We Discover How a 99-Cent Margarita Deployed at Just the Right Moment Turns into a Lifetime Tab of $286,860
The next target on my list was the “Kid Costs” category. That meant focusing on expenses related to my boy, Funny Money Jr., or, as we call him, Li’l Money (’cuz that’s all he leaves us). This was a tough one. His food and other costs were in with the rest of the family budget. And, since he was seven years old at the time, he didn’t run up extra bills, such as sports leagues, car insurance, or bail.
All the other kid categories offered little hope of savings, from his bargain-priced college savings plan to nominal public school fees. My wife finds incredible bargains on his clothes, and I occasionally root through the office supply cabinet for school supplies. (You run a few grease pencils under a hacksaw and tell me that isn’t the same thing as crayons.) Knocking out his summer day camp seemed like an option, but I realized any savings there would be more than offset by his mother’s increased spending on prescriptions and tequila.
The bean counters at the U.S. Department of Agriculture regularly take some time off from counting beans to tote up the costs of raising a child. The most recent price tag: $286,860 to get a kid to age eighteen when adjusted for inflation from 2010 onward. And that doesn’t even include some crucial expenses of the teenage years, such as iPods, car fenders, and tattoo removal.
This puts kids near the top of the list of luxury goods these days in the United States, if you define luxury goods as “something hardly anyone can afford.” That’s the case for lots of recession-racked families in the United States. As of 2009, according to the National Center for Health Statistics, the U.S. birthrate dropped from the record high of 4.3 million babies in 2007 to 4.1 million—the lowest in a century.
The perfect time to figure how you’ll pay for a kid is before you have one running around, soaking up juice boxes and your every last dime. One advantage the Funny Money family had was the fact that we had our son after most of our friends spawned, and they were only too happy to deluge us with their unused baby materiel, from cribs to play castles to Barney tapes (I never will forgive you for the big purple demon, Rory!). So much baby stuff was dumped on us that the house took on the look of a Lilliputian landfill. We never visited the home of anyone with children when we didn’t leave with bags of bottles, squeaky toys, and footed onesies. Our friends, Gretchen and Steve, once completely disassembled a five-foot-high plastic playhouse and stuffed the entire thing into the back of my Roadmaster wagon while I was getting a second helping of potato salad on their patio.
More than once, as we left a friend’s house toting armloads of baby paraphernalia, the front door closed on the beginnings of a marital squabble that went almost exactly like this:
Husband: Why’d you give them all the baby clothes? What if we need them again?
Wife: Hahahahahahahahaha!
Once the kids have arrived on the scene and gotten old enough to pipe up asking for a new bike, wardrobe, Caribbean Disney cruise, or My First Large Hadron Collider, you need to rein in their assumptions that money grows not on trees but magically inside Dad’s wallet and Mom’s purse every night, kind of like a fungus backed by the Federal Reserve. This is often a special duty for dads. On the list of Daddy to-do’s, “Teach Kids the Value of a Buck” is situated near the very top, right between “Don’t Talk Back to Your Mother” and “Here’s How to Play ‘The Star-Spangled Banner’ with Your Armpit.”
Whether you’re looking to introduce your children to the concept of spending wisely or you’re desperate to save because you got laid off, have the money discussion with your kids in advance warns Lou Manza, professor of psychology at Lebanon Valley College in Pennsylvania.
“If something’s been going on for months and months, sit the kids down beforehand and explain it to them,” Manza says. “Don’t just spring it on them in the car on the way to the store.”
Tailor your financial discussion to the age, maturity, and temperament of your child, and focus on giving them choices and helping them feel that they have some control in the situation.
“You can make them understand that everyone needs to save, we’re a family, and everybody helps out,” Manza says. “You can tell them, ‘Mom is cutting back like this, and Dad like this,’ so it’s not just the kid who’s paying the price.”
