Do you have a financial plan for your growing family? Do you know what financial steps to take before having a baby?
If the answer is no, you are in the right place.
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 children are high and even with insurance, moms 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!
What can you do to prepare for your new arrival?
Having a financial plan in place before the baby arrives is key. I would not want to juggle postpartum recovery, sleepless nights, breastfeeding, and bonding time, while also having to be worried about family finances.
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Below, I share 13 steps you can implement to prepare for a baby financially.
13 FINANCIAL STEPS TO TAKE TO PREPARE FOR A NEW BABY
STEP 1: WRITE DOWN YOUR FIXED MONTHLY EXPENSES
Fixed expenses are those bills you pay that are the same each month. For me, I like to use a simple spreadsheet to keep up with monthly expenses. But all you need is a blank sheet of paper.
It helps to do this step as a couple or with all members of the family who are financially involved.
Do you know what your fixed expenses are? Do you have any tool that helps you keep up with fixed monthly expenses?
STEP 2: WRITE DOWN YOUR VARIABLE MONTHLY EXPENSES
Variable expenses are those bills that change month-to-month.
It’s difficult to know what your electric bill will be when temperatures are changing drastically daily; however, we keep track of our expenses each month and a look back at previous months and years show us reliable trends.
Do you know what your variable expenses are? Do you have any tool that helps you keep up with all your expenses?
STEP 3: HIGHLIGHT THE EXPENSES THAT ARE NEEDS
This step requires some serious honesty. Look at both lists of expenses, fixed and variable, and determine which ones are needs and which ones are wants. This can be challenging.
We haven’t had cable for more than a year and if it was on our list of expenses, it would not be highlighted.
- We do not need cable.
- We do not need Netflix.
- We do not need HBOGO.
In our book, those things are wants. Getting rid of cable was a process stalled by my husband’s love of sports and while I would love to blame my husband for all the non-essential expenses, honestly, I was a hold out on unnecessary beauty and shopping expenses.
Are you using the word need with extreme care?
STEP 6: CREATE A SAVINGS PLAN
Once we have gone through the elimination and reduction step, we look at the remaining money that hasn’t been budgeted.
A portion of that money goes to savings. Unexpected expenses are a reality. Having an emergency fund and a saving account can help when the unexpected happens.
A portion of it goes to the new baby budget, we create in the next step.
Do you have a plan for the money that isn’t going to monthly expenses?
STEP 7: CREATE A NEW BABY BUDGET
Having a baby budget helped us feel less guilty about purchasing baby items each month.
The previous 6 steps ensure you have your bills paid, money going to savings, and money for shameless cute onesie purchases.
The baby budget is for the baby items needed for the nursery, car seat, and baby essentials. Remember, a baby shower may provide lots of baby items you don’t need to buy for yourself. Time key purchases strategically.
Can some of the money that isn’t allocated for an expense be added to a baby budget? Will you have funds to purchase the things that weren’t purchased on your baby registry?
STEP 8: RESEARCH INSURANCE
The most confusing part of having a baby may be the insurance (in the USA). First, we found an in-network medical prenatal team.
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.
Although payments were due to the medical 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 4 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)
Do you know how your insurance handles pregnancy and children? If there are two working adults, who will add the baby to the insurance?
STEP 9: PLAN FOR MATERNITY LEAVE
Maternity varies from state to state. In my state maternity leave is unpaid and my employer offered only what was required by the Family Medical Leave Act (FMLA), 12 weeks.
I was able to retain medical insurance during my leave but I was not paid*.
* 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.
Have you looked into the maternity leave policies at your workplace? If they are confusing, don’t be afraid to reach out to your HR reps for answers.
STEP 10: REVIEW 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 or need disability insurance?
STEP 11: UPDATE BENEFICIARY DATA ON FINANCE ACCOUNTS
A new addition to the family means it’s time to update medical insurance and beneficiary information for the financial accounts.
Do you have a timeline for adding your new addition(s) to the beneficiary lists of your accounts?
STEP 12: RESEARCH CHILDCARE
Childcare is expensive. (Understatement)
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 but even if the price isn’t a concern, most centers have waitlists.
When we had finally decided on a center we had visited it twice, one time unannounced (we are those people), and had received favorable reports from other people in the community.
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 13: ANTICIPATE SALARY CHANGES
Although we decided on a quality daycare center, we ended up making the decision for me to care for the baby full-time. I left my position to be a SAHM. 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 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 13 steps above when trying to financially prepare for a baby.
It can take some time to go through each step but having financial peace when the baby arrives is the goal.
Having the answers to these questions before your baby arrives may reduce the stress you encounter when it comes to your family finances. It certainly helped my family during our transition into parenthood.
Are you ready to begin the steps to planning for your baby financially?
Did you find this guide helpful? Let me know in the comments!