I am truly amazed at the number of people who go into parenthood for the first time without a clue about what the implications will to their financial health. So you’re planning to take a year away from your job and live on the pittance that is maternity benefits and you don’t think that’ll cause some financial constraint? Really?

I regularly meet and hear from people who just can’t figure out what they could have done differently. Ditto the people who chose to go back to school, but give no consideration to keeping body and soul together as their minds soar.  Or the people who have to move from two incomes to one because of myriad other reasons.

The first thing you should do when you’re considering a step that would see your family income go down is pay off your debts and build up your emergency savings. If you were racking up debt on two incomes, imagine how deep a hole you can dig yourselves on one income if you don’t do some PLANNING.

Stay away from big financial commitments. I can’t believe the people who think a new baby means they have to go out and buy a new car. New parents with their heightened safety awareness are suckers for the hard sell on everything from safety and added space, to “convenience.” People actually whine about why they needed that new van. Hey, I transported two kids in an old Prelude for years, and it didn’t hurt one bit.

And what’s the obsession with NEW. There are plenty of safe, roomy, convenient options in the used car market. If you’re planning on living on one income, you probably can’t afford a new car!

I think the thing that may be hardest for people, is watching what two-income families can afford that they cannot. The temptation is to act like a two-income family while living on one income, using credit to fill the gap. Oooops! Big Mistake.

But it’s not all about what they can’t have. If you’re making the decision to become a one-income family so you can stay home with baby for a year, or for many years, then you have the offsetting benefit of being able to raise your own children. In this day and age, that’s a real privilege since many people simply can’t make that happen. If you’re cutting back on income because you’re going to school, then you know you’re going to have a more fulfilling work experience later on.

One-income success rides on your ability to prioritize your NEEDS and your WANTS.  If you let everything you want be a NEED, you’re doomed. If you can clearly distinguish, prioritize and make choices, you can make a success of your one-income experience.

Go over your budget with a fine-tooth comb and differentiate the MUST HAVES from the WANNA HAVES. Will you dispense with your annual vacation? Could you do without a second car? Do you really need 500 channels? And if you have a cell phone, do you also need a landline?

Now, of the MUST HAVES: Are their ways to cut back? Would you be willing to re-amortize your mortgage over a longer period of time so your payments are lower? Would you downsize to a smaller dwelling? Are you prepared to cut back on utility costs by hanging clothes out on the line or turning off lights? Will you buy store-brands and shop with coupons?

You may find that with all your trimming, you still can’t find a way to get to the end of the month before you get to the end of the money. But having trimmed back to the bare ones, you have a good idea of how much you need to bring in. Perhaps, babysitting other children is an option, or working nights or weekends when your partner can be home with the kids. If you’re a student, get a job that complements your school schedule, and perhaps even let’s you do homework. Working as an over-night caregiver a couple of nights a week, doing neighbourhood errands for shut-ins, or tutoring other students could give you just enough to make your plan work.

Of course, there’s no better way to test your plan than to TEST YOUR PLAN. So if you’re going off on mat leave, spend the months leading up to your mat leave living on one income. Use the income that will be eliminated to aggressively pay down debt and build up an emergency fund. Practicing your new economic reality will also give you the opportunity to tweak your budget so you know it will work once you’re actually down to one income.

There’s nothing like a great back-to-school sale to get a person’s juices flowing. Shopaholic or not, the new school season brings out the crazed consumer in most. Clearly there are smart and not-so-smart ways to arm our kids with all the stuff they’ll need to face a new school term, but the distinction is not always clear. So here are some guidelines:

DO shop the sales. You can make your dollar go a lot further by gathering up the flyers and doing a little prep work. I buy my kids’ next season’s clothes at the end of the current season, usually at fifty to seventy percent off. Add up the cost of a snowsuit, boots, and the next-size school wardrobe and the savings are huge.

DON’T buy things you don’t really need no matter what a great price they’re going for. Going out of business sales and retail closures can tempt even the savviest shopper. Make a list before you go and stick to it. 

DO involve your kids in the experience. Giving them a budget to work with for school supplies or at least part of their clothing purchases will initiate them in the budgeting process. Help them to set priorities and to determine quality.

DON’T be unilateral, as in “You can’t buy that. It’s stupid.” Once you give your child the money you also have to ante up the responsibility or she won’t learn a thing. If she’s determined to make a bad purchase (in your opinion), let her. The consequences will teach the lesson. Just don’t stick your hand back in your wallet to rectify the situation when she sees the error of her ways. With responsibility should come accountability. Let her earn the money to rectify her problem.

DO hold off on shopping until you’ve done a complete inventory of what your child has and what he needs. If last year’s jacket still fits, that’s one less expense. And if you wait until he’s back in school to do the school-supplies run, you’ll end up getting what he needs, not what he thinks he needs.

DON’T forget about extra-curricular expenses such as sports equipment, music books, uniforms and the like. You’ll likely have to come up with extra money during those first few weeks of school to cover all sorts of activities, so hold some back when you’re off shopping.

DO stick to your guns about what you can afford to spend on your child’s clothes. Even if she has to have that jacket, you can say “No.” She won’t break. You could, of course, allow her to upgrade using her own money to make up the difference between what you’re prepared to spend and the brand she absolutely has to have

DON’T miss the opportunity to guide your kids. This is your job. Remember to keep talking about the cost in terms of what else that money could buy, as in “Sam, I know you really want those jeans, but you also wanted to save for your ski lessons. Which one’s more important to you in the long run?”

DO show your children your budget so they have realistic expectations. Many parents hate to talk about money with their kids. And they’re dead set against disclosing the realities of their financial circumstances. Then they get ticked when their children don’t show sufficient appreciation for how hard they have had to work to provide those no-name jeans. Well, if you don’t tell ‘em, how are they supposed to know? Being smart about money isn’t intuitive. It’s learned. And you are your children’s most influential teachers… of both good habits and bad.

DON’T burden your kids with the horrors of your financial mistakes. If this seems to be a contradiction of what I just said, it’s because there’s a fine line between being up-front and truthful with children, and burying them in reality. Kids deserve to feel safe. Telling them you haven’t got the money to buy groceries doesn’t add to their sense of security. What you want is to create a sense of reality for your children, not to worry them to death.