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Raising a Toddler – 2013 Costs

Becoming parents has been the biggest change we’ve experienced as a couple. When we found out we were going to having a baby, one of the first things we sat down and talked about -after celebrating about the news!- was making sure we had a financial cushion.

How Much Does It Cost to Raise a Child?

We had heard and read about how expensive it could be, so we started tracking our baby expenses. We wanted to see for ourselves and to hopefully help others.

One of the most referenced sources about the costs of having a child is the USDA’s site where currently it’s estimated that it would cost $241,080 to raise a child to 18 years of age. Based on how many kids you have and how old they are, you can get national and regional averages for the costs associated with children.

Like last year, I decided to go ahead and review our expenses to see how we compare to the USDA’s estimates. It’s a fun exercise and gives us an opportunity to see where we did well and where we could improve.

I’m using the USDA’s categories and descriptions as a guide so it can be closer comparison. As always, please feel free to share your family’s own numbers below along with your region. I hope this information cane be useful for couples considering having children who want to get an idea of what expect in terms of their finances.

Housing Costs

According to the USDA,  housing includes mortgage, property taxes, utilities, furniture, and appliances, with the national average at $4,988 with the Southeast around $4,513. That means that on average having a child adds about $415.67/month to your housing bills.

Here is where I have a few questions. There are definitely costs to having a roof over your family’s head, whether it’s mortgage or rent. How much of that is that, though, directly tied to having children? Going from a one bed room apartment to a two bedroom is a change that is easy to quantify and track, but what if you already have a house?

We bought our home before we had our daughter, so there was no real change with the mortgage. We converted the guest room into her nursery before she arrived, but otherwise the general housing costs have been the same. To be fair, we have seen an increase with our utilities (electricity and gas), but not by much – in 2013 we spent $1,090. [For the purpose of this comparison I'm using this amount for housing costs.]

Food

toddler food costs

“Feed me!”

Besides groceries, the USDA includes eating out at restaurants, fast food joints, and school meals.  They estimated that nationally parents spent about $1,788 and this region matching that amount.

We love to eat. Looking back at 2013, we spent a total of $5,343.90 on groceries for the whole family. How much is this devoted for our baby girl? That’s hard to say in exact numbers, so I went back to our spending before we had a baby and found that we had spent $4626 in 2010, giving us an increase of $717.90.

Transportation

The USDA includes car loan, gas, insurance, and maintenance in transportation costs. The national average is $2,163 with the Southeast keeping pace with $2,113. We do not have a car loan as we bought the Accord with cash.

Reviewing all of transportation expenses in 2013 for both our car’s gasoline, insurance, and maintenance expenses came out to $3,431.28. My husband’s car is practically just for commuting to work so I could lower this number, but I’d hate to pour through and see which fill-ups were his and which were mine for the entire year.

Clothing

The USDA includes diapers, clothing, shoes, and dry cleaning under ‘clothing’. National average for clothing was $980 and the Southeast was $950 which mean parents are spending about $80/month. We spent $385.01 on our daughter in 2013.

Big savings here as we have enjoyed the wonderful combination of hand me downs and a lovely consignment boutique. We also buy new clothes to fill in gaps and growth spurts. The money saved is redirected towards other family financial goals and to build our daughter’s savings.

Health Care

The national average for health care insurance, co-pays, and deductibles) is $1,100 and the Southeast is just a smidge under with $1,038.

We have insurance through my husband’s job and the cost for the three of us in 2013 came out to be $6,932.16. Should we have another child the monthly premium cost remains the same.

As far as figuring out how much our daughter’s portion is we’re estimating about $180/month or $2,160.

Childcare/Education

Besides daycare, this also includes baby sitting. Looking at the national level, the average is $3,725 and the region is $3,525. For us we paid practically nothing as I watch our daughter and we’ve had friends and family generously offering to baby sit.

While I was pregnant my husband and I talked about what would work best for us . We decided that I would continue to work from home (with reduced hours) and watch her during the day and evaluate the situation every so often. I have to say it has been better than I expected, but of course some adjustments had to be made. I take on few projects and the ones I accept have to be flexible such as having weekly or monthly deadlines.

Misc

Ah, my favorite category, the one where (almost) everything else gets swept under. For USDA this nondescript label goes for expenses like personal care (toothbrushes, haircuts), entertainment, and reading material. For the country the average is $1,138 and the Southeast is $975.

As far as kids’ activities, we spent $236.57 for trips to the museums, bowling alley, baseball games, and more. Some of the expenses were because we paid for some friends to join us, which enhanced the experiences even more.

Thoughts on the Costs of Raising a Toddler

As you can see, even though the USDA’s study reflects some families’ annual expenses with raising their children, it can vary wildly from your own. For us we’re estimating that $5,827.85 was spent taking care of our daughter.