By the way, this strategy works with holidays and vacations, too. It might be difficult, but if you can adjust family expectations—starting, most importantly, with your own—you can teach some important lessons in financial responsibility. If you decide an expensive vacation isn’t in the credit cards this year, get the whole family involved in planning your staycation. Set a budget and let each family member plan a day of outings. Or perhaps for the holidays you might all decide to concentrate your spending on one big family gift—such as a vacation—and forgo a pile of presents under the tree. Or the family can organize a garage sale together, the kids can opt to give up some of their allowance, or they can agree to cancel cable for a month or two, or whatever. Make a budget and a plan, cut back or redirect spending, do something to earn some extra money, and get everyone involved.
Whatever you do, don’t say, “We’re broke.” That’s only going to frighten the kids and is almost as bad as saying nothing (if you’re worried about money, the kids will pick up on it). You don’t want the kids to suddenly have visions of your family pushing a shopping cart down the alley. Instead, focus on the need to make choices about where your money goes and on having the kids learn to spend money wisely. It’s important because kids often don’t make the connection between the family budget and day-to-day spending. I’m not saying you have to break out last year’s tax return before each shopping trip, but just that you want the kids (and maybe you, too) to understand that money is a finite resource, not something that automatically comes out of the wall at the bank.
Food and clothing
When it comes to your kids, you want to give them everything, but children will do just fine if they don’t have the latest designer-label overcoat that they’ll outgrow after one season. Up until the tween years, kids are pretty easy to shop for—it’s basically whatever Mom or Dad picks out. Right now, Li’l Money could care less whether his shirts come from the thrift shop, though I’m sure that by his high school years he’ll be demanding a $50 vintage T-shirt that’s distressed just so that it looks like it came from . . . a thrift shop. The answer here is to give your kids a budget shortly before they start caring about clothes and let them start to make their own choices.
One approach is to give each kid a clothing allowance and guidelines about how many shirts, pants, and socks are needed, and what is or isn’t acceptable for the school (or family) dress code. Beyond that, they can buy what they want. If they spend less, they can keep the money. If your budget is pinched, let the kids keep half of what they save, or some set amount, like $20, just as long as you give them an incentive to shop wisely. Conversely, if the kids want to spend more than the allowed amount, they have to come up with the difference on their own.
Before that happens, do your best to turn your kids into smart shoppers. Take them shopping with you so that they can see how many brand-new items end up in thrift and consignment stores. When Li’l Money was born, friends gave us some gorgeous larger-sized clothing for him to grow into, including one very handsome outfit with a sweater for trips up north at the holidays. By the time Christmas rolled around, however, the kid had already outgrown the clothes, and he certainly hadn’t gotten a chance to wear them in the 90-degree heat of south Florida. Off to the thrift shop they went, still wrapped and tagged, much to the delight of some other bargain-hunting parent.
Also try to buy larger sizes when you can. My boy looked fine and was comfortable in a slightly oversized jacket that lasted from the fourth grade to the fifth. And when he was wearing size 6 shoes, we kept an eye out for any size 7s that were on sale rather than having to pay full price later on when his toes burst through his boots. When we find a good selection of $2 T-shirts on vacation, we get one the right size for now, two bigger ones for later.
With food, we’ve tried to keep him from getting too stuck on any one brand of anything so that we don’t get a meltdown when, for example, he has to suffer the crushing indignity of eating store-brand cereal instead of Cheerios. Learning how to shop at grocery stores and stocking up when items are at their cheapest goes a long way with this kind of stuff, as I’ll discuss in chapter 10. The one place we’ve failed is with strawberry milk. How the kid ever heard of it, I’ll never know, but one day at the grocery store he spied a box of powdered strawberry milk mix and insisted he would die without it. We were happy to encourage him to drink milk, and when it became a regular item on the grocery list, we found the brand of strawberry-flavored powder that cost the least per serving.
That worked great until the grocery store started carrying premixed strawberry milk (curse you, Prairie Farms!) and the kid declared he would drink only that. Sometimes the strawberry milk is on sale, but usually it’s a better buy to get the regular milk (which is often on sale) and throw in a dime’s worth of strawberry powder. As any parent will tell you, arguing “It’s the same thing!” won’t get you too far with a kid who’s made up his or her mind. And when my boy sets his opinion, it’s locked down so tight that you’ll actually hear the “doink-doink” sound from Law & Order.
