Making the Most of Your Family Paycheck
While the recession is officially over, many families are still carefully watching their dollars. Having children under your roof means there are many expenses – school supplies, clothing, shoes and doctor appointments. By making careful purchasing decisions and saving money on what you have to pay for, you can stretch your income and save. When you involve your children, they learn smart money management as well.
Save before you see it
Make sure you take advantage of all pre-tax savings and deductions available to you. Before making any decisions, consult your tax advisor about your specific situation.
$ Stash away for retirement. Ben Birken, a certified financial planner with Woodward Financial Advisors Inc. in Chapel Hill, advises workers with a 401(k) available to contribute at least enough to take full advantage of any employer’s matching contribution. “Otherwise, you’re leaving free dollars on the table. Even without matching employer contributions, 401(k) contributions are excellent pre-tax deductions. You don’t pay taxes on dollars that go in, which therefore reduces your taxable income,” Birken says.
He recommends people without a 401(k) plan at work look into a Traditional IRA, where contributions are tax-deductible. Depending on your income level, you might be able to make a tax-deductible IRA contribution for a non-working spouse.
$ Take advantage of other pre-tax accounts. If your employer offers flexible medical spending accounts and dependent day care accounts, consider whether these accounts make sense for your family’s situation. Birken says that these accounts work best for those who have known expenses each month because contributed money is lost if you don’t use it.
$ Save for college with a tax break. Birken also suggests that parents contribute to a 529 college savings plan for their children. “A married couple living in North Carolina can deduct up to $5,000 contributed to a N.C. 529 plan. This brings down their state taxable income and, for most families, this amount is about a $350 savings,” Birken says.
Be a smart shopper
Two of the best ways to save money is to use coupons and shop for sale items.
$ Clip coupons. Dan Griffin, a certified financial planner and founder of www.savvydollar.org, says that you can save significant money by using a coupon to purchase an item when it is on sale. “It is important to not be loyal to specific brands and to buy only the items that you need,” he says.
Tasha Vin, Rolesville mom of three, uses her couponing to involve her children in saving and teach them the value of money. “My 6-year-old daughter helps cut coupons and organize them. The kids see how the coupons help us save money each time we go to the store,” Vin says.
$ Look for sales. Another way to save money is to look at weekly sale fliers to find reduced-price items that you use regularly and stock up. Danielle Hook of Apex looks at the ads for nearby grocery stores and stocks up on items that she uses regularly, such as pork chops and chicken breasts. Make sure you are not eating up your savings in gas money driving to too many stores.
Plan ahead to get the best deals
Another way to stretch your dollar is to plan ahead for the items you will need. Shop for the best price and make sure you don’t buy impulsively.
$ Buy a season ahead. Since clothes are marked down significantly at the end of each season, consider buying clothes for your family for the next year during these sales. “My two boys are stocked up on summer gear because I bought it all last year when it was marked down for clearance,” Hook says.
$ Route your trips. Since gas can be a large expense, Hook plans all of her trips before getting into the car. “I drive to the farthest location and work my way back towards home,” she says. Hook estimates she saves at least three gallons of gas a year by designating one day a week as a “stay-at-home day.”
$ Make a meal calendar. By planning meals ahead, you can avoid spending money on take-out and convenience foods. Older kids can help you plan meals and begin to understand how much ingredients cost for each meal.
Meal planning helps Hook take advantage of stocking up on items when they are on sale. “I also plan for one ‘breakfast for dinner’ meal each week. You’d be surprised at how much you can actually save by eliminating a meat from just one meal per week,” Hook says.
Buy and sell used items
Since kids grow quickly, consider buying gently used items and then re-selling the items when your kids outgrow them.
$ Find savings by shopping secondhand. Consignment sales, secondhand shops and Craigslist are great places to buy clothes, toys and equipment. “Consignment sales are booming in the Triangle,” Griffin says. “For families who are having a baby or looking for toys or clothes, it is a great way to save money.”
Before purchasing anything secondhand, be sure to check that the item is not recalled and that it is in good shape. For safety, you should not purchase a used car seat because it cannot be guaranteed that it has not been in a crash.
$ Sell your stuff. Consider selling children’s items you no longer need to bring in extra money. Involve your children in the sales process, especially if the items belonged to them. Give your kids a concrete way to see how the money earned positively impacts the family, such as by using the money to buy groceries or saving it for a specific item the family needs.
Consider how you pay
Understanding where your money goes and sticking to a budget is an important part of making the most of your family’s money. Many families find that using a cash system helps them reduce unnecessary spending and stick to their budget. While other families find that responsible use of credit cards helps them to track their spending and take advantage of credit card perks, such as cash back or airline miles. Each family should carefully weigh both methods based on their financial situation and their personality to determine the best system for them.
$ Stick to a budget with cash. Vin finds that placing cash for each budgeted item, such as gas and groceries, into a binder helps her stick to a budget. Unless there is a medical issue, the family does not use credit cards. “When the money is gone for groceries, it is gone. I try to pace our money throughout the two-week period to make it last,” Vin says.
$ Track purchases with credit statements. Griffin’s family pays for the majority of their expenditures with a credit card and pays off the balance each month. Griffin says that when he uses cash, he is not able to track exactly what it was spent on. With credit cards he can monitor the money spent and keep the budget on track.
“I look at the credit card statement each month and keep a very detailed list of where the money went,” Griffin says. He also says that the limited liability in case of theft is also a bonus for his family. By carefully selecting the credit card, you can also get cash back or other perks.
While changing your spending habits can be challenging at first, take small steps to make lasting changes to help your family’s financial future. By including your children in the process, you help them see the benefits and create healthy life-long spending patterns.
Jennifer Gregory lives in the Triangle with her husband, two kids and three dogs.