We shared our story and numbers, I’d love to hear from you about your expenses. What has been the biggest expense the past year with your toddler? Where have you managed to save money without sacrificing quality?

Alex von Tobel Wants You to Be Financially Fearless

We’re already halfway through January and as some people are reevaluating the money goals they’ve set for themselves this year (such as saving more and getting out of debt) I want to share a book that may keep you on target in 2014 and beyond – Financially Fearless by Alexa von Tobel.

In case you’re unfamiliar with her, Alexa is the CEO and founder of LearnVest, a personal finance site that seeks to make financial planning affordable and practical for many in the middle class. I ‘ve had the pleasure to chat with her last week over the phone while she was in Washington D.C., getting ready to launch her book tour.

While the book covers the foundation of managing money, it highlights the psychology behind how and why we use money in a way that is motivating and challenging. It’s another piece to the puzzle as she and her company are trying to empower others to get their finances under control and working for them.

Becoming Financially Fearless financially fearless

One of the first things I asked von Tobel was about the purpose and timing of the book. With so many personal finance books, services, and blogs, what did she hope to accomplish with releasing Financially Fearless? Her thoughtful response was that she had a few objectives for the book:

  • Spread awareness about personal finances and how manageable it can be for practically everybody.
  • Give actionable advice that allows readers to get a handle on their finances fairly quickly.

She was clear that while this book goes hand in hand with LearnVest’s Planning Services, readers can use Financially Fearless to work on their own too. Alexa came across as genuinely interested in helping others to get started with mastering their money.

LearnVest’s Mission of Affordable Financial Planning

Just what is LearnVest’s program? The company discusses openly how they lead clients step by step with getting their finances under control. It is based on what a client is hoping to achieve – some want help with their budgets, some want to create a five year plan, and others are hoping to kick start their portfolio. The main steps are outline on LearnVest’s site.

  1. Organize: LearnVest’s site can pull your financial data into one spot so you have a clear picture of where you stand on your finances.
  2. Focus: A certified financial planner works with you to create a budget that fits your goals and your current circumstances.
  3. Plan:  Work out step by step how to get out of debt, build your savings, and invest for your retirement.
  4. Protect:  LearnVest guides you so your family has the proper insurance and the right documents to protect your money against some of life’s unexpected expenses.
  5. Build: You work with your planner on how you can make the big purchases like a home.
  6. Maximize: With the foundation laid, you optimize your portfolio.
  7. Achieve: Following the plan you have devised with your planner, you check-in to make sure you’re achieving the goals you had set for yourself and add new ones.

Financially Fearless uses that step by step framework within its pages, giving readers a foundation.

Protecting Your Money

One huge point that von Tobel discussed on out call was making sure that people protected themselves and their money. In Financially Fearless she devotes an entire section to this topic, acknowledging that unexpected expenses and events happen to all of us. We may have control over the car breaking down or a storm damaging our house, but there are things most people can do to manage the problems.

For instance she mentioned Hurricane Sandy as an example – there were homeowners who either didn’t have the right type of insurance coverage or they underestimated the amount of coverage they needed. For those families, it was a financial disaster on top of a natural and emotional one.

Alexa goes into the essential insurances like health and renter’s/homeowner’s insurance. Our health and our homes are two things we can’t afford to lose so having the proper insurance can alleviate some of the stress when bad things come up. If someone depends on your income, then having life insurance to keep them afloat should the unexpected happen is the responsible thing.

Like I’ve mentioned quite a few times, shopping for insurance can pay off in a huge way when you keep in an eye out for value rather than simply looking for the cheapest plans. You want to feel confident that should you need to use it, your insurance company won’t give you a hassle.

Win a Copy of Financially Fearless

Not only did I enjoy how easy it was to read the book, but I appreciated the worksheets included – it made it a more interactive guide. I think it’s a wonderful book to either own or give as a gift to a loved one. If you’re looking to grab a copy, you can find it at many retailers, but Alexa has been kind enough to offer a free book for one Couple Money reader!  All you have to do is share your money goal for 2014 with me.

You can:

I’ll round up all the entries and choose a winner next Monday (January 20, 2014) during my lunch break (1pm ET). I can’t wait to hear from you and see what big plans you have for this year!

In addition to the book giveaway, if any of you are interested in getting a certified financial planner through LearnVest please use the promo code “couplemoney50″ and get a $50 credit good towards a 5 year plan with certified financial planner. Please check LearnVest’s site to find out more about their program to see if would be a good fit for your family.

Want to Get Paid for Your Writing?

