Are you pregnant or did you recently add a new baby to your family?
I know there is so much excitement and joy when you become a new parent, but if you’re like many parents, you might be concerned about your finances. Plus, the ways you start managing money in your household will change when you have a new addition to your family.
Luckily, managing your money doesn’t have to be stressful, especially if you prepare your finances and get organized early on.
Below are some of the best ways to improve how you manage your family’s finances when you have a baby.
Start Cutting Expenses Early On
One of the great things about pregnancy from a financial standpoint is that you have 9 months to save and prepare. It’s best to start cutting expenses early on so you can save more for baby expenses.
You might even want to focus on paying off debt to free up more money and ease your stress levels if either you or your partner has to take time off work once the baby arrives.
“When I found out I was pregnant, I immediately tried to start paying off as many things as possible,” said Sandy Smith, a new mom and founder of Yes I Am Cheap.
Sandy wanted to reduce her expenses while she was on unpaid leave and was actually able to pay off all consumer debt balances (over $40,000) in the months before her son was born, leaving her with just her student loan debt.
Sandy and her husband side hustled to make extra money to pay their debt off faster. Outside of her full-time job, Sandy runs a successful and flexible Amazon-selling business from her laptop.
Re-evaluate Wants vs. Needs
Your priorities will change when you have a baby, so it makes sense to re-evaluate your wants and needs at this time. Comb through your expenses and commitments and determine what is most important to you right now, including some irrefutable expenses. Then, prioritize your needs over your wants.
When I first had my son, I realized that shopping and dining out weren’t super important at that time, and I put my money toward other necessities like insurance and physical therapy.
My son needed physical therapy for a few months when he was still under the age of 1, and I was able to pay for it since I eliminated unnecessary expenses in other categories.
Sarah, a freelance writer and podcaster, also found this helpful to do this. She said, “I stopped going out to malls just to browse and as a result, spent a lot less disposable income on wants.” She added, “Going out less (because frankly, it’s almost too much of a hassle with a little one) has made me realize how little I can live on and still have a really good life.”
Be More Open to Affordable Solutions
There’s a big myth out there that being a parent means you have to spend tons of money on your kids. Some statistics even predict you’ll spend over $230,000 raising each child until they turn 18.
That doesn’t have to be your reality though. Since becoming a parent, I’ve felt more responsible for providing financial security for myself and my son. It’s motivated me to become more frugal and look for ways to save without sacrificing the lifestyle I want to have.
I buy most shoes, clothes, and toys used. I also take advantage of free entertainment and activities, and I focus on being resourceful and using what I have before spending mindlessly. There are also plenty of ways to get baby supplies for free.
Sandy likes to check out Facebook groups for moms so she can learn about clothing swaps in the area, leads on coupons, and other savings tips parents might have.
Adjust Workplace Benefits
Another thing you’ll want to do after you’ve had a baby is adjust your workplace benefits. If you are self-employed, you’ll want to bump up your personal savings, continue contributing to your retirement plan, and consider your options for saving for your child’s future.
Once Sandy gave birth to her son, she changed her benefits at work to include the Dependent Care Flexible Spending Plan (Dep-FSA) so she could put money away for daycare while reducing her taxable income.
“We also moved to one healthcare plan for the entire family from individual plans for my husband and I since we wanted to make it easier to track our costs and reduce medical deductions,” Sandy said. She added, “We also established a savings account for our son with an automatic deduction from my paycheck.”
If you can’t set up automatic savings through your employer, consider getting an online high-yield savings account and setting up automatic transfers on your own.
Update Key Areas Of Your Financial Plan
You’ll have to make a few changes to your financial documents and overall plan when you welcome a baby. It’s similar to when you get married and have to go through name changes, combine finances, and add your spouse to all your accounts.
It can seem like a tedious process at first, but just take it step by step. Here are a few things you’ll want to consider doing:
- Order a birth certificate and social security card (in the hospital if you can)
- Add your child to your health insurance plan
- Get life insurance/Add your child as a beneficiary of your life insurance policy
- Adjust your beneficiaries for your retirement plans
- Consider disability insurance
- Begin planning for child care (if applicable)
As you can see, you’ll probably spend more money in these key areas of your life, which is why it’s best to re-evaluate wants and needs and redo your budget to adjust to the changes.
Ultimately, how you manage finances will certainly change once you have a baby, but as long as you adopt positive money habits, you can adapt easier to the change.