are at a whopping $185,433.92! Wow! Do yourself a favor and learn to cook. Learning a new skill is empowering and will slim your waistline while beefing up your wallet. You also will be spending more time at home if you have a child. Babies and restaurants don’t really go very well together. And we all know how it works when you bring that screaming baby or a whiney toddler to the restaurant….be prepared for some snarls and dirty looks. Instead, have a dinner party once a week at your house, have your friends show up and start a trend of dinner parties taking turns hosting.
To Sum It Up
You can save over $300,000 in 18 years by making some small changes in your life. That’s a lot of cheddar! That’s more than enough to have some kids, reduce financial stress, and possibly go down to one income or work part-time. It’s not about the house, the car, the schools, or the extravagant dinners downtown. It’s about you becoming a parent and doing the best thing you can for your child and that is to simply be present. It’s amazing how much we are spending on items that are not making us any happier while keeping us in debt and overweight. Sure, it’s nice to have a new car for the first month, and you may feel safer carting around Junior in that new car, but that feeling slips away and you are left paying for your mistake every month. You are also adding unnecessary additional financial stress to your life. Sure, it’s nice to have the big house in the suburbs but your commute is killing you and your wallet. Yeah, it’s nice to outsource your cooking 4 times a week but it’s making you fat and poor.
If you are planning on having children or have them already then it’s time to make some changes in your life. What is presented here should be basic, common knowledge and followed by everyone. I drive a 2003 Saab with 130,000 miles on her. I bought the car from my brother-in-law a year ago for $2,700 (he paid over $30,000 for it brand new in 2003 – OUCH!). Before I bought the Saab I didn’t even have a car- as we were a one car family. You would not believe the conversations I have had with co-workers and friends on the age of my car, biking to work, and taking the bus. Apparently it’s just not normal to have an old car and take public transportation. I’m now the odd one for having an older car and using the bus whenever I can. Trust me, if I can do it, you can do it. I estimate the changes we have made are saving us more than $150,000 over 10 years. For me, these modifications have changed my life. They have allowed me to travel, see my family, and be present. I no longer worry about financial stress and I have more time to learn about investing in myself.
I’ve taken those nights out away and have focused on learning to cook amazing meals, invest in the market, travel, and spend more time with my partner. These three changes may seem large but after you sell your expensive cars, move closer to your job, and stop eating out you will see a much larger bank account. Along with these changes comes a slimmer waistline and a chip on your shoulder for outsmarting the rest of ‘em. You’ll listen to your friends complain that they don’t have any money while they drive off in a new car on their way to meet co-workers at Applebee’s for lunch. You’ll sit there quietly with your brown bag lunch while gazing at your $10,000 Honda Fit feeling relaxed knowing you are making the right financial decisions for you and your family.
Now, go forth and multiply!!