When my wife and I had our first child we made the decision she would stay home with her until school age, and then possibly rejoin the workforce. We were young parents, and had only been married about a year when we found out my wife was expecting.
Of course we were elated to be starting a family together, but I couldn’t help but worry a little. At the time I was working an entry-level job and floundering a bit when it came to finishing my degree. Around the same time we had two sets of friends who recently had their first child. In fact, our kids were around the same age and as both moms became friends through various “mothers of preschoolers” (MOPS) events at our church, so did our kids. But there was one big difference in both cases – the couples were about ten years older than us.
Both sets of friends had completed college degrees, and enjoyed nearly a decade of career success. With no kids during that time they also managed to build some serious wealth. They drove new vehicles, lived in a huge (compared to ours) house, and their kids wore handmade dresses and such from the trendiest shops in town. Unfortunately, we made the mistake of trying to keep up appearances with these friends, probably because we were a little insecure about our own finances, even though our situations were entirely different.
The first mistake I made was leasing a new SUV because we just had to have a bigger vehicle with a baby. And of course, leasing made sense to the younger me because I could simply turn it in a couple years and get another one. Of course, now I realize this method of “renting” something to drive is not a wise financial move in most cases.
We also made the mistake of charging a bunch of junk on credit cards when my wife quit work because we did not gear down spending once we were living on one income. From talking with other couples in similar circumstances, I understand this is a common problem. But unfortunately that didn’t make it any easier to swallow when the bills came due.
I share these mistakes in the hopes that other young couples don’t repeat them. And by mistakes, I’m not referring to having children while still young. I am referring to falling into the financial trap of keeping up with older couples who chose to build a more secure financial foundation before having kids. That method probably makes the most sense from a financial perspective, but there are many other factors to consider when having children. And I would argue finances, though important, is not the top consideration, despite what others wondering if they should pay off debt before having kids might think.
Make no mistake; the decision to start a family has a significant impact on your finances. However, it is the decisions we make that ultimately lead to success or failure. In our case, it was the poor financial decisions we made early on that caused trouble, not the fact we had kids. We could have easily made those screw-ups when it was just the two of us!
Having kids magnified those issues because it intensified the pressure I felt to provide a solid foundation for my wife and kids. In hindsight, it probably would have made sense to wait a few years to finish my degree, work my way up the corporate ladder (in other words, beyond the first rung), pay off our debts and build some savings. But, I wouldn’t have it any other way!