Chapter 1: Just Starting Out (Part 2)

Daphne and I had been friends since our 20s when we’d met at a party thrown by a mutual friend.  We’d fallen in like immediately. Daphne had worked while Marcus completed medical school. He graduated with an albatross of student debt, so they limited their spending and worked hard to pay it off. When Daphne had her first child, she chose to stay home, working on her degree part time while raising Kirk first, and then Darren three years later. By the time Lexi came along seven years after Darren, Daphne had launched her own business. She lavished all the good stuff she could on her beautiful baby girl.

Although I hadn’t seen Daphne in several years, we’d always kept in touch through email and on Facebook. And I loved looking at the pictures of her family as the children grew and Daphne and Marcus prospered. They had done very well for themselves.

Lexi was a good girl. She worked hard at school, ran track, got a partial scholarship to university and completed a double honors degree in four years. At 24 she was working her way up in the fashion industry, not making a lot of money, but having a ball.

“So tell me about Matt,” I said as we walked back into the living room, Lexi carrying the tray and me a plate of finger sandwiches and chocolate brownies.

“We met at university and started living together when we graduated from school,” said Lexi. “Paying for one place makes way more sense than keeping two apartments. I was always at his place in fourth year anyway, so it just seemed like the right thing to do.”

“Was this baby planned?” I asked.

“Not planned, exactly,” she said as she poured the tea. The gold-rimmed, white bone-china teapot shook a little in her hand. “But we love each other to death, and we want this baby, so we’re going to make it work.”

“Have you worked out how much you’re going to need initially for the baby, and then long term.”

“Not really, it’s still early days.”

“You’ll be stunned at how quickly the next six months fly by,” I said. “You better put pen to paper and come up with a list of what you’ll need and how you’ll pay for it.”

Gail Rule: Babies Are Expensive

The standard maternity benefits leave very little wiggle room. If you’re using every penny of your income(s) to make ends meet, you may be in for a bit of a shock when you have to do so on less money. How much less? Well that depends on whether you’ll get a top-up at work or not. If you don’t you may be in for a shock when you find out what your maternity leave benefits amount to.

Make a budget for your mat leave. Hey, you can keep flying by the seat of your pants but I guarantee you’ll end up in debt. With a little foresight and some planning you can come out of this will your financial life still in balance. If your income is going down, you’ll have to prioritize where you’ll spend your money.

Say buh-bye to the nice-to-haves. Time to focus on the must-haves. Eating out, entertainment and big-boy and big-girl shopping will come to a grinding halt. With a baby coming, you’ll be exchanging your disposable income for disposable diapers!

Don’t wait until baby’s arrival to put your new budget into action. Practice living on less as soon as you find out you’re pregnant. Use the difference between your regular pay and your mat leave income to get rid of debt, build up your emergency fund and buy the stuff you’ll need (NEED!) for baby. Practicing living on less now means you can get a sense of what it’ll be like when baby gets here. And you’ll have some money for any unexpected expenses that pop up.

Don’t get swept away by all the great baby stuff you’ll be tempted to buy. Babies are a great excuse to spend money. Don’t get suckered into dumb crap like specialty diaper disposal units or wipe warmers. (Seriously?) Do you really need a specialty piece of furniture for changing baby’s diapers? Buy a stack of receiving blankets. Lay one out on your bed, the couch or the carpet to change the baby.  Savings: $200.

Make a list before you head out to shop for baby. And before you put your hand in your pocket, call your friends and family to find out who has stuff they can lend you so you can whittle down your list.  Make sure you register if someone is throwing you a shower so you get stuff you need, not just stuff other people think is cute.


Gail Vaz-Oxlade

Gail Vaz-Oxlade wants YOU! Join to get smarter about your money and help others get smarter about theirs. Isn’t it time we eliminated financial illiteracy? Come find me on Google+ and on Twitter.

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26 Responses to “Chapter 1: Just Starting Out (Part 2)”

  1. I took duplicates of items received as gifts from baby showers and exchanged them all to a department store for things I needed still. I combed yard sales and second hand stores and the for sale listings in the newspapers. I nursed and used cloth diapers. I made it known to people I was happy to take their discards. Things were still tight, but we made it. If we had waited til we were more financially comfortable to have a child, we wouldn’t have had children! You do what you need to do and keep faith it will work out.

  2. Don’t forget Mom to Mom sales. They’re a great place to find what you need on the cheap.f

  3. I can’t imagine having the expense of kids. I never wanted any so i guess i won’t have to worry about paying for them.

  4. People do get “suckered into” buying all kinds of stuff they don’t need. Their home ends up looking like a daycare centre. You don’t need so many pieces of equipment that that they end up filling the living room and all other areas of the house. Again, it’s needs vs wants, and also that wish to “keep up with the Jones”.

