Having a baby is exciting but it can also be stressful without the proper amount of financial planning.
It’s scary because the expected expenses for having a child can be high; even with insurance, families can expect to pay thousands of dollars in out-of-pocket expenses. Unfortunately, these experiences don’t even include the cost of common baby items like diapers, wipes, clothing, or formula. The struggle is real!
Here’s the good news…
You don’t have to commit to juggling postpartum recovery, sleepless nights, breastfeeding (if this is part of your plan), bonding time, and managing the constant flow of family members and friends once your baby arrives.
You can prepare (as much as possible) ahead of time.
Here I share thirteen steps you can implement to prepare for a baby financially before giving birth.
STEP 1: REMOVE THE STATIC FROM YOUR FINANCES
I’m a millennial and I grew up during a time when you could turn on the television and see static. The first instinct was to change the channel but sometimes, if you didn’t turn right away, behind that awful static you could see and hear the programming.
For many of us, our financial situation is like that program, we can’t see well because of the static.
I’m defining static as a lack of clarity caused by the poor transmission of data.
If you aren’t clear on what your full financial picture looks like including income, expenses, investments, debt, savings, and #allthethings, now is the time to get clarity.
Programs that I used to try and watch with static (HBO) were much more enjoyable without the static.
Understanding what goes on with the finances (even if you aren’t paying the bills) can make life at home less stressful and tense.
STEP 2: PRACTICE SHARING YOUR THOUGHTS ABOUT MONEY
Too often, our thoughts and feeling about money go unsaid.
He tries to ignore the constant incoming packages from Amazon. She quietly gets heated at the constant fast-food and restaurant charges. The money keep disappearing and change is impossible because no one wants to rock the boat.
People think just because you’re in a relationship with someone that money conversations are automatically easy. Not true.
It took my husband and I time to get to a point where we could openly talk about money without defensiveness. The earliest conversations weren’t easy but you know what they say about practice; it makes money talk sexy, something like that. 😉
Don’t just talk about money when you have an issue, practice talking about money as much as possible.
STEP 3: GET ON ONE ACCORD WITH A B-WORD
You knew the dreaded b-word, budgeting, was coming. Here it is.
Starting a budget can feel intimidating, especially when more that one person is involved, but it’s sooooooooo important.
If you dread putting together a budget or if you think your partner would cringe at the idea, consider transitioning to a budget.
What do I mean?
Most programs recommend putting together a budget that accounts for every single expense. Instead of starting there, make that your end goal.
Starting slow is an option.
What does this look like in practice?
A big issue for my family of the amount of money we were eating out AND our grocery spending. We were out of control.
I created a simple PDF so that we could visually track our grocery spending. Then, we were able to use that information about our spending habits to create a monthly grocery budget.
You can do this too. It progresses without the overwhelm.
Move on to new expense categories as you feel ready. Notice I didn’t write ‘as you feel comfortable’. Change isn’t supposed to be comfortable. If you’re uncomfortable, you’re likely doing something right.
STEP 4: STOP USING CREDIT CARDS WITHOUT A STRATEGY
I know that many financial experts recommend not using credit cards; however, I choose to use credit cards strategically.
What does this look like?
- Not spending money that isn’t in our banking account.
- Using large purchases to earn rewards and miles.
- Paying off balances before being charged interest.
- Planning purchases in advance.
These principles have helped me average a credit score above 750.
If you currently use your credit card for random expenses just because it’s in your wallet, you can consider a different approach in which you plan what you’re going to buy before using the credit card and decide how you’ll pay it off before you make the purchase.
This is especially useful for making large purchases and provides a great opportunity for you and your partner to talk about money in good spirits.
STEP 5: CREATE A DGM BABY EXPENSE LIST
A DGM baby budget is a budget that takes into account expenses in all the following categories:
- Prenatal care expenses
- Birth expenses
- Baby care expenses
- Baby product expenses
- Maternity leave expenses
This may seem tedious but I warn you the bills during our daughter’s first year were the most cumbersome. There were doctor bills, hospital bills, pediatrician bills, baby product expenses, and you’re still breathing bills.
Some of the expenses on your list will have to be estimated, but many you can be figured out using your current income and expenses.
Once, you have these expense lists, you can pair it with a baby budget. Our baby expenses exceeded our expectations but because we had the expenses listed, we were able to budget using our estimates and adjust accordingly.
