How to Prepare Your Finances for a New Baby

I was once told there’s never a right time to have a child, and you can never prepare enough once they’re on the way.

After seven years of parenting, I definitely agree with the first part of the statement. As for the second half? You never know what will happen after your child is born, but I do believe there are actions you can take to get your finances in order.

Here are some simple ways to get your financial act together before your new baby arrives, and some useful tips to trim expenses that crop up along the way.

Estimate Expenses

Upon discovering we were expecting our first child, we couldn’t be more elated. But as much time as we spent mentally preparing ourselves for his arrival, there’s one important step we completely overlooked: expense planning. Let’s take a closer look at some of the items you want to think about ahead of time:

1. Child Care

Unless you’ll be staying at home with your little one or qualify for an income-based program, brace yourself for the huge sum of cash you’ll be forking over each week for child care.

This was definitely a shocker for us. I remember visiting a number of daycare providers a few weeks after our son was born to get an idea of how much we’d be paying for care. To my surprise, it was much more than we could afford at the time — somewhere around $1,000 per month. So, I decided to attend school at night and watch the little one during the day to cut costs.

I eventually returned to work part-time and took a few courses during the day. Fortunately, I was able to find much more affordable care through a home sitter recommended to me. One piece of advice: Start looking before your child is born.

As you plan, here are a few additional cost-efficient child care options worth considering:

  • Ask family members for help: If a grandma, grandpa, or retired aunt is sitting around all day looking for something to do, asking them to babysit may be the perfect win-win opportunity, at least until you get on your feet. Just be sure they’re reliable to avoid issues down the road.
  • Research employer-sponsored child care: Does your employer have partnerships with local child care facilities? If so, confirm with human resources that you’re eligible for discounted care.
  • Consider on-site care child care if it’s available at your workplace: Perhaps there’s a facility on-site? Not only is this a convenient option, the “tuition” may be cheaper than that of traditional centers.
  • Draft up a nanny-sharing arrangement: Splitting the cost of a private nanny can be a big money saver, but it only works if you know of another family you trust that is willing to participate and share their home (and caregiver) with your new bundle of joy.

2. Diapers and wipes

It’ll be awhile before your little one is potty-trained, so be prepared to spend at least $50 per month on diapers. During my children’s diapering years, I frequently stacked manufacturer and store coupons to curb costs.

Now, I’m not suggesting you go on a diaper-shopping spree just yet, since your baby may be allergic to certain brands. But it’s never a bad idea to start collecting coupons for diapers from multiple manufacturers that aren’t set to expire in the near future.

A more green and cost-efficient alternative: cloth diapering. I personally don’t have any experience with this method, but I know of others who have saved a bundle by ditching the boxed diapers for cloth ones.

3. Formula, Bottles, and Baby Food

Planning to breastfeed? If not, read this section — and even if you are, it doesn’t hurt to take a peek since, there’s a slight chance things may not go as planned after delivery.

Formula has the potential to sink your monthly budget if you aren’t prepared. Expect to spend anywhere from $13 to $25 per can of formula. Baby food is less expensive, but you’ll still need quite a few jars to fill up your growing infant when the time comes.

A few tips to curb the costs:

  • Use coupons: Along with diapers, this is one of the few times I’ll strongly suggest that you clip away. Also, sign up for perks from the manufacturer to receive coupons by registering online or calling the toll-free number on the back of the can. And ask fellow coupon users to pass along to you what they don’t need.
  • Join a Baby Club offered by your local grocer: If you live in a state with a Winn-Dixie or Publix supermarket, you’re in luck. I received over $100 worth of free baby supplies in my my little one’s first year.
  • Load up at the hospital: I feel a tad bit weird making this suggestion, but some mother and infant units have tons of baby formula sitting on the shelves waiting to be consumed. And I’m certain your nurse won’t mind giving you a few extra cases to “try” at home.
  • Pick up samples at the doctor’s office: In some instances, coupons are also affixed to the can. And if you don’t see them, just ask.
  • DIY: Yes, you can make your own formula. Isn’t that spectacular? There are a host of homemade recipes to choose from online from sites, including Pinterest. I didn’t make my own formula, but I definitely avoided pricey pre-made baby food by using the blender.

4. Apparel and Footwear

As tempting as it is to pick up every cute piece of clothing you run across, do so in moderation. I used to be fascinated with baby clothing until I realized that children grow quickly, and often miss the opportunity to wear their cute new outfits. And if you insist on shopping, give consignment stores and thrift shops a shot. Infants basically outgrow their entire wardrobe every three months, so it’s easy to find barely-worn secondhand children’s clothes.

5. Medical Expenses

During the first few years of your little one’s life, you’ll be making a number of trips to the physician’s office. Whether it be for a routine checkup or emergency visit, be prepared to fork over cash for any co-pays or prescriptions your baby may need.

