If you’ve read any of my other posts you probably know how passionate I am about planning and protecting your finances. Nothing can make you feel worse than not being able to pay your bills. AND money is one of the top things couples fight about (it may be the #1 these days).
Since being a new mom is stressful enough, you don’t want to add finances to the list of things to stress about. When you have a new baby your budget WILL need to adjust. However, if you plan for this upfront it’s something that won’t be another stressor on the list once the baby arrives. You may be wondering what exactly I mean by a financial plan for baby – and I’m so glad you asked!
Here are the five things we did to make sure our budget was ready for baby.
This post probably contains affiliate links. That means if you buy something using one of my links I may receive a small commission – at no additional cost to you! How cool is that? It’s kind of boring, but feel free to read my full disclosure if you want more info.
1. Start your financial plan by asking the hard questions
The first step to create your financial plan for baby’s arrival (ideally before you’re pregnant) is to ask yourself some hard questions.
- Do you plan to go back to work after baby arrives?
- If you don’t plan to go back, are you 100% sure you can survive on one income?
- What are the discretionary expenses that you can cut out to make room for baby items?
Going in blind and just *hoping* you figure it out isn’t the best strategy.
2. Plan your expenses
Childcare is the largest expense you’ll face if you choose to go back to work. It’s currently about 15% of our monthly expenses, surpassed only by home costs and about equal to food. You’ll need to make sure you have the cost of reliable childcare factored into your monthly expenses if you’re going back to work.
Set a budget for new additions like diapers and formula if needed, baby clothes, and accessories — anything you think you may need once you have a new little one. This includes diaper rash cream 🙂
Note: Here’s how we save on diapers. If you start stocking up on diapers during pregnancy, you’ll never have to pay full price
If you want to get a general overview of what you’ll need and how much it will cost, check out the baby registry guide. You’ll get a lot of this stuff off your registry, but it’s helpful to set a baby budget before you even register. You’ll be able to estimate what you’ll need to buy if you don’t get it at your shower. This is another big step in your financial plan for baby.
The good news is, some items you’re currently spending on will naturally decline (entertainment out, dining out, etc.) when you have a newborn. Even though some areas are obviously increasing, others will decline without a lot of sacrifice.
3. Revisit your budget
Once you have a good overview of your new expenses, plug them into your budget spreadsheet (my template will come to you FREE if you don’t already have one when you sign up!)
At this point if you’ve balanced your income and expenses your expenses will be above what you make. The good news is you’ve hopefully been saving each month, and we can include some natural adjustments I mentioned above.
- Now is a good time to revisit your entertainment and dining out
- Depending on your family and lifestyle, food is also a good place to cut out waste. If you don’t already meal plan, starting can save you a bundle
- You may need to reduce your savings in the short term until your income grows. Childcare is a massive expense and most families can’t just absorb the cost and continue the pre-savings rate they had before baby
- Start looking for other ways to grow your income (side hustle, planning your next promotion at work, etc.) This phase isn’t permanent, and the increase in expenses can be offset by additional income you generate
4. Think about longer-term expenses
There are some expenses that will pop up with children that just aren’t a factor the first year. This doesn’t mean they shouldn’t at least be on your radar. Things like activities, classes, birthday parties, etc. should all be factored into your budget as baby grows.
Additionally, saving for college can begin even before baby is born. If you haven’t started thinking about this, check into a 529 account ASAP.
Ideally, your income will grow as your baby gets older and these items enter the picture. However, it’s good to at least be thinking about how you’d cover extra classes, etc. within your current budget.
5. Begin making financial adjustments before your baby is born
One of the best things you can do to ease yourself into this new budget is to begin making adjustments and changes even before baby arrives. If you’re covering daycare costs by cutting down your food budget, begin eating out less NOW before you have to. The gradual changes you make before baby gets here make it less of a shock than making a change all at once.
For instance, we didn’t have any idea how we would pay my $1,500 student loan bill on top of $1,000+ monthly for daycare. This was something we needed to address before baby arrived. We looked into refinancing to lower our rates, paying less monthly, switching to a longer term and/or any combination of the above. The key was that we knew we needed a solution BEFORE we were hit with both bills in one month.
Although having a new baby (or adding another to your family) is a huge adjustment – thinking through your budget before baby is born will relieve you of a LOT of future stress. Making a plan to fit major costs into your monthly expenses and living that life now will be incredibly helpful down the road.
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Hope this inspires you to create your own financial plan for baby and get budgeting before your addition comes!