STEP 6: READ YOUR INSURANCE POLICY
The most confusing part of financially planning for a baby may be insurance (in the USA).
Our habit is to skim document but I highly recommend you read your insurance policy.
HOW THE INSURANCE WORKED FOR US
The medical provider provided us with an OB Package that covered prenatal care, delivery, and postpartum care appointments. My insurance information was used to estimate how much I would be expected to pay for deductibles and coinsurance, to cover the OB Package. These amounts were combined and laid out to be paid in 6 monthly installments with the full amount to be paid prior to 32 weeks of pregnancy.
Although payments were due to my prenatal care providers prior to birth, the insurance company was not billed until after I gave birth.
In addition to the OB Package, I received 3 other bills for my birth experience. In total, there were four major expenses where insurance was involved for my birth.
- OB Package for monthly prenatal monitoring, delivery, and postpartum appointment
- Hospital bill for myself
- Hospital bill for my baby
- Pediatrician visit for my baby in the hospital (first 48 hours)
If you have a c-section or use pain medication, you may also get additional bills. My birth was completely non-medicated.
We were able to save money by using my insurance to cover my care and my daughter’s birth while also using my husband’s insurance to cover my remaining expenses from my daughter’s hospital and pediatrician expenses after she was born.
I know that your birth experience will be different from mine but if you can use my experience to assist your situation at all, please do!
STEP 7: READ AND UNDERSTAND YOUR EMPLOYER’S MATERNITY LEAVE POLICY
Your employer’s maternity leave policy is another document you should read (not skim). I was able to get back a decent chunk of money because I knew what was in my employer’s policy.
In general, maternity leave offered by the federal government (USA) currently offers women 12-weeks of unpaid leave through the Family Medical Leave Act (FMLA). States and employers have their own policies.
At the time of my birth, in the state of North Carolina, maternity leave was unpaid; however, I was able to retain medical insurance as long as I continued to pay my premium out-of-pocket each month.
* If I had enough vacation and sick hours to cover 12 weeks, I would have gotten paid but I didn’t.
Understanding the workplace policies and getting answers to all my maternity leave questions answered by qualified HR representations early on in my pregnancy was key. It helped us to prepare the required paperwork and plan for the loss of my salary for the months I was out of work.
STEP 8: DISCUSS LIFE INSURANCE & DISABILITY INSURANCE
I dislike thinking about life insurance because it means I have to think about the possibility of a loss and no one in my family is allowed to leave me.
Many people have life insurance with their employers and that is an added bonus to some work benefits packages. But what if you lost your job? This is the question we asked ourselves.
We sat down and got real and re-evaluated our life insurance needs for our growing family.
Disability insurance is another important consideration for couples planning a family. Having short-term and long-term disability options can be a Godsend for unexpected difficult situations that require extended absences from work.
Do you know about the life insurance policies that are offered by your employer? Are they sufficient to care for a growing family if there was a loss? Will the policy be effective if you lost your employment?
Do you and your partner have disability insurance? Do you want it?
STEP 9: RESEARCH CHILDCARE
Childcare is expensive.
I started researching childcare as early as 20 weeks. I wanted to give my husband and I time to scout out the best care centers and visit each of them before making a final decision. What I found is that many high-quality daycares are costly.
Then once we got over sticker-shock we quickly learned that most quality childcare centers have long waitlists.
Have you given yourself enough time to research and investigate a quality daycare center in your area? Is there a waitlist? Are there special immunization and food service requirements? What are the monthly expenses? Is there financial assistance available?
STEP 10: ANTICIPATE SALARY CHANGES
Although we decided on a quality daycare center, I left my career to stay home and care for my daughter. This wasn’t a decision that was planned early in my pregnancy but it is what we decided would be best for our family.
Financially, losing a full-time salary is something that must be considered, especially if you have a desire to be at home with your baby.
Have you considered the implications of losing a household income, when your baby arrives? Can you reorganize to find ways to comfortably live on one income? How long do you see yourself leaving the workplace? Are there ways for you to earn an income from home?
A FINAL WORD…
Having a baby is a huge family milestone that is likely to change your family’s finances in a big way. I encourage women who are family planning to consider the 10 steps above when trying to financially prepare for a baby.