Dear Mary: I am eager to be a stay-at-home mom to my 2-year-old. We are paying down the bills. What are some of the common mistakes working moms make when changing their lifestyles and wallets to be at home with the kids? -- N.R., email
Dear N.R.: Your No. 1 priority is to create an emergency fund, or as we call it at Debt-Proof Living, a "Contingency Fund." This is a pool of money you have stashed away in the event of a financial crisis -- like unemployment, a medical situation or even a busted refrigerator. When living on a single income, it is even more important to not put yourselves into a position where you are forced to run to a credit card when something goes wrong. And things will go wrong, so you have to plan on it. I suggest you need at least $10,000 that you keep in a liquid savings account.
The biggest mistake women in your situation make when leaving the workplace is forgetting that they need to change their lifestyle to match their new single-paycheck status. You can't leave your expenses status quo while you lose a good portion of your household income.
I suggest you start practicing now, doing many of the chores you are paying others to do, like mowing the lawn, and cleaning the pool and the house. Get passionate about cooking at home. Learn the tricks of slashing your grocery bill. If your income will be cut by half, you should make that be the goal for your expenses, as well. Good luck! And welcome home.
Dear Mary: I'm evaluating whether to renew my membership to Costco. It seemed like a good idea last year, when we were trying to save money, but now I'm not sure. Is it worth the membership to buy some items in bulk (detergent, for example), or can you shop just as smartly at your local grocery store by watching sales and using coupons? -- Beth, email
Dear Beth: I am a member and do enjoy shopping at Costco for the convenience. However, you do bring up a good point, which reminds me why I call it the $200 Store. It's hard to get out of there without spending at least $200. I believe that if you are a savvy shopper, track loss-leaders at your area grocery stores and use coupons to reduce even further the sale price of grocery items, you can do much better over all than if you shop at a warehouse club.
Surprisingly, not all items actually cost less at the warehouse club. Those that are consistently cheaper include milk, eggs, cheese, laundry detergent and frozen chicken. But you have to buy a lot of chicken and wash a lot of clothes to recoup the membership price each year. I suggest you do your own experiment without the membership for a few months. You can always rejoin if you find you're spending far more on the "outside."
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