When you have a baby for the first time, your life changes. You might be caught up in the excitement of buying new clothes, letting your friends and family know, or even picking out a name. First, you officially become a parent. Second, you have additional responsibility for the baby. Sticking to the second realization, being responsible for a newborn means that you’ve to plan your finances well so that your child gets everything that he or she needs. To help you with your journey of first-time parenthood, we have prepared a list of nine budgeting tips that you can use.
1. Learn to Survive on a Single Income
Before the baby arrives, practice surviving on one income. Doing this prevents you from panicking when you realize that your employer doesn’t offer paid maternity leave. Many new parents are overwhelmed by the extra responsibility, and as a result, they end up spending more than what they can afford. Overspending may cause families to make risky financial decisions such as turning to payday loans rather than exploring more affordable lending options. To avoid such a scenario, practice living on a single income so that you can learn to keep track of your finances.
If you have family and friends that had babies, ask them if they still have the child’s crib. If they do, borrow it for a specified period. Sometimes, it makes more sense borrowing instead of buying. Instead of budgeting for a crib, save that money for a rainy day. You don’t need to buy something that the baby will use for three years at most, and then replace it.
On average, you’ll spend between $50 and $200 per month on baby formula. If you were planning on saving, forget it with such an expense. So, what do you do? Well, doctors and researchers say that breast milk is better than formula due to its health benefits. Therefore, breastfeed your baby to cut on certain costs.
4. Use Government Incentives to Your Advantage
If you’ve been selected for foster parenting, the government will give you a small allowance to care for the child. In many instances, the federal incentive is only enough to cater for the day to day requirements of the minor. So, what do you do to make sure that there’s enough for savings? First, talk to your foster child and tell him or her that you’ll have to do certain things to make sure that you reduce the expenses and save for his or her future. Then, employ cost-cutting measures, such as purchasing clothes from the thrift shop and eating home-cooked meals instead of take-outs.
5. Be Part of a Toy Library
If you’re going to be a first-time parent, be prepared to spend money on toys. Babies need something to keep them busy and engage their tiny minds. Thus, the toy comes in handy. However, you cannot spend so much on toys because you have to think about your child’s future. So, what do you do if you don’t want your child to be disappointed that you didn’t buy them a certain toy? Join a toy library. A toy library, as the name suggests, is a place full of toys that you can borrow for a specific period. The toys are well maintained and cleaned, so you don’t have to worry about contamination. Find out if they exist in your neighborhood and join as soon as the baby arrives. A toy library will help you minimize your expenditure on baby items.
6. Apply for a Dependent Care Flexible Savings Account (DCFSA)
The IRS allows you to save a specific percentage of your gross salary for your dependents. Under the DCFSA program, you’re allowed to set aside $2500 annually from your gross income if you’re married and decide to file an individual tax return. Alternatively, you can save $5000 annually if you’re married and file your tax returns as a couple. The amount is usually subtracted from your gross income and kept in a savings account to be used for your child’s daycare, summer day camp, and before and after school programs, while you continue working.
7. Medical Expenses
Before your baby arrives, talk to your medical insurer to find out whether they’ll cover the entire delivery expense or you’ll have to remove some money from your pocket. If you’ve to contribute, find out the exact figure and plan for it. You also need to know by how much your medical premiums will rise when you include the baby in your cover. Having prior knowledge allows you to prepare both your mindset and finances for the expected changes. It also helps you deal with future hospital bills.
8. Examine Your Goals Once Again
Before you thought that you were ever going to be a parent, you had set personal financial goals, for example, have a specific amount in your retirement account. When the baby arrives, you’ve to prepare for their future and re-examine your goals. You’ve to create a savings account for the children and set up a college fund for their university education. However, as you do this, you shouldn’t lose sight of your goals since you still have to live after your children are grown up. Hence, make sure that your monthly contributions can cater to both your needs and your child’s. Take a second job if the math doesn’t add up.
9. Consider Your Needs and Wants
In the past, all you needed to raise a baby was a loving home, some diapers and wipes, baby onesies, a warm piece of clothing to cover the child when it’s cold, food, and reliable car seat for when you strap the baby. Nowadays, there are all sorts of stuff for babies; from automatic baby strollers to designer clothes. As a first time parent, you have to set your priorities straight and buy only those things that the baby cannot do without. Also, make the purchases simple and affordable.
According to statistics, you should expect to spend roughly $233,000 on your child until they reach 18. Use the above budgeting tips to make sure that this amount is spent wisely. So, know that becoming a parent won’t just change your emotional and social life, it’ll affect your financial one too. References/Resources: