There’s plenty to prepare for when you have a first child on the way. There’s baby room decor to think about, planning a baby shower and adding adorable baby garments and gear to your registry, and stocking up on baby books to be physically and mentally ready.
You also need to prepare financially for a child. In the US, the average middle-income family will spend approximately $14,800 annually per child and $233,610 to raise a child up to the age of 17.
Planning finances for a new baby isn’t always easy, but if you’re getting ready to panic, don’t! We’ve got some tips that will help you manage your budget online and anticipate the changes a baby will bring.Best Personal loans
#1: Manage Your Income and Expenses
In other words, build a budget! This is key to planning finances for a new baby and will help you manage household finances wisely.
It’s easy to spend money on a whim without keeping track when it’s just you (or you and your partner), but introducing a child into the equation will bring in new expenses that need to be accounted for.
Creating a strong budgeting approach to stretch your income and cover these expenses will not only put your mind at ease, but it’ll keep you saving more money in the long-run and avoid debt from piling up.
The 50-30-20 approach
If you’re new to the world of budgeting, the 50-30-20 budgeting approach is the recommended way for dividing your income to pay expenses.
It looks like this:
- 50% of your household income goes to necessities like bills, loan payments, diaper, formula, child care, and so on.
- 30% is reserved for wants, like a vacation or going out to dinner.
- 20% goes to your savings and paying down toxic loans and debt (like payday loans or high-interest credit card balances)
While managing your budget like this might not work out every month, this budget approach is the goal and should be what you strive for. Even if your necessities require more than 50%, that’s ok! This is just a baseline to give you an idea of how you can break down your budget, track your progress, and keep improving.
You can manage your budget online or even leverage apps to help you stay on track.
If your “wants” monthly spending was previously higher than 30% it can be hard to suddenly adjust to spending less. Start early! Practice living on less before the baby arrives. Even if you don’t think it’s necessary, spending a little less will help you ease into your budgeting approach and anticipate upcoming expenses.
Work on your debt
Planning finances for a new baby can feel impossible when you’re busy paying off your debt but remember, there are options available.
If you feel stuck paying down your high-interest credit card debt, there are tons of reputable lenders out there, like ClearOne or Freedom that offer debt consolidation loans and other debt solutions to help reduce your monthly payments.
Or for those working on reducing their student loan payments, you can always apply online for student loan refinancing. Credible is a website that lets you get quotes from multiple lenders.
Reducing your monthly payments, even by a little bit, will help free up money and manage your debt.
#2: Prepare for Delivery
It can cost thousands to have a baby in the US, even with good health insurance. Pre-delivery planning is a big part of preparing yourself financially for having a baby.
The first step is to understand what your health insurance coverage is and what you’ll be responsible for paying out-of-pocket throughout your pregnancy up to delivery so you can anticipate these expenses and budget accordingly.
This will help you establish a pre-baby budget so you’re prepared for your new family addition.
When digging into your health insurance details, don’t forget to find a physician within your network to avoid extra charges.
If your healthcare plan isn’t great for parents-to-be, explore your options. Some employers have multiple health insurance plans they offer as part of their benefits.
#3: Plan on Childcare Costs
Paying for childcare is a big cost when having a baby, so start planning early about what you’re going to do once your maternity leave is ove