But one of the few convenient things about kids is that when they’re young, they go to bed before you do, and when they’re older, they hole up in their rooms without the least interest in how Mom and Dad handle the domestic chores, as long as it doesn’t involve them. So . . . the kid wasn’t around, I was cleaning up in the kitchen, and I happened to have this empty jug from the premixed strawberry milk that he drained in world-record time. Who’s to know if regular milk happens to get poured into it along with the cheaper strawberry-flavored powder? The same tactic can work with any of a kid’s must-have ingestibles that come in a box, bottle, or tin. The bag of store-brand Chocolate Frosted Sugar Bombs cereal fits just fine into the box from the premium brand, too.
Okay, call me a coward. But hear me out. Veteran parents always say you’ve got to pick your battles, but that forces you into choosing between fighting or capitulating (by the way, “capitulating” is an SAT word he’ll know later because I scrimped on strawberry milk now so we can afford a tutor in high school). Rather than choosing between being a Scrooge who puts his foot down or a wimp who caves into the child’s demands, I choose instead to be Generous Dad, the great giver of all good things who miraculously makes it all fit into the family budget. Bait and switch is illegal only if the appliance store does it. Besides, this is strawberry-flavored milk. It’s not like I’m swapping his 2010 Châteauneuf-du-Pape for some Two Buck Chuck.
Freeing up cash
With infants, your first stop should be a wholesale buying club such as Costco. The savings on formula (if you need it) and disposable diapers (if you go that way) will more than pay for the annual membership. Just don’t get carried away with the awesome $1,200 stainless-steel backyard grilling “system” and blow your budget. Another option to consider is Amazon Mom (gender stereotyping much, Amazon?), which allows you to subscribe to regular deliveries of baby stuff at a discount. You save 5 percent with up to four deliveries a month, 15 percent with five or more. That cuts a box of 194 Pampers from 25 cents apiece to either 23 cents or 20 cents. Plus, you get free shipping and you can combine the Amazon Mom plan with Amazon Prime discounts as well. You may even be able to apply additional discounts, such as special offers from parenting magazines, to save more.
You can find a rundown on the whole strategy at BabyCheapskate .com. That site—and other baby discount sites, which unfortunately insist on focusing on moms—are another source for great deals. BabyCheapskate.com recently dug up a nice deal on the Little Tikes Cozy Coupe, the ubiquitous red-and-yellow toddler car that Li’l Money gravitated toward as if it were his destiny when he was two years old. His favorite part? The driver’s door that opens and closes. I once watched him get in and out of his Cozy Coupe more than forty times straight. We scored a great deal on one at a baby consignment store, and my advice is if you see one, grab it. As we walked out we endured the baleful, jealous stares of other parents. If you must buy new, hit the baby sites for a deal; but when your kid outgrows it, remember to get some of your dough back at the consignment store.
For other food and clothes, it comes down to how frugal you want or need to be. You can hit the farmers’ market and make a month’s worth of strained peas for less than half the cost of prepared baby food, or you can coupon like crazy and get a great deal at the store. There are more books and blogs about frugal living than I can begin to count, and you can glean good tips (and some crazy, extreme ones, too) from all of them. Using the grocery shopping approaches outlined in chapter 10 works for us, along with taking advantage of sales and outlet stores.
Making ends meet
You need to move from the convenient side of frugal to the side that requires more time and effort. Instead of an occasional trip to the consignment store, make a regular circuit of consignment and thrift shops as well as local garage sales. Babies and kids outgrow most clothes (except, in my experience, shoes) before they wear them out. Somehow, Li’l Money can pound through a pair of discount sneakers in a few scant months. Fortunately, he’s not nearly as hard on his boots, so in our house winter lasts until Mother’s Day. (Since we live in Michigan, that’s not really much of stretch.)
Another source of clothing bargains is eBay, where moms tend to bundle up all the stuff a kid has outgrown and auction the whole lot. For $20 you can obtain an entire season’s wardrobe if you’re lucky, and anything that doesn’t fit can be donated to the thrift store (take a picture, get a receipt, and take the tax deduction). You can similarly sell off what your kid has outgrown and cut the cost even more.
Swapping with other parents is another option, and you can find or organize a clothing swap through your neighborhood, church, community center, or school. Anything stained or excessively worn gets thrown out, of course, but the rest is up for trading; you swap one item for each one you bring. And you don’t have to limit it to clothes, but can add baby blankets, maternity clothes, toys, and more. I’ve even seen swaps for unused Christmas decorations.
Pinching pennies so hard that Lincoln gets a headache
Go as frugal as you can. Start with any and all of the tips from Mary Hunt at EverydayCheapskate.com. Worn through an old pair of flannel pajama pants or shirt? Meet your new Swiffer pads. Dishes coming out of the dishwasher less than clean? Try cleaning out the sprayer-arm holes with a hanger instead of buying a new one for $500. And Mary’s homemade laundry detergent recipe cuts your cost per load from 35 cents to 3 cents. Mary also has wonderful advice on living debt-free, so if that’s one of your financial goals, you’ll find her advice doubly helpful at the DebtFreeLiving.com site.
What is pretty much the bible for frugal living is Amy Dacyczyn’s Tightwad Gazette. Long before the Internet, Dacyczyn published a newsletter filled with tips on how she and her husband raised a passel of kids on a $30,000 annual salary and managed to save $39,000 in seven years. Dacyczyn has retired as the country’s leading penny-pinching publisher, but she collected the best of her advice in The Complete Tightwad Gazette. Check the library for a copy, or find a used or new copy online.1
If your income has taken a huge hit, check with your county social services agencies and your church for programs that can help you and your family over the hump, and apply for any support programs you can. You’ve paid taxes all your life, and this is why. At this point in the postrecession landscape, nobody should feel any qualms about claiming whatever they can from the government they support. Food pantries, volunteer programs, and more are there to help people in just your situation. Apply for everything. I was stunned when the special kindergarten program my son went to gave us a partial scholarship, but we wouldn’t have gotten it if we hadn’t asked.
Most important, let your friends and extended family know what you need. You don’t have to give people a full financial disclosure to let them know that things are tight. They’ve been tight for almost everyone the last few years, and my feeling is that it’s made people more willing to share whatever extra they have. A friend of Mrs. Funny Money loves to shop estate sales and somehow wound up with a free canning pot. Now we enjoy the most wonderful homemade tomato sauce all winter long. A friend of a friend wanted to clear out a storage unit where he had a bunch of tile remnants and he offered us our pick. It transformed our ugly cement patio into a backyard retreat. And when my wife mentioned to a coworker that Li’l Money had joined the Cub Scouts, she provided us with the uniform her son had outgrown. Every dime you don’t spend is a dime you have for something essential, so don’t be shy.
In our case, cutting the food budget was a family effort that we took up later in The $1,000 Challenge, because by that time we were well beyond the years of formula and baby food. We also weren’t spending a lot of money on clothing for Li’l Money, probably because the long-suffering Mrs. Funny Money already used all the tactics described here to keep the boy dressed at a discount. And, fortunately for us, he doesn’t seem to be the kind of kid who’s going to demand expensive boots, the latest sneakers, or designer-label goods when he gets to high school. That will just leave all the other teen costs, such as thousands for robot-design camp, driver’s training, astronomical car insurance, and enough orthodontia to rival the front end of a ’49 Buick.
School supplies
I’ve found that shopping for your kid’s school supplies is one of those things that really needs to be done well in advance. Otherwise, all the other parents at work will get to the office supply closet ahead of you.
More importantly, back-to-school time is the first leg of the family’s Triple Crown of debt. It starts when you don’t plan, budget, or save for school supplies but, hey, Junior needs an Avengers backpack and Missy wants fourteen Hello Kitty notebooks, so, along with a bunch of clothes, it all goes on a credit card. You figure you’ll pay it off in the next few months.
Then comes Christmas, the second leg of the debt Triple Crown, and, wham, you can’t scrimp there because the kids are only young once, your wife deserves more than a little something for putting up with you all year, and it’s your turn to host the holiday dinner, complete with mashed organic Brussels sprouts shaped like a turkey to keep your cousin happy, because she’s now a vegan Wiccan who’s actually celebrating the Feast of Ullr. The holidays are priceless, as they used to say in the MasterCard ads, and that’s exactly how you will finance this one. But you’ll be getting that tax refund check in time to wipe out your tab from December plus whatever stubborn debt is left from school shopping. Six months, tops, and you’ll have that credit card balance back to zero.
