Personal Finance Interview with Matt Becker on Family Finances

Personal Finance Interview with Matt Becker on Family Finances

Becoming a parent might just be the single most overwhelming experience you'll ever face. Not only are you on duty 24-7 caring for this small, writhing little person, but you are also dealing with the stress that comes from long sleepless nights, anxiety over parenting decisions and not to mention the financial strain that little bundle of joy has placed on your bank account.

When he and his wife were planning to start a family years ago, Matt Becker scoured the web looking for practical advice for young families on how to manage money and when he couldn't find much he decided he'd be that resource, so he created the blog Mom and Dad Money.

Matt's biggest piece of advice to new parents on creating and sticking to a budget is to take willpower out of the creation as much as possible.

"If you're making multiple decisions every single day about whether each individual purchase does or does not fit into your budget, you're either going to fail or you're going to be miserable," he says.

Instead, the financial planner says to set some savings goals and then to set up automatic contributions to make sure you hit those goals every single month without even thinking about it.

"The rest of your money is available to spend how you please," he adds. "No guilt. No existential crisis every time you want to buy something. No more just saving whatever's left at the end of the month."

Matt recently checked in with us to give us more background on his site as well as offer plenty of practical tips to all those sleep-deprived moms and dads out there.

Hi, Matt! Can you tell us about Mom and Dad Money? When and why did you start your site?

Mom and Dad Money is a fee-only financial planning practice dedicated to helping new parents build happy families by making money simple.

I started the site in January of 2013 as a blog and my goal at the time was to make it the financial resource I had wanted but couldn't find when my wife and I were getting ready for our first child. Most of what I found was either a lot of fluff or was geared to an older, wealthier demographic. There just wasn't a lot of good, honest and detailed financial advice catering specifically to my situation: a new parent who just wanted to make good financial decisions for his family.

So that's been my mission from the start, and now it's evolved into a full-time financial-planning business serving that same purpose. It's been an incredibly fun and rewarding way to mesh my financial background with my personal experience.

Who should be reading it?

I write for new parents, from the perspective of a new parent. To me, this includes anyone who's either thinking seriously about starting a family, is pregnant with their first child, or already has a couple of young kids (like me!). My primary goal is to help people in those situations make the right financial decisions so that they can let go of the anxiety and get back to enjoying their lives.

If you're looking for a roadmap showing you what you need to focus on and what you can ignore, with some step-by-step guidance through it all, then I think my site can help.

What do you think is the toughest or biggest challenge facing new parents when it comes to managing money?

I think there are two big challenges facing new parents.

First, is simply knowing the full list of things they should be handling. That is, what things ARE important and what things AREN'T.

And the second is taking that list and prioritizing it according to your specific situation:

  • How do you know what to tackle first?
  • What are some steps you can take today to get started?
  • When do you know when you've handled one thing "well enough" so that you can move on to the next one?

Those aren't always easy questions to answer, especially when you're also trying to figure out all of the non-money questions that come with being a new parent.

This is where it can really help to have some guidance.

How do you think families can best prepare financially for life after their first child?

It's impossible to really understand how a child is going to change your life until you're there. So while planning is helpful, and while there are plenty of things you can get into place before the baby gets there, the reality is that you're going to make up a lot of the day-to-day stuff as you go along. And that likely means spending more money than you think for at least those first few months.

So the best preparation is to simply start saving money. You'll have plenty of things to stress out about once your baby is born, so do your best to make sure cash isn't one of them. A nice savings cushion will allow you make some rookie mistakes without putting yourself in a hole.

One helpful thing my wife and I did was estimate what our budget would look like after our son was born and start trying to live by that budget a few months ahead of time. Since my wife was going to be staying at home with our son, and we would therefore be losing her income, this was an especially big change. But those months let us get used to spending less in certain areas AND let us build up a little more of a savings cushion.

What do you think are the most common mistakes people make with their money before starting a family that they really can't afford to make after having kids?

I would say that the biggest financial mistake people make in all stages of life is simply not knowing where their money is going. This is especially harmful when you have a family, since your children are depending on you to make good financial decisions.

