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New Baby Checklist: 10 Ways to Get Your Finances Ready

If you’re expecting a new baby, you probably know that your finances are about to change … but maybe you’re not sure exactly how much they’re going to change, or in what ways. I can relate.

When my wife was pregnant, we spent a lot of time talking about the potential cost of childcare. What we didn’t talk about were the small purchases that add up over time: diapers and wipes, milk storage bags, and teething wafers. Oh, and every single swaddle or sleep sack that got an Amazon reviewer’s child to sleep through the night. 

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There will always be costs you don’t anticipate, but having a financial plan will put your mind at ease and give you more time to focus on counting those fingers and toes.

If you’re wondering when you should start preparing financially for a baby, start now. Follow the 10 steps we’ve outlined below, and you’ll be setting your new family up for success. 

1. Create (or update) your budget

Developing an annual budget for something you’ve never done before can be intimidating. I mean, how much does a baby actually cost per year?

Each family’s expenses will be different, but on average, parents spend $12,680 to care for a baby in their first year, according to a study done by the U.S. Department of Agriculture. Consider big-ticket items—like cribs, strollers, and childcare—as well as the small day-to-day expenses like diapers and formula.

Let friends and family know what you’re in the market for. We saved a bundle by getting things like highchairs and clothes from friends whose children had outgrown them.

2. Plan for parental leave

For most of us, forgoing a paycheck for several months requires advanced planning. Talk to your HR department about your options, and think carefully about what makes the most sense for your family.

Under federal law, many employees (both male and female) are entitled to 12 weeks of unpaid parental leave. And your state or your employer could provide even more generous benefits—such as paid leave or the ability to purchase short-term disability insurance to cover some of your income during a leave of absence.

3. Start locating a childcare provider

With annual childcare costs averaging around $8,600 nationally (and over $20,000 in some states) according to the nonprofit Childcare Aware of America, paying for childcare is often the most expensive part of parenting.

And in some communities, the waitlists to get into a daycare center are as long as the pregnancy. It pays to get in early so you’re not left scrambling.

Even if you don’t think you’ll use daycare, it doesn’t hurt to put your name on a waitlist. My wife and I didn’t put our names on any lists because I was planning to work from home while caring for our son. By the time we realized we needed help, we were too late. He was seven months old before we got him into daycare. 

4. Pay down credit card debt

It’s time to get rid of all that interest you’re paying on your credit card balance. If you’re carrying a balance in the thousands, you’re probably paying hundreds in interest annually.

That’s real money you could use for things you’ll need, like a crib or a car seat. And reducing your debt load will make you a better candidate for future loans on any big purchases.

5. Re-evaluate your student loan debt

Adding new expenses to your budget can make things feel pretty tight, but you may be able to create a little breathing room by lowering your monthly student loan payment.

Refinancing your student loans could save you an average $259 a month. With lower interest rates and new payment terms, you’ll have the extra cash flow you need to rest easy…at least when the baby’s asleep.

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6. Anticipate your medical expenses

Giving birth is one of the most expensive healthcare events many young families will experience. Ask your medical providers to help you anticipate costs, and take the time to understand your health insurance plan and what it covers.

Because my wife and I wanted to avoid unexpected medical costs, we chose a health insurance plan with a relatively high deductible and lower premiums. We knew we’d meet the deductible early in the year—when she gave birth in January—and then we wouldn’t have medical expenses outside of our premiums for the rest of the year. Of course, this may not work as well for babies born later in the year.

7. Set aside emergency funds

Things happen. No matter how much you plan, something will catch you off guard—a costly home repair, an unanticipated medical bill, a layoff.  You can’t always know what’s coming, but you can prepare yourself for the unexpected.

Most financial experts recommend having at least three to six months’ worth of living expenses set aside. If that number has you balking, take a deep breath and start small. Schedule a regular monthly transfer from your checking account into a designated emergency savings account.

8. Keep (or start) funding your retirement

With all this focus on taking care of baby’s needs, you might’ve forgotten about your own retirement. But that’s a mistake. Contributing to a retirement account is more important than ever.

And you don’t have to stop contributing even if you take a longer leave of absence from the office.

While 401(k) plans and IRAs require that your contributions be made from earned income, non-working parents who are out of the workforce for more than a year can contribute up to $5,500 a year to a spousal IRA with income earned by their spouse. They can then deduct that amount from the household taxable income.  

9. Make a will and buy life insurance

No one likes to think about the what-ifs, but now that you’ll be responsible for a tiny human being, it’s time to put some contingency plans in place. Creating a will and buying life insurance are both good places to start.

If choosing your child’s guardian sounds impossible, just imagine the issue being decided by the court system without any input from you. That should motivate you to make an appointment with an attorney and put your wishes down on paper.

10. Set up a college savings account

College seems like an awfully long way off when you’re looking into your tiny baby’s face. But with the cost of education rising, you can’t start saving too early. 529 college savings accounts allow you to make pre-tax contributions between $235,000 and $520,000, depending on the state, per child.

Don’t forget to let friends and family know that you’ve opened an account. Some people would much prefer to help secure your little one’s future education than wrap another receiving blanket.

With a little planning, your bank account will be just as ready as you are to welcome a precious new family member.

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