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18th Mar 2015

Why don’t I have more… MONEY. Top tips on staying solvent when kids come along

Kids bleeding you dry? Try some of this brilliant advice

Fiona McGarry

Is it possible to put a price on parenthood? Well, the number crunchers have certainly had a good go, with estimates in the US and UK suggesting that raising a child takes the equivalent of around €200,000 over 18 years. Most of us would argue that children are priceless, but that six figure sum certainly gives pause for thought.

Michael Culloty of the Money Advice and Budgeting Service (MABS) has ten top tips for staying solvent:

  1. Bite the bullet – make a budget. It’s not always easy to face financial facts, but it does provide a better sense of control in managing your family’s money. “Most people don’t do it,” Michael acknowledges. “But it’s absolutely crucial. This involves looking at all of our income and outgoings and making sure that they balance.” Try this easy-to-use budgeting tool, it makes the whole scary process a lot easier.
  1. Maximise your income. Michael’s advice is to know your entitlements. There is a range of social welfare, tax and employment-related benefits available to Irish families. “As part of your household budget, you need to make sure you’re availing of all of your tax reliefs and any welfare entitlements. If you’re unsure of what you might be eligible for, the best places to find information are the Revenue Commissioners and the Citizen’s Information.”
  1. Manage your outgoings. Prioritise essentials like your mortgage or rent, food, utility charges and medical expenses. “It’s also important to be fully aware of the penalties for any missed payments,” Michael advises. “You should know the exact terms and conditions on your different credit arrangements.”
  1. Watch discretionary spending. According to the MABS Chief, “People are generally surprised and often embarrassed when they actually look at what their money goes on every day. It’s useful to keep a track for a week or fortnight of spending on items like coffees, the kids pocket money, optional transport and so on. When you know where your money is going, you’ve got more choice in making savings.” Here’s a template spending diary.
  1. Plan for special occasions. With big family events like communions and confirmations on the horizon, Michael’s advice is to plan well in advance. “There’s a lot of concern and criticism about spending on communions and a lot of pressure on parents to give the best to their children and keep up with everyone else. Our advice is to budget well in advance for the occasion, whether it’s a communion or other family event.” Here’s a very handy planner for communion and confirmation budgets.
  1. Save what you can. If the car suddenly breaks down or the pushchair needs replacing, it can put a sudden strain on the household budget. That’s where your ‘rainy day’ fund comes in. No matter how small the amount is, Michael’s advice is that you put some money aside for emergencies. “We believe that if you can’t afford to save then you can’t afford to borrow.”
  1. Borrow wisely. “If you’re planning to take out a loan,” Michael says, “you need to check you can afford the repayments. If you can’t, you’re putting your credit rating at risk, and you could end up without any source of credit. Falling back on family and friends is something we hear more about, but those sources can quickly become exhausted. After that, people may be tempted to go to moneylenders. The advice there is to consult a MABS advisor before doing anything like that. The Central Bank keeps a list of regulated moneylenders. Outside of that, you’re into the unregulated, criminal activity, and the advice is clearly not to even go there.” Here’s a free information leaflet on money lending.
  1. Separate self-employed accounts from household accounts. “If you work for yourself, you should be paying yourself an income. Make sure the spending of that income – on your household expenses – is tracked in a separate budget. Accounts relating to the business should be completely separate. We do see people getting into difficulty otherwise.”
  1. Negotiate with creditors. If you are struggling to make the loan or other payments, the advice is always to take the initiative yourself. “Don’t wait for a creditor to notice late or missed repayments” advises Michael. “It’s best to be upfront. Because it’s difficult to approach creditors, MABS has a series of sample letters that are easy to adapt and use. We don’t advise that you negotiate over the phone. The power imbalance is too great in that situation. We advise email or snail mail. That way you also have records of your efforts to negotiate, in the event that the matter ever ends up before the courts.”
  1. Seek advice. Try this four-step approach to managing money and dealing with debt. “People can dip in and out of this,” advises Michael. “If you’re finding it difficult, on an ongoing basis, to make ends meet, make an appointment to see an advisor, it’s free and accessible through this helpline 0761 07 2000.