Back in April, my wife gave birth to our third child, a beautiful baby girl.  Prior to the birth, I wrote about some changes that we were making to our budget, to prepare for life with the new baby. I made some predictions, based on what I thought we might have to deal with, once the new baby arrived.  Let’s see how I did (items in italics are quoted from the original article):

Categories That Have Increased -

Grocery - When the baby arrives, we’ll be buying diapers, pacifiers, formula, food, wipes, etc. Plus, we’ll be eating-in even more…

Indeed, our grocery spending has increased, by more than 20%!  I attribute this to the fact that a) I have less time to focus on my shopping and b) grocery prices have increased, across the board, for everyone.

Electricity – A new baby means more loads of laundry, more baths, and more lights (turned on during the middle of the night). Plus, our two older kids now have televisions in their rooms so that they can watch and…

Our electric bill was very high last month.  It has been very, very hot here the last six weeks.  Hopefully, as it cools, we can run the air less and conserve a bit of electricity.  Plus, with the new baby, we are constantly washing clothes!

Medical – Our doctors are all located about 50 miles from where we live. (We also have a ‘back-up’ doctor here in town, but we’ve been with our pediatrician for almost a decade…

Our medical expenses were actually a little less than I had anticipated, until last week, when baby girl had to be admitted to the hospital.  (She’s home now and doing well!)  Our insurance will pay the bulk of the hospital bill, but we’ll still have to cover our part.  We may actually go over budget in this category, once all of the bills have come in.  If so, I’ll have to borrow from some other category.

Clothing – A new baby needs new clothes. Of course, with four awesome grandparents, she’ll probably have enough newborn outfits…

As expected, the grandparents and friends bought more clothes than a dozen babies could wear!  We are so blessed.  But, Mommy needed some new clothes, after the baby was born, and both of the older kids needed back-to-school stuff.  Still, all expenses were covered by our new budget.

Daycare - In August, we’ll have two kids, not just one, in daycare…

We’ve been preparing for this added expense for almost a year, so we are prepared.  Baby girl started daycare yesterday, and she did great!  Big brother is SO proud to have little sister with him.

Categories That Have Decreased -

Entertainment – Let’s face it. With a new baby, we just won’t have the time (or energy) to go to the movies or rent DVDs. We are pretty much homebodies anyway…

I pretty much nailed this one.  Our lives have settled into a pretty steady routine.  Once in a blue moon, Mommy and I will rent a DVD, but we spend most of our waking hours taking care of the kids.

Eating Out – Not only am I trying to lose weight, but we’ve grown tired of eating out…

Actually, we still eat our more than I’d like.  But, we have eliminated expensive meals.  Instead, we’ll grab a sub sandwich or grilled chicken sandwich.

Vacation - We will, more than likely, not go on a true ‘vacation’ in 2008…

Uh, ignore the above sentence.  The baby is so well behaved, we were actually able to go on vacation – when she was just 5 weeks old!  We spent a wonderful week at the beach and had a blast.  I actually suspended our savings plan for two months, and use the money that would have gone into savings, for our vacation.  Bad form?  Perhaps.  Great time?  Indeed.

Other Financial Impacts -

When I file our 2008 income taxes (in 2009), we’ll be able to claim a third dependent. This should reduce our taxes for 2008…

Not only will we be able to claim a third dependent, by my wife’s gross income will be less in 2008 than it was in 2007.  She took off the last few weeks of school to stay home with the baby.

I did a pretty good job of predicting our new budgetary needs.  But, creating a budget always involves a little guesswork.  Over time, I get better at figuring out what my monthly needs might be, and I’m constantly modifying my budget to fit the actualities of my life.

By the way, if you are looking for an easy-to-use budget, check out YouNeedABudget.com

Next week, I’m going away to church camp as a counselor.  Yesterday, I went shopping for camp supplies with my wife and my daughter.  While they were looking for shorts in JC Penny, I walked to the other end of the mall, looking for a new printer for our home.  My old printer, which has served me faithfully for almost a decade, is sadly incompatible with Vista, the operating system on my new laptop.  Following my own $100-a-day-rule, I researched the new printer for a week, and decided to go with a Lexmark All-In-One.  I wanted a printer that could fax / scan / copy / and print – and since my “office” is now the baby’s room, I needed a compact machine that could be set up on the kitchen counter and print documents wirelessly from my home network.  (For those interested, I went with the Lexmark X9575.  It’s a nice machine and I am really digging it’s wireless functionality.)

