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Avoid Debt by Not Having Children

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By Kali Hawlk, CommonSenseMillennial.com

Every time someone asks, “so when are you having kids?” I have two reactions. First, I cringe. Second, I feel grateful that I’m a woman living in 2014 where having children feels more like an actual choice than it ever has before.

I’m one of those millennial women who has zero interest in adding children to my family. My husband and I are happy, fulfilled, and satisfied with life in a household that consists of the two of us and some four-legged family members. We don’t feel like anything is missing. Our family is perfect to us.

The Choice to Not Have Children

To those with children, or to those who one day want them, my general response to kids (“no thank you”) often comes across as hostile or aggressive toward their way of life. That’s not my intention in declining to participate, and I feel like this is important to try to explain.

Having children is simply not an experience that appeals to me in any capacity. There has never been a time in my life when I’ve thought, “maybe I’ll give that a try someday.” A mother is not a state of being I’ve ever identified with. That doesn’t mean I spend time questioning the choices of those who do identify with motherhood and are happy to acquire the title of parent.

Far from feeling negatively about children, I just don’t feel anything at all. I don’t spend time thinking about the issue one way or the other (until someone presses me about it and then makes assumptions about me, my relationship, and my quality of life based on my answers). And I don’t hate kids. I like or dislike children on the same basis I like or dislike adults: their individual personalities.

The only thing I hate is that to have or not have kids is even a debate. You either want them or you don’t, and the only opinion you should get worked up about is your own. Having children is an intensely personal decision, and it is not a choice that should be judged by others either way.

Now that we’ve clarified that I’m not some sort of kid-hating jerk who thinks everyone with kids is somehow wrong, let’s move on to the more controversial points of the post.

The Financial Issues with Having Children

Because I feel completely unemotional about the idea of having children, the only issue that captures my attention is the practical matters involved. However you may feel about kids and having them for yourself, no one can deny the financial facts: kids don’t come cheap.

The US Department of Agriculture recently released research that indicated raising a child to the age of 18 would cost the average American middle class family $245,000. That’s a quarter of a million dollars just to get a child to the legal start of adulthood; the figure doesn’t even touch higher education costs. And that’s the average, meaning many families are paying far more.

When I ran my own information to calculate the average cost of my family having kids, I nearly fell out of my chair. This calculator from Baby Center says I’ll spend a whopping $319,422 to raise a kid to the age of 18 and pay for that kid’s public college education.

This number is particularly painful to me as it is far, far more than the total gross income I’ve made since I graduated college at 21 and entered the full-time workforce. (I’m approaching my 25th birthday now, and if you feel that’s young for having kids, keep in mind I live in the South and know many people younger than I am with multiple children.)

Combine this financial responsibility with all of the other financial goals Gen Y is working towards, and something becomes immediately, painfully obvious: if you want to avoid debt and save more, skip the kids.

The Cost of Children Makes It Difficult for Average Families to Achieve Financial Success

The average American household’s median income is about $51,000 per year, pre-tax. Even assuming that was post tax, the average yearly cost of raising a child, about $13,000, takes up a quarter of annual income.

That doesn’t leave much room for achieving a number of financial goals that you must hit in order to achieve financial security and independence. It’s difficult to gather up enough money for a down payment on a home, build an emergency fund with three to six months’ worth of expenses at a minimum, contribute a little something to your retirement down the road — all after accounting for the cost of kids.

Note that I said difficult, and not impossible. Many families do manage it — but many more simply can’t because of the financial burden associated with children. It may be enough of a struggle to make it from paycheck to paycheck, let alone add cash to different savings buckets and investments for the future.

[Be sure your savings account is earning more than 0.01% in interest. Compare rates here.]

Without the financial drain of children, my husband and I were able to purchase a home, build up an emergency fund, create a separate savings fund for international travel (what we personally prioritize and find necessary for a fulfilling life), and invest nearly half of our income so we can achieve our financial goal of retiring early to pursue our passions full-time. Adding kids to the mix would have made our version of financial success impossible.

We were able to do all of the above on a comfortable yet firmly lower-middle-class income; we’re above the average of $51,000 but below six figures. We would have not only struggled to get on track for our financial goals, but would’ve flat-out struggled financially.

Just adding one kid-related expense would start straining the cash we have available in our current budget for discretionary spending (which does not include cash available for bills and savings). Daycare for one child in our area is more than the mortgage payment on our home. Adding more costs would mean slashing the amount we could put into savings, and the total cost of kids per month and year would drive us awfully close to not being able to save or invest anything at all.

