Let's face it, babies are the BEST! But your little bundle of joy could be a drain on the pocketbook if you're not careful. In our Babies on the Brain article, we discuss things you can do now to prepare for getting pregnant both physically and financially. Let's dive in deeper on budgeting for baby.
You have almost 10 months to prepare for your little one's arrival and a laundry list of items you'll need, so it's important to start budgeting for your baby even before she arrives. When you add everything together, your baby could run your family as much as $2,000 a month, so spending wisely is important.
Build a Budget
Take time before your baby is born to build a budget, and do your best to stick to it. Here are some important facts to keep in mind as you are building that budget.
Consider how much you'll be spending on baby supplies each month. Diapers alone can cost you $1,500 to $2,000 in total by the time your baby is out of them. Add up additional food costs, including any formula and baby food.
Investigate Child Care
If you plan to go back to work, do your homework on day care centers. It's often the biggest line item, with day care averaging around $1,200 a month depending on your location. Will one of you stay home? If so, account not just for the loss of pay but also for lost perks like a 401(k) match.
Determine Health Bill Costs
Contact your insurer to see what it will cost you for prenatal care and delivery costs so that you can plan for the outlay. Also check with your doctor to see how many visits you can anticipate, being sure to include visits when your child is sick. Multiply that by your insurance co-pay to find out what you can expect in medical expenses.
Maternity leave rarely covers your salary at 100 percent, and that could drop even further if you extend your time off. A law called the Family and Medical Leave Act (FMLA) grants up to 12 weeks of unpaid leave every year, but it applies only to full-time workers at companies with 50 or more employees. And in most cases those 12 weeks run concurrently with your short-term disability benefits. In the case of maternity leave (one of the most common causes of short-term disability), short-term disability insurance would replace part of your income for up to six to eight weeks depending on the type of delivery. Then your remaining weeks would be covered by unpaid FMLA leave.
About half of all working Americans are covered by FMLA. The other half — freelancers, contract workers, entrepreneurs, people who work at small businesses — are on their own. Paid leave is even rarer: Only 12 percent of American workers have access to it in the U.S., according to the Bureau of Labor Statistics.
That means some people may not get anything at all, so it's crucial to begin preparing for this time by lowering expenses and spending before the baby is born.
Plan for College Now
Don't fall into the trap that you think you have plenty of time to save for your babies' college. I've found from experience that babies can be less expensive than toddlers and teens with food, extracurricular activities and more. Try to build a savings plan in your budget now and you'll thank yourself when your little one turns 18! Check into a 529 plan, Coverdell Education Savings Account or Uniform Transfer to Minors account.
How much will you need to save? A big chunk of change! Business Insider shared future college costs, and they are expected to inflate 5 percent a year, taking annual private college costs (for tuition, fees, room and board for a year) from $39,518 today to $90,576 in 2030 (in 2012 dollars).
Don't Neglect Retirement Savings
What you don't want to do is save for your child's education at the expense of your own long-term savings. Your child can always get financial aid, but there is no financial aid for your retirement.
Pay off Debt
Try to knock down any high credit card bills before your baby arrives and stash away three months' living expenses or more if only one in the house is working.
Consider putting a small amount of money back to cover the necessary baby items you need to purchase. A small amount can add up quickly! If you can put back $10 a week for 40 weeks, you would have $400!
Spending for Baby
Don't Overbuy Baby Gear and Gadgets
There are endless gizmos and gadgets on the market. Ask yourself if you really need all of them. Parents-to-be tend to overbuy because of the excitement and can spend too much money on baby products. How many onesies do you really need? One of the biggest mistakes I made with my first baby is having way too many clothes. I didn't even get through half of the outfits before he grew out of them and had a ton of extra outfits with tags still attached. A newborn doesn't really need that much stuff — a bassinet and crib to sleep in, some warm clothes, a full belly and lots of love is all they really need.
Buying the Most Expensive Items
You don't have to have the best of everything for your baby. Trust me, she won't know if the dresser doesn't match the crib. Spending top dollar on items that your baby will soon grow out of can be a drain on your budget. And when you're buying "stuff," look for products that will grow with your baby. Convertible items are a great way to extend the life of baby necessities. Cribs that turn into toddler beds and strollers that transition from newborn to toddler mode grow with your baby and save you money.
Consider Used or Borrowed Items
This is a great way to really save on high-priced items. High chairs, jumpers and more can be purchased used at 50 percent off or more and are often in mint condition. Use your local Facebook garage sale group as often the items are close by and easy to pick up. If you have friends or relatives in the "having babies" phase of life, try sharing with one another. Bounce seats and bathtubs are great examples of items to share. And don't forget about local thrift stores where you will often find gently used and even new items for way less.
Eating Out or To-Go Budget
New parents are tired, but try not to fall into the take-out trap. If you don't like to cook, then make sure you put this item in your monthly budget. And keep in mind it's almost always more expensive to eat out than to make home-cooked meals. Plan a weekly menu, shop for groceries for that menu and stick to it as much as possible. Also, consider making extras so you can freeze meals on those days you just don't have the energy to cook.
Here are some good resources to get you started on a weekly meal plan:
Plan a Baby Shower and Use a Baby Registry
Ask your BFF to throw you a shower and make sure to join a baby registry to avoid repeat gifts. Only register for what you know you really need. Consider asking for gift cards too, as it gives you the flexibility to purchase what you need, when you need it, without spending money out of pocket.
When budgeting, it's important to consider taxes. For example, being able to claim an additional dependent will lower your taxes and may lead to a larger refund.
Having a baby is one of the greatest joys, and with a bit of planning and budgeting, money will not be a deterrent in enjoying every second of the gift that you've been given.
Laura Thornquist, North Texas mother of two to Nicholas and Ava, shares ways to save and live in the Metroplex, scattered with straightforward, honest and down-to-earth advice on being a mommy and wife while still taking the time to treat yourself on her blog, MyDFWMommy.