But then it’s off to the races once again, this time with summer vacation, the Belmont Stakes of the family debt circuit. This is the year you promised your wife (who’s still putting up with you) something special, and the kids have never had the chance to see the Grand Canyon, the Czech Republic, or the Gowanus Canal. So . . . out comes the credit card, and that new debt gets piled on top of the Christmas and back-to-school spending, which, by the way, is just around the corner—again.
Before you let the debt horses out of the gate, stop and do a little planning in the fall. The big office supply stores and discount stores start running all kinds of back-to-school specials well before September. (You’ll know when that is, because it’s about the time they haul out the Christmas carols for the store sound systems.) With a little planning you won’t go broke, and you’ll even get another chance to school your kids in budgeting, shopping, and spending.
Freeing up cash
Start by going through all the stuff left from last year or that you already have on hand. You’d be surprised at how much you can winnow down your back-to-school shopping list if you get your kid to realize that the centimeters on the ruler from fourth grade still work in fifth grade. It’s also a reason to dissuade little kids from picking out a Dora the Explorer calculator that they’ll be too embarrassed to use in middle school.
Having your student put some of his or her own money into the back-to-school budget is a good idea, too, especially for discretionary items such as clothes or electronic gadgets, suggests Nina Sutton, author of The Chic Mom’s Guide to Feeling Fabulous. Parents can set up some quick and easy chores, such as having the kids clean their rooms each night, so they can earn a portion of the money already being budgeted before going shopping.
“If they’re doing something to earn that money, they feel some responsibility for the purchases,” Sutton says. For younger kids, sticking to the budget may be as simple as adding up purchases on their shopping lists and crossing off items. For older students, she suggests using gift cards to give them a feeling of control and responsibility. “With the gift card, they need to choose how they’re going to spend it, but when it’s done, it’s done,” Sutton says.
Making ends meet
Once you get your shopping list together, sit down with your kids and sort out needs versus wants. A youngster might be more willing to accept using last year’s backpack and binder if it stretches the budget to cover Justin Bieber stickers for their locker. (Kids: we try to protect them with hand sanitizer and school-bus safety belts, when what they really need to be shielded from is their own bad taste.)
At the beginning of August, start keeping an eye out for back-to-school specials, such as 10-for-$1 pencils or notebooks, which may show up at the supermarket or drugstore just as often as at discount and office supply stores. As a person who still works at and reads an actual printed newspaper, let me point out that the ad inserts in the Sunday edition are your best bet for finding and comparing offers (also, your hands absorb a special ingredient from newspaper ink that helps prevent gum disease). Last fall, for example, two of the big office supply stores advertised free backpacks with a $10 purchase of other school items.
Parents with fashion-conscious kids might want to hold back some of the budget for their clothing and just buy one or two outfits for the start of school. That way, the kids can shop the clearance sales later, and, if their classmates are sporting some hot new look that your kids missed, they can fill in any wardrobe gaps later, instead of buying clothes they may not end up wearing.
Beyond teaching money management and shopping skills, parents can use back-to-school time for lessons in applied math, whether it’s subtraction and addition for first graders or calculating and comparing the per-unit cost of a $3 bag of ten pens versus a $4.25 package that holds twenty-four.
Pinching pennies so hard that Lincoln gets a headache
Between reusing leftover items from previous years and shaving your shopping list down to the basics, try to cover the essentials but leave maybe two or three new things that the kids can get—within reason. Ask around to see if your friends and other parents can fill in the gaps. In my case, I’ve received enough press releases and financial studies stuffed into ring binders that I could outfit Li’l Money’s entire class. If tenth-grade math requires a particular model of graphing calculator, for example, you can try eBay or Craigslist, but chances are that there are plenty of those gizmos gathering dust in the homes of any eleventh graders you know. Your kid’s older friends (or their parents) will be glad to part with their old one for a few bucks.
