If you read our article Kids Cost How Much!?! you now realize that the expenses associated with being a new father are significant.  A baby will cost on average $1,790 a month (not including the cost of childbirth). This cost can be much more depending on location and desired gadgets for your child.  Childcare costs alone are typically $1,150 a month and usually consume 17% of household income. That is why budgeting for families is so important as you prepare for a new child.

A budget will create guardrails around spending and set expectations between you and your partner when it comes to expenditures.  The key in doing this is doing this together.  Typically, one partner is more financially inclined to track earnings, spending and report budget results, etc.. The key will be for you both to come together in creating your budget.  If both parties have bought in, the expectations are established when it comes to monthly spending. Budgeting for families can be simple if all are bought in.

Budgeting For Families – Get Started

I read a book once, that said to think of every dollar like a soldier.  You have so many soldiers in your army and they have different roles to protect your citizens (Family).  The primary roles of these soldiers are below:

-Fortify your defenses (housing, utilities, and related expenses).

-Daily needs for your citizens (food, healthcare, transportation).

-Repair damage from prior battles (debt).

-Ensure an enjoyable life for your citizens (entertainment and luxury items).

-Fend off new attacks (unexpected expenses).

-Train and prepare for future battles (emergency fund, savings, investing, kids’ college funds, large planned purchases, etc.).

-Community goodwill (gifts and charitable giving).

Every soldier has a role to play.  You do not want a soldier sitting on the sideline getting out of fighting shape. You also do not want a situation where you do not have enough soldiers. If this happens you will be putting your citizens at risk in one of the essential categories.  There will be times that you will have to re-deploy your soldiers in a manner different than was originally intended (pull some off Entertainment to battle Unexpected Expenses).  But the key here is to have a plan for every soldier in every month.

How to Build your Budget

So how do you setup and adjust to this plan?  Here are some simple steps to take to build your budget:

1. Identify how many soldiers you have.  This is understanding your income (after tax).  This can be a very simple task if you both work traditional jobs that provides a predictable income each month.  However, the gig economy has further complicated the income streams that people need to consider. This creates the potential for variability in the amount that is coming in each month.  Get a good understand of your income. Understand any seasonality that you may realize if you have variable amounts from month to month.
2. Make a budget plan to deploy every dollar.  This is often referred to as zero based budgeting. This requires you to plan every dollar of income to go into a budget category each month.  Some of your budgeted categories will be static, like monthly mortgage, childcare cost, HOA fees, etc.  Other categories may have monthly or seasonal volatility (things like large purchases or utilities in some markets).  Zero based budgeting allocates all your after tax income to be deployed to a “spending” category every month (I am putting “spending” in quotes because your budget also should account for what you plan to save and invest as well).  
3. Create a general contingency plan.  This is the process of prioritizing your budget categories as to those that are mandatory and a high priority to your family verse those that have some flexibility.  You want to do this upfront so that you can adjust your strategy when unexpected costs arise (Furnace goes out, car breaks down, unexpected medical, etc.).  This is the process of redeploying your soldiers to ensure the overall welfare of your citizens. 
4. Track your performance.  There are a lot of automated tools out there that will link to your financial accounts and credit cards that will do this for you.  I have used both Mint and Personal Capital in the past and find them both to be great/free resources for this.  There are alert features they offer as well that can update you on your progress and/or you can access at your leisure to see how you are performing. 
5. Meet and adjust your strategy.  Have regular monthly meetings with you partner to measure your progress and adjust your budget are necessary to keep the budget relevant and keep you on track.  And Dads one of the key things about this meeting is that you are both present ; )
6. Don’t beat yourself up.  Raising kids is a challenge in itself and then to try to guess your expenditures during this time will be difficult until you have a few months under your belt.   Have some grace for your partner and yourself as it may not be a smooth ride at first.  Once you start to realize some routine, adjust your budget accordingly and your will get into a greater rhythm moving forward. 

You Can Do It!

Budgeting for families is all about intentionality.  Like a general with his soldiers, you want to deploy your resources (income) in a manner that is most beneficial to your family and your priorities.  Doing this jointly with your partner is so important as Mom and Dad need to be on the same page when it comes to spending.  If you jointly set expectations upfront, you will avoid unnecessary conflict down the road.