Expectant parents usually have a nagging feeling that they should adjust their finances for the new arrival. But apart from opening a college fund, first-time parents don’t always know where to begin. In fact, very few actually create a baby budget. But you can do it–it’s easy. Try taking it in stages, from pre- to post-pregnancy, and examine how best to handle debt management along the way. Here are the issues that the credit counselors at Clearpoint Credit Counseling Solutions a certified consumer credit counseling service, advise examining when you begin thinking about starting a family.
Pre-Pregnancy: Planning for a Baby on a Budget
Now is an excellent time to focus on debt management. The more you can reduce bills now, the more cash will be available for baby expenses. A trained credit counseling service can help restructure your finances to maximize debt reduction in a short period of time. This is especially true if you have credit card debt–Clearpoint can help.
Ask if your employer offers a flexible spending account, an excellent option for having a baby on a budget and saving for unreimbursed medical costs. Our credit counselors advise starting a baby fund a soon as possible. Put a set amount into the account each pay period to cover unexpected expenses.
Pregnancy: Make a Detailed Baby Budget and Cut Costs
An important step in forming a baby budget is understanding your medical coverage, say credit counseling experts, as couples that already have debt management issues can be overwhelmed by these costs. The average hospital delivery (with no complications) costs between $8,000 and $10,000, and some health insurance deductibles can leave you liable for as much as 20% of that.
Also get information on your employer’s maternity leave policy. A typical short-term disability policy covering pregnancy will pay 60% to 70% of your gross income for about six weeks. Part of your baby budget must include a plan that accounts for the time you will miss from work, along with any income you might miss out on.
Smart shopping can make a difference here, too. As you stock up on supplies and equipment, bear in mind that babies quickly outgrow car seats, clothing and other items, so it makes sense to bargain hunt. Your baby will never know the difference, and cutting costs will free up extra funds in your baby budget.
Post Pregnancy: Keep an Eye on Your Income
The largest expense new parents face is usually child care, which costs more for infants than for older children. If you plan to return to work, a credit counselor can help fit childcare costs into your “baby budget” and your monthly budget in general. We also have a free budget calculator that can help you plan expenses.
If one parent plans to stay home indefinitely, it is critical to review household finances and create an accurate budget that reflects the lifestyle change, particularly if you are struggling with debt management.
Bear in mind that an extended absence from work, skills and training will severely limit your career options later, and therefore your lifetime earning potential. Consider maintaining part-time work or pursuing training and education while children are young.
Other financial issues to address include making changes to insurance coverage and wills. Clearpoint Credit Counseling Solutions can help you examine all options and make the right choices for your family. Once you’ve examined your costs and have created an accurate plan for covering them, you can sit back and enjoy the new addition to your family. If you need help forming a baby budget, contact us or sign up for a free budget review!