If you are about to be a parent, then there are many things that you need to take care of. First-time parents experience excitement, joy and anticipation, and in the flurry of emotions it is easy to lose sight of the financial implications of adding a new member to your family.
Expenses increase drastically when there is a new baby in your family. Right from the day you receive the joyful news of pregnancy, expenses related to your baby begin. You should sit down and plan how you are going to manage your income and expenditure, and make room for fulfilling the needs of your little one.
Another reason why a new baby can make things difficult on your financial front is the exorbitant cost of childcare, medical care and education. Very often one of the parents will have to leave his or her job to stay home and care for the child. This leaves you with a steep fall in income leading to considerable financial strain.
Here are a few money management tips for new parents while preparing to welcome a baby home.
1) Outline Your Financial Goals
It is easy to lose sight of your financial goals when you are grappling with sleepless nights, parenting responsibilities and new ways of life. Ensure that you draw up a long-term plan for attaining your financial goals.
Continue with your monthly saving plans and investment schemes. With expenses increasing, it becomes hard to save as you used to. But it is better to cut down on regular savings rather than have all the diaper bills pile up on your credit cards.
If possible seek the services of a professional financial planner, who will be able to help you streamline your finances and achieve a better balance between income and expenses.
A new baby can also compel a young family to stay away from big ticket purchases like a home or a car. Going on that dream vacation also may seem less likely now.
But experts say that what matters most is that you do not lose sight of your financial goals and stick to your budget and investment plan. Your baby will be home with you for the next 17-18 years. You may think that after the first few tough years you will get back to managing your finances better. But school, tuitions, sports and activity classes are all things you need to pay for as your child grows. And there are also the mammoth college education expenses coming up.
So take each day at a time. Do not be overwhelmed by the situation at hand. No matter how small, do continue to save a small portion of your income every month. Remember that if you build a comfortable nest egg you will not have to depend on your children during old age.
2) Limit Your Spending
As soon as you know that you are pregnant get started with the work of getting your finances in order.
If you do not have insurance take one. Ensure that your medical insurance and term policies are all current and updated. Choose your birthing hospital and also decide on the care you want.
You and your partner must set a conservative pre-baby shopping budget. Design and plan the nursery well within what you can afford. Do not splash on expensive baby accessories and gadgets. Buy reasonably priced products that are safe and durable. Also do not spend a bomb on baby clothes. If possible try to make do with quality hand me downs that will serve your immediate needs without burning a hole in your pocket.
Do keep your eyes open for freebies and online offers that provide massive savings on baby products. Small savings can add up to a big amount if you are careful enough
Remember that there will be a ton of other expenses like visits to the doc, diapers and formula to be taken care of, where you cannot really cut corners. So do hold back wherever you can and go with the flow the rest of the time.
3) Plan for Maternity/Paternity leave
Maternity or paternity leave policies vary from state to state, and sometimes from employer to employer. Check with your employer what the policies are and how long a break you will get. You can also check whether your break will be a paid one. Big companies and many startups offer flexible work opportunities for new parents. This will help you balance both your career and your baby without having to worry about daycare expenses.
The situation may also arise that you will have to take a break from your career to care for the baby. You will have to account for the loss of income. You must also have a plan of action ready that will keep your skills updated and not render you obsolete when you are finally ready to re-enter workforce.
3) Parenting is a Tough Task
New parents find that they have entered a new phase of life and nothing is like it used to be. Responsibilities increase and you find yourself juggling a hundred tasks at the same time.
This is undeniably a time of stress and you need to be kind to yourself. Rejuvenation and relaxation become a luxury with a baby at home.
You may want to go on short holidays away from hectic schedules to de-stress and bond with your child. Ensure that you save up for small delights. It is occasions like these that will help you step back for a moment and take in the beauty of the phase of life that you are in.
4) Make Retirement and Education Your Topmost Priority
College expenses and retirement are the two most important upcoming events in your life. You need to save up to live comfortably in your golden years without depending on your kids. A good retirement corpus will allow you to meet living expenses as well as enjoy all that you always wanted to, when there is no other responsibility on you.
College education is spectacularly expensive. You may not be able to save enough to cover all expenses, but a sizable contribution from your end can reduce the student debt your child will have.
It is hard to predict how much you will spend on raising your baby. The cost of having children and seeing them grow depends to a great deal on where you live, the kind of life you want to provide your family and a host of other factors beyond your control. But if you are mindful of your spending, invest wisely and save judiciously you will be able to attain almost all of your financial goals.