Should just one thing go wrong, our previously debt-free lives would be completely disrupted. Without money going to savings to handle financial emergencies, we’d be pushed into debt and hard pressed to find a way to dig ourselves out.

Financial Losses Are More Than Just Expenses

Adding children to the mix in my personal situation would also hinder my ability to earn an income and financially contribute to my family. Although I know women who do an amazing job of working stressful jobs from home while caring for multiple children — and am endlessly impressed by their ability to do so — I wouldn’t be able to do the same.

My business is extremely important to me, and I value the freedom and energy I currently have to devote to growing and expanding it. I couldn’t even get passed a pregnancy without losing income: as someone who’s self-employed, I don’t receive employer benefits to cover a stretch of leave. If I don’t work, I don’t get paid.

Many other women are in the same camp as I am, and either unable or unwilling to give up their ability to earn money. Complicating the situation is the fact that the United States is one of the worst countries in the world for providing paid family leave. In fact, we rank right at the bottom of the list with countries like Liberia, Suriname, and Papua New Guinea.

Many companies aren’t obligated to provide paid maternity leave (much less paternity leave), which leaves many working women no choice but to go without an income in the weeks they must spend recovering and caring for a newborn.

Moms are still at an earning disadvantage even after those initial weeks and months. As Erin Lowry explains in a piece for AOL’s Daily Finance, “on the financial side, non-moms have the advantage” because they’re more likely to earn more than women with children. There shouldn’t be a debate around whether that’s fair; it’s obviously not. But it’s another financial strike against choosing to have children, especially when women already struggle to secure equal pay for equal work.

So in counting the financial downsides to children, we must consider not only the expenses but also the opportunity costs to women who value their ability to work and earn income.

Avoid Debt by Not Having Children

I have plenty of personal reasons for not being interested in having children. My husband and I are on the same page, and our goals and our plans just don’t account for kids.

I’m glad this is not a financial issue I need to account for. Without children, we’re financially successful and ahead of most of our peers. We’re on track to achieve all our biggest financial goals — and many of them, like financial independence, in less than 10 years.

Add kids to the mix, and things start going financially bad awfully quick. We’d go from saving and investing the majority of our income to living paycheck to paycheck hoping we never experience an unexpected financial need at best and struggling with growing piles of debt at worst.

Dealing with debt? Consider a personal loan or a balance transfer to slash interest rates.

The ugly financial picture isn’t the only reason we don’t want kids and won’t have them. But it’s a reality that other millennials need to think about and plan carefully for if they do want children. There’s never a “right” time for kids and I’ve been told by grouchy parents that advising others make sure the financial stars are in alignment before reproducing is not realistic.

But, if kids are a part of the long-term plan for you, I still believe it’s worth your time and effort to give the financial issues some thought. If you can’t take care of yourself financially, you aren’t prepared to adequately provide what a child deserves. Ensure you can meet your own basic needs first, then have an emergency fund and at least a little bit invested in retirement accounts for your future before taking on the financial responsibilities associated with having kids.

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5 Steps to Prepare for a Child While in Debt

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By Matt Becker, MomAndDadMoney.com

Money was the thing I worried about most before our first son was born, and my work as a financial planner with other parents tells me that I’m not alone. There are a lot of new financial responsibilities that come with starting a family and it can be hard to figure out what needs to be done, how much it will cost, and how to prioritize it all.

If you have debt, all of those questions can be even scarier. Debt can feel suffocating, and many of the parents I work with want to get rid of it as fast as possible.

But while getting to debt-free is a fantastic and admirable goal, I usually encourage new parents to pump the brakes a little bit.

Before you go into full-on debt attack mode, there are a few steps you can take that will not only make it easier to pay off your debt, but will give your family more financial security in the meantime.

Step 1: Find some big wins

Freeing up room in your budget is almost always the first step towards reaching any of your financial goals. Whether you want to pay off debt or save for the future, you’re going to need some free cash in order to make it happen.

The quickest way to do this is to focus on what I like to call “big wins”. A big win is simply a one-time effort that reduces or eliminates a regular bill, saving you money month-after-month without requiring any ongoing effort.

Here are some examples of big wins:

  •  Negotiating your cable bill. Or maybe even cutting it completely.
  •  Finding a lower-cost cell phone plan (check out companies like Republic Wireless and Ting).
  •  Finding a bank that doesn’t charge you ridiculous fees, and maybe even pays a little  interest, such as Internet-only banks.
  •  If you really want to go big, you could downsize your home or trade in your car for a less  expensive model. Those are the kinds of decisions that could save you hundreds of  thousands of dollars over your lifetime.

