Surviving the Daycare Gauntlet

My family is going through something right now that I’m going to affectionately call the Daycare Gauntlet. Maybe you’re familiar with this time in life? It’s temporary, thank goodness, but we have two young kids, they’re both in daycare, and you know what? Daycare isn’t cheap.

Technically, my son goes to a daycare and my daughter goes to a preschool, but for this discussion, they’re effectively the same thing. We’re fortunate that my children attend, I believe the cheapest daycare in town (though with a fantastic reputation).

It’s still incredibly expensive.

One kid costs $150 per week, the other costs $220 per week. That’s $370 each and every week for child care. That’s $19,240 per year. Let’s call it $20,000 per year, because that’s close enough.

If I had my way, I could do a lot with $20,000.

I was listening to a well known financial radio show a year or so ago and someone called in asking how to handle the high cost of daycare. They were in a similar situation, paying roughly $25,000 per year. The host made some dismissive comment about what is this person paying for? College for their toddler? It made me mad. Clearly this radio personality had not actually paid for child care in a very long time.

There’s no escaping the fact that childcare, daycare, preschool, it’s expensive. I don’t want to spend this whole post complaining about it, because it’s just the way things are. Those educators deserve to get paid a living wage, and I’m happy to help.

If you’re in this situation with me, know that I see you. It won’t last forever, and you can get through it. The question is how?

Staying Home

For some families, the answer is that one partner will leave the workforce and stay home. If this is what makes sense to you, then of course you should do it. We decided against this for a couple reasons.

  1. The Daycare Gauntlet does not last forever. Eventually your children will go to school, and that shouldn’t cost nearly as much as daycare, particularly if you’re using public schools. It’s not free, of course, especially if you need after school or before school care, but it should cost significantly less than full day coverage. If you take five years off from a career to watch your kids until they go to school, you might find it challenging to re-enter the workforce at the same level you left. The ripple effects from that might last the rest of your career.
  2. Interaction with other kids during the daycare years is crucial to their development. I’ve seen this first hand with my own kids. My daughter had a classmate at daycare when she was an infant. His parents chose to take him out of daycare to stay with a relative during the day, and now, three years later, he’s back in preschool. The difference in growth between my daughter and her classmate is noticeable, and I think it’s because she’s stayed in daycare the entire time.

FSA

If you’re not going to stay home, what else can you do? Well, if your employer offers a daycare FSA program, absolutely take advantage of it to the fullest. A daycare FSA allows you to pay for childcare with pre-tax dollars. This can save you thousands of dollars per year.

How it works is pretty simple. This is my situation:

  1. Every paycheck, my employer deposits pre-tax dollars into an FSA account.
  2. We pay for daycare out of pocket.
  3. We submit receipts from daycare to the FSA administrator, who reimburses us from our FSA account, effectively paying for daycare with pre-tax dollars.

Just Get Through

The last thing I can think of right now is not something I’m excited to say. It feels a bit like giving up, but there’s just no way around the cost of daycare. It’s expensive, and there’s only so much money in the budget. You may need to cut spending elsewhere temporarily to pay for daycare.

It’s also not forever. My wife and I tell each other this all the time. This isn’t forever. The kids will be in school, that daycare money will be freed up and can be allocated somewhere else in a few years. We just need to get through it.

These years are hard. There’s no denying it, but do whatever you can to get through them. They won’t last forever. Good luck.

You need to keep your accounts secure

This may be a little bit of a different topic for this blog, but it’s something everyone should be taking very seriously: How secure are your financial accounts?

Are you using the same username and password for multiple accounts? Is it the same username and password you use for everything online? If this is the case, you’re in a very perilous situation that needs to be addressed immediately.

Keeping any online account secure is critical, and it’s especially true of our financial accounts. We do not want to be reusing passwords, or using passwords that are easy to figure out. Things like 123456, or MyFavoritePassword! are terrible passwords. And if you’ve used the same password for a while, it’s time to get a new one.