When I’ve mentioned to family and friends that some of my income comes from writing, there’s an element of surprise. After all, aren’t writers broke? My response is that earning income from writing has a lot in common with earning money in other careers – working smart and being willing to hustle can help open doors.  It’s not luck, it’s having a system that makes it more likely that ‘big breaks’ or opportunities pop up.

Earning Money with Freelance Writing

I know that some Couple Money readers are looking at earning more on the side and freelance writing is one way to do so. Unfortunately some people wonder how to make the transition into being a freelance writer. Unconventional Guides came out with a new release that delves into the nuts and bolts of building a business from writing, aptly titled The Unconventional Guide to Freelance Writing.

What’s Included in the Unconventional Guide to Freelance Writing? unconventional freelance guide

Like other Unconventional Guides, this newest release has several components to it.

  • The Ultimate Freelancers Guide:  Amber Adrian, 10 year freelance writing veteran, created a 55-page guide with practical steps for crafting a pitch, sample rates for a variety of writing projects, and how to manage yourself as a business professional. She also goes into topics like when and how to raise your rates.
  • The Big List or Links and Resources: A comprehensive list of vetted resources and online tools every freelancer should have on speed dial.
  • “Rejection Be Damned” Tools for Success: Within the half dozen smaller and more targeted guides,  topics like overcoming writer’s block and being an introverted freelancer are covered.

If you decide to plunge in with the Editor in Chief package you get some big bonuses, including:

  • Sample Pitches and Letters of Introduction. You’ll get your hands on actual pitch letters and LOIs that have successfully landed freelance writing work in legit publications.
  • Bonus Author Interviews. You’ll get the transcripts of eight Q&A’s with successful freelance writers from all genres. Each interviewee shares their personal secrets on how they land their best business, how they got their first gig, and what unconventional methods they use to get their writing out to the world.
  •  44 minute audio interview with seasoned travel writer Kristin Luna who lands bylines in heavy-hitting publications including Newsweek, Forbes, Redbook, Self and Glamour, and has contributed to several Frommer’s travel guidebooks.

Depending on how much time, you’re investing into freelance writing, you may opt for the Pen for Hire edition to test the waters out. Either edition you decide to go with, once you buy an Unconventional Guide you get lifetime updates.

Unconventional Guide to Freelance Writing– Overview

Interested in learning more? Let me give you an overview of the 55 page guide that serves as the backbone.

Getting Started and Setting Yourself Up

Adrian opens up with the mindset of becoming a successful freelance writer and quickly jumps into getting started by creating a very basic site to serve as your online presence, finding a niche to gain some experience, and sending your first pitch. The idea is not to simply think about being a writer, it’s about getting work and building up your resume and skills from day one.

Speaking of pitches, they and letters of introductions are covered in the first section. Adrian gets into how to pitch and how to research for different publications. She also jumps into how to find and hook clients by doing interviews with other experienced freelancers. After all each writer has a different style, you may find that you are more phone networker or perhaps you like using online social media tools like LinkedIn.

The guide gives a bird’s eye level view of the different types of writing opportunities available to freelance writers including blogging, content marketing, and magazines. Adrian finishes up the section with how to nail your job – vetting and interviewing sources, making your deadlines, and working with editors.

Getting Paid and Other Practicalities

Paying the bills is usually a big concern for writers and Adrian address it in her next section. Making the transitions varies from person to person, but most test the waters out before taking the plunge into full time writing. This section goes over how to figure out how to charge – by hour, project, or retainer, and how much to charge.

Once you’ve become established and you’ve built up your portfolio, you inevitably wonder how to raise rates, which is included in the guide as well. The section also discusses taxes and contracts, both huge and important to a freelance writer.

Getting Out of Bed Every Morning and Facing Your Fears

This section tackles the realities of being a freelance writer on a daily basis. How do you stay motivated and productive when you’re the boss? How do you overcome fears and writer’s block when you’re working on a deadline?

One of the biggest challenges with being self employed is dealing with the ebb and flow of projects. Sometimes you are just swamped with business and then it seems like it’s been forever since you got a new client. Adrian shares tips and advice on how to deal with the slow periods.

Thoughts on Earning Money as a Freelance Writer

I found The Unconventional Guide to Freelance Writing an informative guide for those considering making the transition into becoming a full-time freelance writer. If you want to grab a copy, please click here and pick the edition that works for your situation. If you’re curious about starting a business, but you know writing is not for you, please check out the complete list of all the Unconventional Guides on his site.

There is much more to the multimedia, I only wanted to give you an overview of the main guide so you can get an idea if this is for you. I hope you find my review helpful. Whatever you decide, I wish you success on your freelance writing. If you have any questions about the guide, please email me.

Disclaimer: This post has affiliate links.

