Where's the Money???

First things first, we need to look at where our money is going. I can hear you moaning and groaning already, budgeting is no fun. I'm with you on that, but it must be done. Print out or find your bank account and credit card statements, open a bottle of wine and sit down with your spouse to take a look at what you're spending that hard-earned money on. We've all heard how much money could be saved by eliminating the daily coffee (bought outside your home) but what about the other small expenses that add up? Do you have a magazine fetish that's costing you more than you thought? Are movie rentals higher than your cable bill? What can be eliminated/scaled back? What "luxury" purchases do you want to keep? The important thing is discussing your priorities together, by mutually deciding what is worth your money and what is not you will be less likely to purchase that no-no item.

Now that you have an idea of how much you're spending each month, let's look at your current income. For this you will need a piece of paper onto which you will draw two columns. On the left side, you will list the current income for the person who will be staying home (the income you will no longer be receiving). Include any bonuses here and put the total in after tax dollars, for this part we really only care about the money we're keeping. On the right side you want to list money that you will be saving by no longer working and any expenses that you will no longer be making. Any amounts you cannot accurately predict (ie: how much you will save on groceries) should not be included. We only want to list what we are sure of, like childcare expenses that will no longer be paid. Don't forget to include clothing you purchase annually for work, dry cleaning bills, gas to and from work (although I assume you will still do some driving with your kids) and lunch costs--for this one write in how much MORE you spend at work than you would on lunch at home, since you will still be eating of course.

Comparison time-what is the difference between your two columns? Post this amount somewhere you will see it daily to remind you of your monthly goal. This is a good baseline for how much you need to start saving every month. You can do this by cutting your grocery bill, buying toiletries from drug stores (yes you read that one right!) and lowering your monthly bills. By saving this amount each month you will effectively come out "even", but in our experience we have made this number a negative and have been able to build a decent savings account for the first time--which would be quite helpful in an emergency or job loss situation. It amazes me everyday that we would actually have LESS money if I were working!