For more help, check with local social service agencies and your church. Since the recession, I’ve found several companies and charities giving away school supplies, and my own church, the very generous and wonderful First Presbyterian Church of Birmingham, collects school supplies to distribute to folks who need to spend their money elsewhere. Check with your nearest United Way, and also search on the Web for a school supply giveaway event in your area. They often take place in July, so, again, start looking earlier than the week before school starts.
Once again, I couldn’t find a lot of savings in this category, because we were already pretty good at keeping costs low. Mrs. Funny Money picked up a sturdy Lands’ End backpack on sale for about $14, and it’s lasted four years with no signs of giving out. It’s in the boy’s favorite color rather than being adorned by some kid-TV abomination such as Barney, the evil off-key, brain-rotting dinosaur even kids loathe by third grade, so Li’l Money doesn’t gripe about using it year after year.
The big surprise is how many of his school supplies can be reused from year to year. The trick is to dig through the whole lot at the end of the school year, figure out what can be kept for next year, and then put it all safely away so that the glue sticks, crayons, and scissors don’t go AWOL over the summer or get dragged out to the sandbox. And if the kid insists on brand-new pencils next fall, he can pick any box he wants at the dollar store.
Health care
When you have children you lose not just your sanity, sex life, and car keys but your vocabulary as well. This explains why otherwise sophisticated professionals excuse themselves from business meetings to “go potty” and conclude phone conversations with “buh-bye.” Adult conversation is even more fractured in our house because, as I mentioned earlier, Li’l Money is a late-talker.
Late talking is a little like dyslexia for the ears, but he has made astounding progress with language, thanks to lots of effort, patience, and unreimbursed speech therapy. But as a toddler, the confusing communications dragged out potty training to the point where I thought he wouldn’t be out of Pampers until I was in Depends. But when the boy got the knack of using the bathroom he embraced the concept with gusto. When nature called on the then-four-year-old kid one day at the home improvement store, I turned to lead him to the men’s room, only to find him up on a platform of plumbing items—planted in front of a $400 designer toilet that soon would no longer be for display purposes only.
I managed to avoid paying for that pricey porcelain, which would have come on top of the average of $815 a year Michigan families with special-needs kids spend on out-of-pocket costs. In our case, that includes out-of-state specialists and consultants, plus private speech and reading therapy, plus a $190-an-hour special education attorney to keep our local school system from making the common—but extremely harmful—mistake of pushing a late talker into autism programs.
None of it comes cheap, and none of it is covered by insurance. But there is one place I found a break: taxes. Setting up a flexible spending account to cover $4,000 of our medical expenses took that money right off the top of my salary, reducing my taxable income and my tax bill. The money is deducted from each paycheck and added to a special account. I then file health care claims against the account, and I’m reimbursed tax-free. At our tax rates, that knocked an even $1,200 off our projected tax tab to Uncle Sam for the year, according to the handy-dandy IRS withholding calculator.2 The same break applies to the Michigan state income tax, which cut $174 off our state tax bill, for a total of $114.50 in monthly savings, which shows up in each paycheck after my withholding was adjusted.
While the tax break certainly helps, it doesn’t completely solve the problem, since what we get back on taxes is only about 30 percent of the money we put out. Michigan, like many other states, now requires insurance companies to pay for autism therapies, but that leaves families like mine, with kids who have other developmental issues, on our own. Still, we muddle through. My wife became particularly adept at interpreting Li’l Money’s requests, explaining, “He says it’s time for the playground,” when I asked, “Why does he want to put socks on the pumpkin?”
Although he sometimes still uses just two or three words when other kids use two or three sentences, Li’l Money gets his message across. After working late one night and missing the chance to tuck him in, I sat with my coffee the next morning as he trundled out of bed. He shuffled over in his pajamas and threw his arms around me. “Luv,” he declared as he put his head on my shoulder.
I don’t get it. If he’s the one with few words, how come I’m the one left speechless?
Freeing up cash
The good news is that most companies with any kind of decent benefits program offer a flexible spending health care account. The bad news is that you can shelter only $2,500 a year now. This hits families like mine that shell out a lot for health care during the year, but the fact is that most people using a flex account set aside quite a bit less.
