Babies come with a hefty price tag, but budgeting for the new addition prepares your family for the costs. Calculating the new budget before your baby is born gives you time to build up your savings and make financial decisions to benefit your family. By estimating your baby-related expenses and accounting for unexpected costs, you can better anticipate changes you will need to make to your current spending habits or your income to avoid accruing debt once your baby is born.
Review Your Budget
Your current budget will be out of date once your new baby is born. You will have added expenses, such as diapers and daycare, that aren’t currently part of the budget. Review your current budget to identify areas you can cut back. Consider cutting or scaling back extras such as cable, dining out, movies and other entertainment. If one parent will stay home with the baby, consider getting rid of a vehicle to save additional money.
Life insurance provides financial security for your child and surviving spouse. Purchase a life insurance policy as soon as possible. If you already have a life insurance policy, you may need to increase the value of it to accommodate the expenses of a child. An insurance agent can help you determine how much coverage you need. Don’t forget to figure in the life insurance premium in your new budget.
An increased savings account balance is another way to protect your family financially. Transfer money each month to your savings account to build up a surplus for unexpected baby expenses.
Sort out Health Insurance
Read your health insurance policy or call your health insurance company to determine how much you will need to pay for the prenatal care and delivery of the baby. Ask about your out-of-pocket maximum as a worst-case scenario at the high end of the spectrum. This allows you to budget for these costs so you are prepared. Many hospitals will allow you to set up a payment plan for the expenses incurred for the delivery.
Determine if your maternity leave will be paid or unpaid. Identify the amount you will be paid for your maternity leave and the number of days that will go unpaid. Keep this in mind as you prepare a budget for your bills at that time.
Day Care Vs. Staying Home
Secure day care for your baby if you plan to return to work after maternity leave. Calculate the cost per week for the selected child care to figure into the budget.
Calculate the monthly income lost if you plan to stay home with your baby. Recalculate your current budget for your monthly bills based on the new lower family income. Working a second job before the baby is born may allow you to accumulate extra money to account for the loss of income with one parent staying home.
Large baby purchases add up quickly. Calculate the cost of the one-time baby purchases, including the crib, mattress, car seat, stroller, high chair, baby swing and bouncer seat. Visit a local discount store to get a general idea of the cost of the baby gear. You may receive some of these items as baby gifts, but it’s a good idea to budget for the costs in case you have to buy them all yourself.
Estimate the average monthly cost of the recurring baby expenses, such as formula, diapers, baby care supplies and clothing. Add these expenses into your monthly budget along with the other regular expenses.