How do you do this? Well, like anything, there are good ways and bad ways to go about it. A bad way would be to write your password down on a piece of paper you keep next to your computer. That would be easy to lose, and very insecure. Not to mention a pain, requiring you to type the password in manually each time you sign in.

A good way is with a password manager. This is what I use. If you’re not familiar, there are many good options out there. They’re services that store your passwords for you, fill the password in on the website automatically, and generally keep track of things in a highly secure way. Services like Bitwarden, LastPass, and 1Password are popular options.

All of these services have password generators, too. This lets you have a password of nearly any length you want, and they’re random combinations of letters, numbers, and symbols. The goal is to create passwords that are very difficult if not impossible to guess. They might generate something like: t&Ban!p6ayP&#dx6U87B.

No one is going to guess that, and no one is likely to remember that. That’s what the password manager is for. It can create a unique random password for each one of your accounts, and then keep track of them all. A unique password for each site is the best way to prevent disaster, and a password manager is the best way to create and remember those passwords.

If you’re not using one already, go and check them out today.

You might need a cleanse month

If you find yourself regularly over spending your budget, it can be hard to get that spending under control. One of the ways we try to address this is with what we call a cleanse month.

Once per year, usually in February because it’s short, we’ll do one of these cleanse months. The idea is pretty simple: spend as little as possible for the entire month.

Not only does this help us stay under budget for the month, but going a whole month saying no to purchases as often as possible will really help to break that habit of spending money.

It sounds like a ridiculous and entitled problem to have, and it is, but there is absolutely such a thing as falling into a habit of spending money. You might be in one now and not even realize it. It looks like buying a snack or a soda when you get gas, getting a cheap 4 for $4 meal at Wendy’s when you just don’t feel like cooking dinner, that sort of thing. It can sneak up on all of us, and it likely does.

It’s the sort of small time, almost inconsequential spending that you don’t even think about, but that adds up over the course of the month, and it may be ruining your budget.

I’m not suggesting you don’t spend any money, although if you can pull that off, even better. We all need groceries, right? But a cleanse month can really help cut down on the extra spending, the unnecessary spending, that you might be doing without realizing it.

You don’t need to wait for February, you can start right now. Or, start next month. If you’ve never done this, I think it would be a great exercise to go through.

What do you do with extra money in your budget

I recently had a friend reach out with a question about what to do with extra money in his budget. He reached the end of the month and still had some money in a few categories.

The first thing I said was congratulations! That’s exactly what you want. That means you’re living below your means and spending less than you make. But there are some things to think about in this situation.

What can you do with the extra money?

The first thing you should do is make sure you aren’t over spending in another category. If you’ve gone over somewhere else, cover that with the categories where you’re under. You don’t want to end the month with any category showing negative.

The second thing you can do is just leave the money where it is, and let it roll into the next month. For example, if you budget $50 into restaurants and you have $7 left, you can start the next month month with $7 already there. Then you’re just deciding if you want to budget $43 to bring the $7 up to $50, or, if you want to budget the full $50, keep the extra $7 and have $57 the following month for restaurants. Maybe you know you’d like to go out a little more and the extra money makes sense!

The third thing you can do is to apply anything extra towards a goal. Usually these would be big goals, but it can be anything. For example, you can send any extra money each month towards paying off your mortgage early. Or maybe you’re saving for a big vacation, you can put the extra money towards that.

The great thing is that there’s really no wrong answer here. Having a little extra money in your budget at the end of the month is a fantastic place to be.

When can I stop budgeting?

Sometimes I have these incredible day dreams where I have hundreds of millions of dollars to my name, and I can buy whatever I want without even thinking about it. It’s a short lived fantasy as I rush to check YNAB and run my net worth report. Then I think, would I still even need YNAB if I had that much money?

Well, yes. Yes I would.

People who reach incredible heights financially typically do so because they are diligent, aware, and concerned with the details. They know where their money is, and where it’s going. They do that with a budget.

Making a lot of money, or having a large net worth, doesn’t change that fundamental truth.

When can I stop budgeting? If I’m being totally honest, probably never. I’ll always want to know how much I have, and how much I’m spending.

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