I also purchased a new router for my home network.  My daughter now has my old laptop (connected to an external monitor) and I wanted to be able to network all of our computers.  Now, we can all share the Internet connection and the printer.  (My daughter has a webkinz pet.  Have you heard of this?  The people behind this idea are geniuses.  Sell a $1 toy for $15 – add in a few online games – and boom – you’re rich!  Amazing…)

Over the past three years, I’ve learned a lot about myself -

I do a pretty good job of saving money.  (I pay myself first, last and all along the way…)  But, I’m not particularly frugal.  I still like “stuff”.  So, I’ve managed to create a budget that allows me to both save and spend.  Being debt free allows me the option to do both.  I can save a good portion of my income, in taxable and non-taxable accounts, and I can still have enough left over to buy some nice things.  I don’t go overboard with my spending – and I never buy anything for which I have not budgeted – but I do enjoy having a few gadgets and gizmos.

When I talk to my friends about living on a budget – and saving for the future – they always assume that I’m missing out on the fun things in life.  On the contrary, I’m enjoying my life now, more than ever.  I have a plan.  I’m sticking to the plan.  And, as part of the plan, I have some discretionary spending.

My wife and I talk about this all of the time.  Instead of new cars, we’ll drive used ones.  Instead of name brand foods, we’ll eat generic.  But, we’ll also go on vacations, send our kids to camps, and buy nice things for the new baby.  I don’t even pretend to be “Mr. Frugal”.  I’d say that I’m frugal 50% of the time, practical 49% of the time, and foolhardy 1% of the time.  I guess that’s not so bad! 

My goal is to live a life of balance.  I enjoy saving money – but I also enjoy spending it.  In the past, I spent with out care or thought.  Now, I still spend, but I do so only within the confines of a well-developed plan.  By planning for the occasional splurge, I can feel good about the purchases that I make, knowing that I am also responsible with my savings and retirement contributions.

(By the way, I use You Need A Budget to manage our household finances.)

What about you?  Have you found balance?  Are you a saver or a spender?  Both?  I’d love to read your comments.  Please note, comments take a few minutes to appear.  Please be patient.

Nine years ago, I bought a blue chair-and-a-half.  Yesterday, I hauled it away.

As I was driving down the road, returning from the ‘dump-trash’ (that’s what my daughter calls the local collection facility) – I started thinking about the old blue chair.  My wife and I purchased it on a whim.  We lived in a small, two bedroom apartment, and we were expecting our first child.  We were, as we always were back then, broke.  But, we had good credit.

We went to a local furniture store and we scanned their selection of chairs.  Quickly, we picked out out the blue chair-and-a-half, because it matched our other furniture.  We used the furniture store’s in-house financing – and we promised ourselves that we would ‘pay the whole thing off, next month’.

When the next month rolled around, we didn’t ‘pay the whole thing off’.  In fact, we took eleven months to pay for the blue chair.  That’s right.  It took us nearly a year to pay for a chair.

I was recently digging through some old paperwork, and I stumbled across the financing documents for the blue chair.  I was astonished to see just how much we paid for the chair – and that the interest rate had been 21.99%!  I also noticed that they charged me a delivery fee – and yet I distinctly remember using my own truck to bring the chair home.

As you can see, back in those days, I wasn’t very money savvy.  In fact, I was foolish.  When I wanted something, I went out and got it, regardless of its price.

Now, we are thinking about getting a new chair, to replace the old blue one.  For the time being, we have simply moved an old recliner from one spot in the den to another, and we are using it to fill the space where the old blue chair used to sit.  Eventually, we’ll buy a new chair.  But, we’ll shop around first – comparing prices and features.  We’ll pay cash and the purchase will be included in our budget.  And, we’ll do business with a local furniture store with whom we have an established, first-name relationship.

In other words, we’ll make an informed decision based on rational thought, instead of an impulse purchase based on irrational want.

It isn’t easy, thinking about the way things used to be.  But, it is good to know how much we’ve changed.  It’s amazing how much better life is, when you have a plan and you stick to it.

How have your money management skills changed, over the years?  Do you still impulse shop?  Are you living on a budget?  Leave a comment and let us know how you are doing.