With just a few one-time efforts, you could find yourself with a couple hundred dollars extra per month. Then it’s time to put that money to work.

Step 2: Build a cushion

No matter what kind of debt you have and what the interest rates are, it can be a good idea to put at least a small amount of money into a savings account before going into full-on debt attack mode.

The reasoning is pretty simple: having a baby is going to change your life in a lot of ways, and the reality is that it will take you some time to adjust. In the meantime, there are going to be expenses you didn’t plan for and having a little bit of savings will allow you to handle them with cash instead of putting them on a credit card.

That simple habit of handling the unexpected with cash instead of debt is possibly the biggest key to not only getting out of debt, but staying out of debt. And it’s a big mindset change, so the sooner you can start, the better.

The easiest way to build your savings cushion is to take some of the money you’ve saved with your big wins and set up an automatic transfer that sends it from your checking account to a savings account on the same day every month. With that consistent progress, it won’t be long before you have $500 to 1,000 dollars saved up, which should be enough to handle most unexpected expenses that come your way.

Step 3: Protect yourself

One of the best things you can do for your growing family is ensure that they will have the financial resources they need no matter what happens to you. Generally this means getting two things in place: insurance and wills.

I have to admit, I love insurance. No, it’s not the most exciting topic in the world. But when it’s done right it’s the best way I know to protect my family financially from some of life’s worst-case scenarios.

Here are the big types of insurance to consider as you start your family: Health

  •  Life
  •  Disability
  •  Liability

Writing wills is one of the most morbid topics in all of personal finance, but for new parents it’s also one of the most important. More than anything else, a will allows you to name guardians for your children, ensuring that they will be in good hands no matter what.

Step 4: Test drive 

This is a tip I give to all expectant parents, whether they have debt or not, mostly because it can help make sure that having a baby doesn’t send you into even more debt.

A few months before the baby gets here, estimate how much the baby will cost you on a monthly basis (babycenter has a good tool for this) and start putting that amount into a savings account. This will do two big things for you:

It will let you practice living on your baby budget before you actually have to do it.

It will help you build up that savings cushion we talked about in Step 2.

The combination of practice and savings cushion will make the whole adjustment easier, less stressful, and less likely to lead to more debt.

Step 5: Attack that debt!

Finally! After all of that we’re finally ready to start attacking that debt!

With those other pieces in place, you can send extra money towards your debt without the prospect of one financial mishap messing up your progress. You have a little cushion, you have the worst-case scenarios handled, and you have some practice living on a tighter budget. Now you can crush that debt with confidence!

There are two schools of thought when it comes to which debts to pay off first.

One is called the “debt snowball” and encourages you to pay your debts in order of balance, with the lower balance debts being paid first. Proponents of this method say that the motivation of quickly paying off individual debts makes it more likely that you will keep going.

The other is called the “debt avalanche” and encourages you to pay your debts in order of interest rate, with the highest interest rates being paid first. This is the approach that will save you the most money, as long as you stick with it.

No matter which approach you take, make it automatic just like you did with your savings cushion. Putting those extra payments on auto-pay will make sure that you’re attacking that debt consistently month-after-month and getting to debt-free as fast as possible.

Did you have debt when you were starting your family? What did you do to make it easier?

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4 Biggest Debt Temptations and How to Avoid Them

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By Kali Hawlk, CommonSenseMillennial.com

Trendy outfits. Stylish furniture. Fancy vacations. Latest and greatest tech tools and gadgets. New cars. Bigger homes. This list of things people want and can’t get enough of could go on and on — because the temptation to spend money we don’t have is everywhere in our consumer-driven society.

We’re tempted to buy ourselves a little happiness with a new shirt, a fun piece of decor for our living space, or a snazzy smartphone case (that we somehow see as better than the other three we own but don’t use).

We treat ourselves with expensive coffee drinks, over-complicated cocktails, and meals that someone else prepared. We work hard, so we deserve it.

We want to keep up with the Joneses, or at least our peers. We don’t like feeling left out and owning less can often feel like amounting to less.

The temptation to spend isn’t difficult to explain, but that doesn’t mean it’s justified or no big deal. Here’s the problem: spending temptations, when left unchecked, lead straight to debt temptations.

When a Little Extra Spending Turns into a Whole Lot of Debt

Will a $4 latte that you buy on occasion after a rough day at work put you in the poorhouse? Unlikely. The problem occurs when you consistently make the mistake of spending just a little too much money — a little too much more than you actually have in your checking account to cover. “A little extra spending” quickly evolves into a financial mess when you charge purchases to your credit card and don’t pay that balance off in full.