Comparison shopping when benefits enrollment time comes around in the fall is another way to see if you can save. Co-pays on medical visits and prescriptions seem to go up every year, along with the deductible. If your workplace offers more than one option, don’t just automatically renew your plan every year, but consider how your qualified health care spending in the past year would fit into all the options and lower your costs. Or, if your spouse has a health plan, compare the plans to see which works best for you at the lowest cost.
If you’re using a flex account, remember the one big caveat: you need to spend all the money during the calendar year or you lose it. So base your withholding on your actual medical spending, which is another good reason to track your spending and maintain a budget.
Making ends meet
Start shopping aggressively for all your health care spending, from prescriptions to health plans. Talk to your doctor, pharmacist, and any therapists or service providers and ask them how you can save, especially if you’re going without insurance.
If you’ve lost insurance because you lost your job, you’re probably eligible for COBRA, an acronym for a federal law that gives you sixty days to continue your health coverage by picking up the entire premium yourself. COBRA covers spouses and kids, as well as people who lose insurance because of divorce, a reduction in hours at work, if you got too old to stay on your parents’ policy, or if you were on a relative’s policy when that person became old enough to switch to Medicare.
COBRA isn’t usually an affordable option if you lost a job, because the premium you paid as an employee was likely less than a third, or even a fifth, of the total cost your employer was paying. Private coverage, on average, will cost less than half of what you’ll pay for COBRA. One tactic is to shop for private insurance, and mix and match private and COBRA coverage, using COBRA for those family members who can’t get comparable, affordable private coverage.
If you do go with COBRA but are working to land a new job and the benefits it brings, consider this free trick for filling the COBRA gap. You have sixty days to decide whether to sign up for COBRA, and another forty-five days to pay your first premium. If you get hit with a major medical expense in those sixty days, you can opt in to COBRA and be covered retroactively, and you still have more than a month to come up with the first premium payment.
If you’ve got a side job, moonlight, or work as a freelancer, look for health care coverage through trade groups and professional associations, or see if you can get group coverage as a small business. Fourteen states let you qualify as a “group of one” for group rates,3 and all states allow you to qualify with two employees. If your wife maintains the Web page for your freelance yak-grooming business, see if you can set things up to qualify. Naturally, there will be hoops to jump through, and there will be plenty of red tape, because, you know, insurance. Another option is short-term gap insurance policies covering only catastrophic illnesses and accidents. Call several insurance agents and compare options. A good guide to the basics of buying your own health insurance is at www.insure.com.4
Pinching pennies so hard that Lincoln gets a headache
As always, free is better than cheap, so start with any options you can find for free health care for your kids (and you). If you’re out of work, start with all the social service agencies and government programs such as Medicaid and the Children’s Health Insurance Program, even though it will be frustrating and often feel like a waste of time. Your local United Way is also a good source. Again, this is why you and your family paid taxes all those years and why you made that $20 weekly paycheck deduction to United Way. (Make a note to yourself that when you do get back to work, you’ll contribute again.)
For typical care, check out walk-in clinics, urgent care centers, and even the health care options increasingly provided by Target and some of the big drugstore chains. Need to check your blood pressure? Skip the $60 cuff and regularly stop at Walgreens and use the free machine instead. When it comes to prescriptions, a limited number of commonly prescribed drugs are available from Kroger, Target, Meijer, Food City, and other big chains. Let your doctor know that you want lower-priced generics rather than more expensive brand-name drugs, or ask if you can substitute an over-the-counter remedy. If you’re facing a co-pay on prescriptions, ask your doctor for a ninety-day prescription instead of thirty days, or for pills at double the dose that you can cut in half (say, 500 mg instead of 250 mg), or both, to stretch your time between paying for refills. Also check out the Partnership for Prescription Assistance,5 which aims to helps people without prescription drug coverage, and NeedyMeds,6 which lists programs to help you find discounted medications.
When it comes to tests, remind your doctor that you’re paying out of pocket and ask if each one is really necessary or can be postponed. With treatments, ask to pay Medicare rates (which are lower) or if your doctor’s practice offers a sliding scale of fees based on income. Look for a community center that offers free or low-cost medical services,7 and check out other low-cost insurance options at healthcare.gov. The National Association of Free and Charitable Clinics lists free and charitable clinics.8 Also check out medical centers and teaching hospitals near you.
