With two young kids, our monthly child care costs exceed $2,500. That’s over $30,000 a year! To say the least, this has made a very significant difference in our disposable income and will impact our savings goals in a big way. Our goal of financial independence is still very real, but this time period with two kids in day care will push that goal farther out.

We have analyzed our options in terms of dual incomes vs. single income. From a cash flow standpoint, our dual income, dual day care situation is the way to go. Making changes for other goals such as balance, more time with kids, time to start our own businesses, etc. are constantly on our minds.

For now though, we are buckling down to some serious budgeting in other areas to be able to even afford our childcare costs, let alone continue on a long path toward financial independence. By the way, yes, we budget. Some feel that budgeting encourages spending up to a certain level rather than encouraging frugality.

We find that budgeting provides us with useful targets in a hectic phase of life that requires some convenience purchases to stay sane.

High Fixed Costs

At the start of 2018, we evaluated our 2017 spending and set budget goals for the new year. In 2017, as expected, the majority of our spending was on housing and day care. In fact, our housing and kid-related costs (including day care plus basics like diapers) accounting for 65% of our spending. With a couple other fixed costs like basic utilities, our area for budget changes accounts for only about one-third of our spending. Not a ton of room for change, but we are doing what we can with that one-third.

Maintain Core Priorities

Some things are clear priorities, like buying healthy food for our growing kids, seeing our 12 year-old dog through her old age in a humane way, maintaining active life insurance policies to name a few. That leaves even less flexibility in the budget, and yet the need remains to pay for child care for baby #2.

The easiest thing to do would be to reduce our pre-tax retirement savings. Currently, our goal is still to max out both of our 401k/457b accounts in 2018. We are committed to doing that, and to setting aside some additional funds for college savings for our kids.

A Lot of Little Changes Add Up

The fact that we have high fixed costs and some savings and spending priorities just means we’ll have to work a little harder where we do have flexibility. Here are some of the key changes we made to accommodate for full-time childcare costs for baby #2:

  • Cut our budget for all eating out by 30% from an already bare bones level.
  • Cut the grocery budget by 15% from an already tight budget for us (and added another person to the household eating crew).
  • Cut the coffee and alcohol budgets by another 10% (I know, we should eliminate them, but we’re making progress each year).
  • Cut clothing budget by 25% which is down to just $50/mo for the family.
  • Cut personal care (i.e. haircut) budget by 10%; J is cutting his own hair at home now.
  • Cut gas budget by 10%; I’m bike commuting but gas costs also rose here.
  • Cut gifts budget by 10% in hopes to find more low-cost or homemade options.
  • Cancelled Hulu and the Sunday home delivery of the newspaper.
  • No plans to renew annual zoo or aquarium memberships.
  • Planning a low-cost vacation to stay with family instead of a higher-cost destination.
  • Decluttering and selling what we can to cover some discretionary purchases.
  • Continuing our ongoing efforts to save money on kid supplies.
  • Planning to potty train our toddler asap to save on diapers! 🙂
  • We may cut out all paid exercise classes but this is a huge sanity saver for me at the moment so I’m going to try my hardest in the other areas to be able to keep this one

Like for all of us, budgeting and lifestyle changes are a journey. Though there may be more we could do, we are attempting to balance living for today and living for tomorrow. We are striving for the balance that will allow us to enjoy our chaotic life with young kids now and also allow us to save enough for a future of flexibility down the line.




5 replies on “Budgeting in the Age of Day Care

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