Now, the classic advice here is to "make a budget." And that can be great for some people, but for a lot of people budgeting is full of frustration and guilt. So what I prefer to do is help people first identify their big goals, especially the long-term ones. Then we set up an automated saving schedule that pulls money out of their checking account and into their different savings buckets every single month without fail.

This approach accomplishes the goal of a budget, which is really just to be purposeful with your money, without all the hassle and guilt of traditional budgeting. Once your "long-term" money is out of your checking account, the rest is there for you to spend as you please.

When do you think it's smart for people to recruit the help of a financial planner like you?

I would say it's as simple as not being sure whether you're making the right financial decisions.

I think people hear the words "financial planner" and think that it's only for rich people. And these days that couldn't be further from the truth. You don't have to pay big bucks up front, hand over all your money for someone else to invest, or sign any long-term contracts in order to get some good financial advice.

There are advisors out there who will work with you either on an hourly basis, or on a monthly model that you can cancel at any time. Those models make the advice much more affordable, and they allow you to get only the amount of financial advice you need. For some people, they might sit down with a financial planner for a couple of hours, ask their questions, and get everything they need to feel confident that they're on the right track. For others, they may find that they like having someone they can go to whenever they have a question.

The one thing I'll say is that if you're seeking out a financial planner, make sure that they're fee-only. It certainly doesn't guarantee that you'll find a good one, but it's the best chance you have to ensure that your planner is really on YOUR side. Three great organizations that can help you find a fee-only planner are NAPFA, Garrett Planning Network, and XY Planning Network.

What advice do you have for finding someone whose money-management style and vision complements your own? What are some red flags that the relationship might not work?

The very best move you can make is first investing some of your own time to learn some of the basics. Ideally, you would start a conversation with a potential financial planner with some idea of what you're looking for and what money style feels right to you. The more you know ahead of time, the less susceptible you'll be to a sales pitch and the more likely you'll be to find someone who you can really trust.

Beyond that, I would look for three key characteristics when you're interviewing potential advisors:

1. They should do more listening than talking. If you ask them a question, then obviously you'll want them to be able to answer it intelligently. But your financial plan is about YOU, not them. So if most of your meeting consists of the advisor talking about him or herself, you're probably not in the right place.

2. Find someone who emphasizes the planning just as much as, or ideally more than, the investing. Investment management is actually only a small part of a good financial plan. You want someone whose goal is to help you put together a comprehensive plan where all of the pieces fit well together, not someone who's mostly just intent on managing your money.

3. If their pitch sounds like a lot of hype, that's a good sign that you're probably best going elsewhere. Especially when it comes to investing, a lot of advisors like to tout their ability to "beat the market." The reality is that very, very few actually can, and the ones who are the quickest to boast about their abilities are probably the most likely to get you into trouble. The best financial advice is often pretty down-to-earth and maybe even a little boring. Look for someone who isn't afraid to give it to you straight.

Why is setting financial goals so important?

Goals allow you to make a plan that has an overarching purpose. Without goals, you can make what seem like good individual decisions, but when you put them together they don't really lead you anywhere specific. But when you set clear goals, every decision can be made with those goals in mind and you end up with a plan in which all of the pieces are moving you in the same direction.

Setting goals also allows you to measure progress, which will make it easier to see when your plans might need to change. People often think of goals as a static thing when they're really anything but. They will evolve over time and your financial plan will have to evolve with them. But if you never set them in the first place, it's going to be really hard to know when it's time to make a change because you won't really know which actions have been working for you and which haven't.

Set, track and re-evaluate. The work is never done, but it still has to be done.

What are some of your favorite money-saving and/or money making tips for young families?

I've mentioned it a few times already, but by far the most powerful money-saving tip I have is to automate your savings. Once you set up those automatic contributions, you almost never have to think about it again and your savings just keep growing and growing. There's just no better way.

As for making money, just don't be afraid to put yourself out there and try something that you love. The fact that you're a parent doesn't mean you have to abandon your dreams. I started my blog when my first son was 10 months old. I started my practice right as my second son was being born. Both of those things are taking time to build, but they're things I believe in and I'm doing my best to make them happen and still spend plenty of time with my family. If there's a career you want, just figure out a small way you can get started towards it today. Taking action is the best way to find opportunity.