Where Did You Go? Blogroll Time

I’m in the process of updating my blogroll (which I do about once a year) this week and I noticed some some have been sold and now have new owners, some have stopped updating, and some (gasp!) are gone. Crazy how much things can change in a year. Besides removing some sites that have gone or I’ve haven’t read in awhile, I’ve add some new ones, including:

While I don’t do link exchanges with my blogroll, I do enjoy discovering other personal finance sites, so please feel to email me about a site you love or mention them below in the comments so others can see!

Favorite Personal Finance Posts

Feeling the need to spread the word on some incredibly fun and informative personal finance blogs, I found some posts that I’d thought you would enjoy.

  • Investing in Lego: I didn’t realize how profitable the tiny bricks can be, but there’s a fairly developed market for buying and selling certain collections. I got excited for all of two seconds, since all my husband’s Lego collection have been opened and used. (He had a massive box of them that he claims he’s saving for when our daughter is older. She’s not happily playing around with her Duplos.)
  • 2014 Tax Brackets, Standard Deductions, and Other Changes: It’s that time of the year where Human Resources sends over all the paperwork for insurance, flex spending accounts, and W-4s so taxes are on our minds. Mike from Oblivious Investor gives the numbers making it that much easier for me.
  • Achieving Your Goals Takes Time: Beating Broke’s design has been dramatically updated (looks good!), but the handy posts are still there.  With 2014 approaching I know some couples are looking at their goals for the next year, hoping to do better.
  • Top Online Saving Accounts of 2014: Go Banking Rates gave their favorites and I’ll just quickly add my two cents and say that we use Ally and they have served us well. If you’re thinking of making a switch from your current bank, please review GoBankingRates picks.

To get all of my Twitter updates as they happen (or to just chat with me), please follow me here.

For any Couple Money readers that use Chase credit cards, I wanted to let you know about a way to increase your rewards. With Chase Sapphire Preferred, cardholders earn two points per dollar spent on dining and travel including airfare, hotels, cruises, rental cars, train tickets, taxis, and tolls. Cardholders earn an additional point per dollar spent when booking airfare or hotels through the Chase Ultimate Rewards website.

I hope your weekend goes well; take care!

Photo Credit: tribehut

How to Determine If Buying or Renting is More Cost-Effective

Most renters dream of transitioning from renting to owning homes. For some, it is more financially responsible to buy. While leasing an apartment is cheaper in the short term, buying a home is most likely the largest investment and asset a person ever owns. The tricky part is determining when is the best time to switch from being a tenant to a homeowner.

Consider these four factors before breaking a lease to purchase property.

Use Math

Using the Breakeven Analysis Methodology structured by Zillow, prospective house hunters can mathematically calculate the number of years at which buying becomes more cost-effective than renting. To determine the cost of owning a home, individuals should find the total sum of their down payment, closing costs, mortgage, property taxes, insurance, maintenance and renovation, utilities, as well as condo or community fees. However, even with all costs included, the home hopefully sells for a profit down the road. Renting costs are made up of deposits, broker fees, monthly payments, utilities and insurance. It is more advantageous to own a property when the purchase cost is less than or equal to the total sum of monthly rent costs. Online tools are great for those who want or need to determine if they should begin searching for a home to buy. Zillow calculates how many years, on average, the breakeven horizon occurs in major cities.

Observe Market Trends

The housing market has fluctuated immensely throughout the past 10 years. Observe the times of year houses sold for less than their original listing prices to get the best deals. If homes in a neighborhood have consistently sold for less than their estimate value, it’s probably a good time to buy. However, areas in trending neighborhoods are going to be inflated and homes are going to cost more than they typically would. Homes centrally-located or close to water are typically steep in price. Keep location-related price variances in mind; some neighborhoods are always going to be more expensive, regardless of the time of year or popularity.

Assess Finances

Individuals should not buy a home if they can’t afford it. Bad credit leads to a significantly more difficult process of trying to obtain a mortgage. The likelihood of being approved for a low rate is compromised by negative credit history. Work on improving a credit score prior to applying for a mortgage. Then calculate the monthly cost of owning a home. The higher the down payment, the lower the monthly mortgage cost and the faster a person owns their property outright. These calculations may affect how prospective buyers save for their down payments or stretch budgets to afford more expensive homes.

Look Ahead

Anticipating a baby? Planning on traveling for an extended period of time? Desperately need a new car in the next year? These are all factors to take into account when deciding on the right time to purchase a home. Work with a financial planner to create a strategy. Prospective homeowners can confidently rent while taking the appropriate steps to prepare to own properties.

Obviously, the decision to buy or rent differs on a person-to-person basis. There are many factors in play within a home purchase, but these four are good starting points.