“Not paying attention to where your money is going is what leads people into debt,” explains Sam Farrington, founder of SoundMind Financial Planning and member of XY Planning Network. Failing to track your spending or keep a budget leaves you more susceptible to overspending and living above your means.

As the old adage goes, you can’t manage what you don’t measure. Measure your money so you know you’re living in your means and not spending more money than you actually have.

The Number One Debt Temptation

You’d think that saying “don’t spend more money that you have” would be one of the most intuitive personal finance fundamentals out there. But many people find this exceedingly difficult, thanks to the top debt temptation: credit.

Lines of credit — usually associated with credit cards when we talk about debt — enable you to literally spend more money that you have access to via cash (in something like a checking or savings account). “The reality is that the credit card temptation will become your biggest financial snare down the road once the balance becomes unmanageable,” says R. Joseph Ritter, Jr. CFP® of Zacchaeus Financial Counseling, Inc.

It’s incredibly easy to open a credit card account, charge a purchase on the card, and forget about it until about four months later when your balance is steadily accruing interest. And just like that, you’re in debt.

Debt Temptation Intensifies When Credit Card Companies Sweeten the Deal

Credit cards may serve as an even bigger temptation when they’re rewards credit cards. Users may feel like they’re getting an amazing deal by opening up credit cards to get discounts, free items, statement credits, and points for fun and exciting experiences like travel.

According to Dennis M. Breier, president at Fairwater Wealth Management, “one of the biggest debt temptations, especially for young professionals, is putting vacations or large purchases on credit cards in order to get the points.”

That’s where savvy consumerism abruptly ends and financial trouble begins. It’s tempting to open — and use — more credit cards than you need. It’s justified because you got a free airline ticket, right? Not when you had to spend $3,000 you didn’t have to score a flight that retailed for $300.

“Many young people will book a trip or buy something expensive with their card to get rewards points because it sounds smart. However, they won’t immediately pay this debt back,” says Breier. The temptation to use the card to feel “rewarded” is strong, and it can quickly leave you with a mass of credit card debt if you don’t have a plan to manage and pay your balances in full and on time each month.

Debt Temptations Go Beyond Plastic

Credit cards aren’t the only kind debt temptation out there — although they may be the easiest to give in to. Other types of credit, like auto loans, lure many into financial situations they can’t afford to get out of.

“Two of the biggest temptations include relying on credit cards and buying a car,” says Ritter. “Although the monthly payment makes a new car seem affordable and the new car smell is tempting, in the long run you will spend a lot less money on cars by buying a car that is several years old.”

Mark and Lauren Greutman, money management experts at MarkandLauraG.com, agree and also suggest buying used. “New cars depreciate by 20 percent right after driving off the lot,” they explain. “If you want a new looking car, I suggest buying a two year old car that was previously leased. You will get that new car feeling, but without that hefty depreciation.”

Avoiding Debt Temptation by Using Credit Cards the Right Way

Buying a used car instead of a brand new one is a simple and easy fix when it comes to avoiding debt temptation in our vehicles. Figuring out how to use and manage credit cards properly, however, is a bigger challenge for many.

Michelle Black, author and credit expert at HOPE4USA.com, believes that improper attitudes towards credit card usage serve as the biggest trigger to overwhelming debt. She suggests that, even though you may have a larger line of credit than you do cash balance in the bank, you need to think of your credit in the same way you would cash.

“Credit cards should be treated just like your bank account: if you don’t have the money to pay off the bill right that moment then you should not use your credit card to make the purchase,” explains Black. “Resolve to never revolve a credit card balance from month to month,” she advises consumers. “Your wallet and your credit scores will thank you.”

Black also wisely points out that just because credit cards can lead us into debt temptation, we shouldn’t label all credit cards as “bad.”

“The cash and carry crowd will lead you to believe that the only way to achieve true freedom from debt is to avoid credit cards all together,” she says. “However, that is not only bad advice it is also insulting. If you develop true financial discipline then it is no harder to avoid overspending on a credit card than it is to avoid overspending the funds in your bank account.”

This is where financial education and literacy become critical. Credit cards — and other financial products that allow us to borrow money for a period of time — can be useful tools when we understand how they work and how to use them to our advantage.

It’s important that we can identify our debt temptations. But it’s just as important to realize that we’re not fated to give in to them. With the right knowledge and information, we can make empowered financial decisions to avoid temptation while making the most of powerful financial tools available to us.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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