And if you’re currently employed, it’s never too early to start researching maternity leave benefits along with any short-term or long-term coverage you have and when it will kick in. I wasn’t fortunate enough to have these benefits the first time around; the second round came with three months of paid leave. (And my husband had a chance to join in on the fun, thanks to paid paternity leave). If you don’t want to use up all of your leave at once for financial or personal reasons, inquire with human resources about additional options that may be available to you.

6. Toys

The motto in my home is simple: If it’s not on clearance, we don’t purchase it. But we ran into a major problem when our first son was still in the oven: There were tons of toys on clearance, and it was tough to narrow down the choices.

My advice: Stick to your budget, because you’ll have bigger fish to fry in the near future. Also, friends and family will more than likely shower your new arrival with toys that he’ll barely touch during the first few months.

7. Miscellaneous Expenses

I’ve given you a pretty good overview of what to expect in terms of expenses, but life happens. In other words, everyone’s situation is different, and you just never know what might come up with little ones — so it’s best to be prepared for the unexpected.

Adjust Your Spending Plan

Once you have a good idea of how much you’ll be spending each month on your new bundle of joy, adjust your budget accordingly.

This was yet another costly mistake we made the first time around. We knew our son would mean some additional expenses, but we figured we’d just find a way to work it all out each month. Boy, were we sadly mistaken.

Don’t fall into the same trap we did and be forced to make adjustments after the fact. Instead, be proactive and plan cuts if needed to comfortably afford the extra costs that come with a new addition to the family.

Create a Registry

If you discover that the costs of raising your new arrival greatly exceed the income you’re bringing in each month, don’t be afraid to throw those necessities on a registry and let your family and friends fill the gap. Also, ask for gift cards as they will come in handy a few months down the line when money’s tight.

And don’t forget to add the big-ticket items, including furniture, pack n’ plays, strollers, and car seats, just to name a few.

Creating the registry was one of the more memorable moments of my pregnancy — not because it was a load of fun, but because of how time-consuming the process was. However, it’s the best thing I could’ve done, as family and friends purchased enough items, with the exception of baby food and formula, to last us for almost nine months.

Build Your Cushion

Life happens, and so do emergencies. As a parent, you never want to compromise your child’s well-being by having to choose between purchasing formula or diapers. I wouldn’t wish that on anyone, but I’ve seen it happen time and time again. So, it’s best to establish a “baby fund” to get you through any rough patches.

If money’s tight and you’re barely scraping by, here are a few ideas to get you started:

  • Cut the extras: Could you survive without the routine spa visits, pricey gym membership, 300-channel cable package, fancy smartphone data plan, or any other money-devouring habit you’ve formed? Most certainly, so now’s the time to trim those costs for the sake of your little one.
  • Skip fine dining: I’m a big fan of a gourmet dinner out, but let’s face it: The price points are often exorbitant for the portions you receive. As a feasible alternative, visit and learn to create your favorite dishes in the comfort of your own home. Set the table and the mood with a few candles, prepare your favorite dessert, pour a glass of sparkling cider, and you have the perfect date night for a fraction of the cost.
  • Sell some stuff: Remember those shoes you purchased awhile back that are collecting dust? Or that artwork grandma gave you years ago? If you have no intentions of using these items, or any of the others sitting around the house collecting dust, host a yard sale or post them on Craigslist. Not only will you make a little (or a lot) of dough to add to your cushion, but you’ll also clear up the clutter — and you’re going to want the space with a new baby on the way.
  • Negotiate your current obligations: You never know until you ask, correct? If so, what’s stopping you from picking up the phone and reaching out to your service providers and creditors to see if more cost-efficient alternatives are available or if they offer alternative payment plans? Each time money’s been tight in my household or I wanted to make room in the budget for some other expense without touching the emergency fund, I picked up the phone. On average, I’ve saved $100 or more by making a few calls that took up 30 minutes or so of my time.
  • Bank windfalls and extra checks: Expecting a tax return or some other cash infusion in the near future? Sorry to burst your bubble, but you ought to forgo that shopping spree or highly anticipated vacation and stow the funds away. Your little one will thank you! The same rule applies to those months with an extra week of payroll: Transfer the direct deposit to the “baby fund” as soon as it hits your account.
  • Work a little overtime: This is probably the last thing you want to hear if you’re suffering from an extreme case of morning sickness or in your final trimester and anxious to head to the birthing table. However, working a few extra hours and banking the cash can provide the extra boost you need to beef up your cushion. Your significant other should be willing to make the same sacrifice; after all, you’re in this together for the long haul.

I’m certain your precious bundle of joy will be in good hands once he make his grand entrance, but getting your financial ducks in a row can give you peace of mind to focus on the things that matter most.

And if you weren’t fortunate enough to plan beforehand, don’t fret. Start now and before you know it, you’ll be in the perfect position to start planning for you little one’s college expenses.

Most importantly, cherish these precious moments when your children are young, because they grow up way too fast!

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