  5. It reads to me that Lexi is surrounded by high expectations. The bone china, fashionistas, and a certain status from being the daughter of professionals. Babies can bring you to your knees physically, financially and emotionally. She has some great challenges (and opportunities for growth) ahead as she finds what really matters and works in her life.

  6. I still think the biggest non-optional expense is daycare, and the fact that in Ontario you only get a $7000 credit for daycare when it’s basically impossible to find it for less than $12000 a year in Toronto is really unfair (the price was fixed to the national average for daycare fifteen years ago).

  7. Note about EI Maternity, they DO NOT withhold any taxes, and must be reported as income. Save a little for the tax man.

    Other than that, have kids before your other siblings do. Dibs on the grandparents..hah.

  8. Considering this is probably the second most “expensive item” (kinda weird phrasing it that way, but sticking to financial facts) after your home, I think it is difficult for many people to focus on the financials of this as it is extremely emotional.

    I think of it as if a person has a hard time keeping their emotional shopaholic habits in check, good luck when it comes time for baby “planning”. Then there is more craziness put into the mix and stronger “justifications” on spending because you have a little person you “need” to take care of.

    Seen it many, many times.

  9. @aB

    I had my kids after my cousins, after my sister, after my friend. I am so grateful to all of them! I did not spend for any clothing (except for a few outfits that I really wanted to be bought exclusively for them), and I spent very little on big items (baby bed and stroller, because they were still being used!).

    So I think you should either be first to have a baby in your entourage, or be the last, like I was!

  10. I was the last in my family to have babies, after my sister and my cousins. I spent almost nothing on clothing and very little on big items. I did have to buy a few things because these were either still being used or were just too worn out! For that, I did a mix of buying used (for things you won’t use for a long time) and new (for things you use for a longer time, for many kids and for when safety is a priority: stroller and car seat)

    So like @aB said, be the first one to have babies in your entourage, cause I did see how my sister got so many gifts. Or like I say, be the last to start a family, cause I also got so many gifts!

  11. Really sorry for the double message! I thought I hadfumbled with the first one, so I did another!

  12. Gail, stop poo=pooing baby wipes warmers. Although we never saw the point and never got one, we do know people who swear the warmer was the difference between the kid getting back to sleep at night and not.

    Never mind putting off mat leave calculations because it might be hard, just assume your income will be cut in half and start from there.

    Here’s a fun thought, what happens if Hubby’s workplace shuts down while you’re on mat leave? Happened to us, God bless our Emergency Fund. We’d been doing as Gail says (although I didn’t know Gail at the time), putting my entire pre-mat leave paycheque in the EF and living on one income. This is because I have a debilitating case of the “just in case-ies”. We continued putting my mat leave pay in the EF for 3 months until Hubby lost his job.

  13. Take a look at what babies needed 100 or 200 years ago. Chances are that your baby doesn’t need more than that and a car seat if you have a car. (Babies haven’t changed much.)

  14. avatar psychsarah Says:
    April 16, 2013 at 12:00 pm

    Leave your pride at the door when it comes to taking used stuff for the wee ones. My guy was always dressed well in hand-me-downs and various consignment store finds. The gear that you “need” can also be borrowed or found at garage sales for cheap. Just give them a good scrubbing and you’re all set.

    I would also put in another good word for cloth diapers. They are a lot easier than you think, and waaaaaaaay more economical! (Not to mention better for health and environment, but we’re talking budgets here). I estimate spending about $400 all told on diapers, related supplies (wipes, liners, etc. ), and laundry to date (about 21 months). Compare that to the estimates that it costs $2500-3000 to diaper one child! Even if we doubled what we have already spent (impossible, as we already own the diapers) for the rest of my kiddos’ diapering days, we’re still way ahead. And we can reuse these diapers on kiddo #2 one day. It’s one way to keep the consumable part of the budget down. I bought them when I was still working and had the “disposable income”, and then we didn’t have that ongoing expense when I was on mat leave or returning to work with the monumental daycare costs that Geoff mentioned. The online cloth diapering community is amazing, and can help you with any questions you might have. :)

    I would also second Gail’s recommendation to avoid buying a change table. We bought a dresser that will serve my kiddo for years to come, spent $20 on a change pad for the top, and it has been very successful. We’re tall people (DH and I) so changing on beds and the like was hard on our backs. The dresser was taller than a change table too, so more comfortable and useful (lots of drawers to keep all the necessities at hand!)