In many cases, doctors can get you free samples, so let them know that you’re in a tight situation. I had one physician who made it a point to stockpile a ridiculous quantity of samples in a closet that looked like it contained an entire Rite Aid. He wouldn’t have cared if I drove a gold-plated Mercedes, and he routinely handed out a full course of sample drugs to treat an infection or rash.
If you end up needing a medical procedure and you’re paying for it yourself, do some comparison shopping. The cost of services varies widely even within a small area. Many states require hospitals to post their rates, and other hospitals voluntarily do so. Search online for “hospital pricing” in your state. In Michigan, for example, many hospitals participate in listing rates online.9 In Metro Detroit, the average charge for delivering a baby ranges from more than $14,000 at one hospital to less than $6,000 at another. In addition, contact a hospital ombudsman or patient representative to discuss charges and payment assistance plans beforehand.
It’ll take some digging and hassle and lots of phone calls, so be prepared, but it’s better than letting your kid go without care. I never expected that we would qualify for a partial scholarship in the preschool speech therapy program Li’l Money attended, either because there were lots of folks worse off than we were or because the program would have been oversubscribed. But somehow we did, and the boy got the help he needed without too much of a hit to our budget.
It still remains to be seen how access to health care and its cost will change under the Affordable Care Act, which is still rolling out health exchanges in several states along with other incentives and limits on health care costs. Focus on your needs, keep an eye out for new information, and ask lots and lots of questions.
The Bottom Line
Goal: $1,000
Week 1—Transportation . . . $41.61
Week 2—Miscellaneous . . . $132.89
Week 3—Utilities . . . $139.39
Week 4—Kid Costs . . . $114.50
Total monthly savings . . . $428.39
Left to cut . . . $571.61
We already were pretty frugal with food, clothes, and school supplies for Li’l Money, but the tax move to run our speech therapy and health care expenses through a flexible health spending account put me over the $100 goal in this category, for a total of $428.39 in cuts. That left $571.61 still to cut to make my $1,000 goal.
As for teaching Li’l Money important life lessons about money, he’s become a very good saver, if an impatient one. Although he’s quick to exclaim, “I can save the money!” when he sees something he wants, the reality that it’ll take four or five weeks of allowance isn’t met with the same enthusiasm. I often make him a countdown calendar so he can tick off the days and feel like he’s making progress, even if he’s just waiting for next week’s allowance.
What’s more interesting is how many money lessons my boy has reinforced for me and Mrs. Funny Money. Babies show up and somehow, magically, the family budget stretches to accommodate cribs, diapers, and the collected works of Elmo, all to the tune of hundreds of dollars a month. What’s astonishing is that the same parents would have sworn they couldn’t save anywhere near that amount a year before the kid was born. Sure, the budget stretches hard, but it rarely snaps. The late songwriter Bill Morrissey once put it succinctly, “There’s Bud in the ’fridge instead of Becks/And I ain’t seen any side effects.”
Likewise, a walk through the toy store with Li’l Money becomes a lasting lesson in the dangers of instant gratification at any age. Just as it becomes obvious that you’re going to go broke $3.99 at a time right there in the Hot Wheels aisle, it sinks in to the parental consciousness that you also can go broke $39.99 at a time down at the mall. Later, when you notice that the T-shirt that fit the boy just fine two months ago now barely reaches below his neck, you suddenly realize that tomorrow does come. Suddenly a future of scout camp, driver’s ed, college, and his wedding day are breathing down my neck, along with the realization that if he’s getting older, I might be, too. That’s about the time I switched my little guy’s bedtime story from The Runaway Bunny to dramatic readings from my 401(k) prospectus.
When I put it all together—budgeting, expense reduction, deferred spending, and long-term savings—I’d say my little boy has given me a pretty good financial education in a few short years. And when it comes to teaching his old man the value of a buck? Let’s just say that 99-cent margarita I bought Mrs. Funny Money all those years ago was the best investment I ever made.