by Brian M. Williams
Whether you have a baby on board or are thinking about starting a family, adding a cute little bundle of joy can strain your family budget.
How do you get your finances in order? By using this handy checklist!
These items will help you get your finances prepared so you're covered when your baby arrives.
Let the fiscal fun begin!
In a nutshell, your pre-baby plan consists of spending less, saving more and cutting down debt. Going through these steps can potentially increase your overall net worth. These steps can also ease the transition to one income if one of you plan to stay home with the baby or transition to a reduced income if you'll be paying for childcare.
Step One: Build your budget. Break down your expenses into these three buckets:
#1 -- Every Day Expenses
-- Essential expenses: Mortgage or rent and utilities, transportation and the other items that you must have.
-- Variable expenses: Changing cell phone or internet plans, updating insurance coverage and taking a look at food costs might save you hundreds a month.
-- Optional expenses: Dining out, buying take-out, movies and impulse purchases.
#2 -- Preparing for Baby Expenses
The average family spends about $12,000 during baby’s first year. Babies are expensive, but they don’t have to be as expensive as you think. Buying baby gear on eBay and at yard sales or borrowing items can more than half the cost.
#3 -- Ongoing Baby Expenses
Jot down your estimated expenses including diapers and childcare.
Now that you've got a feel for what you'll spend, take a look at your income and expected income.
Is there a gap? Try these next suggestions.
✓ Prioritize: Having a baby can be a life-changing experience. What you find essential to your life now might change once your baby's here. Scan your expenses. Do you anticipate lifestyle changes that might eliminate some costs?
✓ Lower expenses: If the gap still seem large, look at ways you can lower expenses. Changing cell phone or internet plans, updating insurance coverage and taking a look at food costs might save you hundreds a month. Some families-to-be lower costs by moving to a less expensive area or switching for a more economical car.
Step Two: Jiggling numbers and work hours now, will help with finances later.
✓ Supplementing income: See if you can ask for overtime and set aside the equivalent of one person's pay check every or every other pay period. Can't get overtime? Try adding a part-time job to the mix if you're able to handle the load.
What should you do with all that extra money you're packing away? You could create an emergency fund. Your emergency fund should cover at least three months of household expenses.
✓ Reduce toxic debt: Reset your financial button during pregnancy by eliminating credit card debt. Try to pay as much extra on top of the minimum payment as you can afford. Even if you're not able to pay everything off during these months, you'll have lowered your monthly interesting charges and decreased payments. and student loan bills. If your mortgage or car loan has a high interest rate, consider refinancing those.
Step Three: Weigh the cost of staying at home versus working. These questions can help you decide which option is best for your family. Calculate your loss or savings using your take home income, not your gross income. Working or staying at home with your baby has benefits besides potentially saving money.