    Finally, EI does take off taxes, but maybe not enough (they assume that the only income you’ll have that year is the EI they’re paying you, which is not likely true if you have worked part of the calendar year before baby comes). Most of my friends ran into difficulty at tax-time when they had employer top-ups that weren’t taxed enough either. It’s good to crunch some numbers and figure out where you stand. Because I worked half the year (Jan-July) and was taxed at my full wage for that half of the year (assuming I’d work the 12 months) I had paid lots of tax prior to collecting EI. Each situation is different-don’t be surprised at tax-time figure it out now! Gail kindly sent me the following link to figure it out with the below instructions (copied from the e-mail she sent me when I begged for help!)

    “Okay, go here for a tax calculator.

    Add your income to date to the income you’ll receive from EI and then put that number into the calculator. It’ll show you how much tax you’ll have to pay. Deduct the tax you’ve paid so far, and divide the balance by six to see how more you’ll need to pay to see your through to the end of the year. Make the adjustment for what EI is withholding, and put the rest in a savings account for tax day.”

  15. Babies are definately expensive! I’m currently home one mat leave with my first.
    The big items we bought new were a crib & change table dresser (its multi purpose) & a stroller/car seat system oh and recently a jumperoo (got a great deal on it tho)
    change table rarely used, i’ll admit it.. good thing its also a dresser or else it woulda been a waste of $$
    we got alot of stuff as gifts, registered so people knew what we needed
    bought some clothes, majority of them hand me downs from a friend who is a clothes horse, really ralph lauren for baby? who buys that lol and do they really need 15 onesies, 20 shirts, 20 pants? ridiciolous the volume she drops off (her baby is 4mths older than mine) I just do laundry lol
    biggest surprise cost monthly was formula, had to buy the fancy gentle kind at $40/box and it only last a week & a half! easily $120/month thankfully her tummy can handle normal formula now, just switched 2 weeks ago.. its only $14 :)
    yes i kno you can breastfeed.. but it didnt work out as planned
    save money for the tax man, they only take $1/week off my benefits, no where near the amount needed, I set aside $50/wk and it worked out fine at tax time this year. Good thing I had known about this, cause I don’t know wehre $450 I owed them woulda come from otherwise.

  16. I just finished mat leave and I found our biggest cost was diapers, I know some say cloth diapers are great but that was one thing I did not want to do. We saved so much by accepting used baby stuff from friends and family, it was great! Lol our son is better dressed than I am with all of the hand me downs! It’s unbelievable the amount of baby related items for sale out there, and you dont actually “need” most of it! We never used formula so that was a huge savings. We were very lucky that we only had to tighten things up a little financially, since before I went off most of my pay was going to paying off my student loans so we wouldn’t have to worry about that payment when I was on a reduced income. So we were already used to paying most of the household bills out of my husbands earnings. We also had some money set aside so we didn’t have to worry. For us it’s only been diapers and RESP that we had to adjust our budget for, my husband now works on the farm full time and takes care of our son and his mom will take the little guy sometimes to help so we have no childcare costs.

  17. Well, our baby is now 20 years old, but we were quite poor when he was born, as his Dad was still finishing university, but we had everything we needed, and didn’t splurge on anything. We used cloth diapers until he had to go to daycare which required disposable, and continued the cloth ones during his home time. I washed and hung them on the line every 3-4 days and sat folding them watching tv in the evening – they were great. He didn’t have diaper rash until he went into the disposables, either.

    I had the benefit of the change to a 6 month mat leave, from the previous 3 month, that started the year he was born, and when I went back to work, we staggered hubby’s part-time work so we only needed daycare occasionally. It wasn’t easy, but it was fun. Doting grandparents were quite generous, with gifts and time, and we just made do. Holidays were scarce anyway, so were adult only outings, but who cared? This was our first and only child, after 4 miscarriages, and we were so glad to have him.

  18. The biggets cost for us is daycare, at 1000 a month. Our girl is almost 4, so we thought the cost would go down – it didn’t. Baby care is now 1300 a month at our daycare.
    We love our family, but this and the fact we have no family around is why we decided to only have one.

  19. We moved to a very small town when I had a six-month VERY bulging belly. One week later, our back porch was full of garbage bags of EVERYONE’s old baby clothes, toys, etc from the entire town. The note asked that we “pass the stuff along” when the next baby arrived. What a great housewarming gift for us, and a great feeling of community too! We had a high-chair, crib, play pen and car seat all show up on our door step too . . . all we bought were the cloth diapers that lasted both babies!

  20. Holy cow, this article and the comments bring back memories :).

  21. And plan for the worst, because you never know what might happen. I had to take sick leave prior to maternity/family leave, due to issues with the pregnancy, and then we had emergency expenses we did not anticipate when our baby was premature, and then she was ‘failure to thrive’ so we had to buy (could’ve rented, but didn’t) a breast pump and buy formula and other medical items – have more cash on hand when baby comes than you expect to need. We spent a full week in hospital (which meant buying more meals, transportation, cell phone usage)… the whole adventure was far more expensive than we’d planned.

    And check out in advance what your insurance will cover – we spent so much on medication and hospital bills even though I have great extended coverage through work. 10% of a lot is still a lot – and one has to pay that stuff up front and be reimbursed the 90%. Read your insurance statements, too – they refused to pay some of our hospital expenses because they mis-read the bills as being duplicate, when they were for two separate date ranges of our stay, and I had to fight them to get that money.

    The pump was useful upon my return to work, though.

    I also want to add that you can consign a lot of baby items once your child has outgrown them – but don’t expect big bucks doing that. We consider that to be ‘found money’ to buy a few additional new items, but the real value is making room in our home for our child to grow. None of our friends or family members had babies, and we got few gifts, so had to bankroll everything ourselves – we shopped minimally, (except for books, which are my vice, but now my 2 yr old can read so I don’t mind that), but still had to buy for ourselves. When we did get gifts, they were often useless sorts of things, or very non practical – photo albums, dressy dresses.

    People can get preachy about cloth diapering and breastfeeding, so please remember that not all women or infants can breastfeed successfully, for a number of reasons. Formula was invented to save these babies, so let’s withhold judgement there. Also, not everyone is in a position to cloth diaper – our laundry room is four flights down stairs, no elevator, and shared with 30 people who don’t have kids and were not keen to share their laundry machines with icky diapers. We just couldn’t manage it – but we do save money by living in an apartment, in an urban area (no car required!), and our child benefits from proximity to parks, museums, libraries, and more. Every family has to do what’s right for themselves, overall. I’m sure I saved lots of money by making all our own baby and toddler food (toddlers do not need special packaged meals!, and nor do babies).

    And yes, I was caught in the tax trap. My tax bills for the two calendar years I had mat leave were surprisingly high – I just didn’t know to plan for that. I knew more about EI and family leave than my workplace’s HR professionals, but I didn’t know about that.

  22. For those using formulas and diapers, keep in mind that most companies have promotions for free samples.

    Have everyone you know (and feel comfortably asking) sign up for those for you.
    I have a friend that does that. Each sample was a weeks worth of formula.

  23. As a Realtor, I am self employed and there are no Maternity Leave benefits. I had budgeted for baby (I thought) but sure could have used Gails wisdom back then.
    A good friend gave me clothing for my daughter from age 6 months to 6 years, family bought us a stroller and a playpen, my colleagues bought a lovely crib and the rest we got at yard sales and Goodwill. We were just getting our heads above water (remember, no benefits) when we found out we had #2 on the way. Surprise (a lovely surprise, but still). A week before my 2nd was born, we found out hubby had cancer. I was coming home with a newborn, an 18th month old and a hubby having surgery who was physically unable to help with the girls.
    For almost a year hubby had radiatian treatments, medications and check ups. The meds cost money. The parking at the hospital cost money. Diapers, food, life, it all costs money. We kept sinking deeper and deeper into the financial abyss and it took us YEARS to finally be able to breathe again. If I had the guidance of a friend like Gail years ago, I would have had an emergeny fund and it would have made all the difference in the world. It’s so important to have that “Emergency fund” building way before you have kids if possible.
    Just remember that all a baby really needs is a family that loves it, and a full belly. The rest are lovely extras.

  24. avatar psychsarah Says:
    April 17, 2013 at 9:36 am

    Didn’t mean to come off as preachy about the cloth diapers-sorry if I did. I know it’s not feasible for all, but a lot of people dismiss it out of hand without realizing the budgetary benefits and how easy it can be (especially if you have easy access to a washer). Everyone can do different things to make their budget work-just offering suggestions in case someone hadn’t thought of this option :)

  25. avatar Christine Says:
    April 17, 2013 at 10:11 am

    I tried with the cloth diapers but my daughter, at 2 months, absolutely refused. I would put it on – she would fuss, I would take it off – fussing stopped. Repeated, same response. Waited a week or so, tried again – same. Wow. (And yes, she is still opinionated.)

    As for wipes, they are not necessary. A big stack of face cloths (reserved for bum use only) wet in hot water before using. Bring along moist in a baggie with a spare baggies for when they are dirty. Wash in hot water (a must!). It works out to be a huge savings and no skin reaction if your baby has sensitive skin. I had to buy special non-perfumed wipes when she went to daycare. Now THAT is expensive.

  26. There are also a bunch of groups of Facebook where people give things they no longer need for free. Ie: Frugal Moms Toronto, Free to good home Toronto etc. Look for one in your city or town.

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