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Creating a Budget When You’re Expecting a Baby

So, you’re expecting your first child!  Congratulations!  While planning what items will you need to purchase and what, if anything, will need to change in your home to prepare for your new baby, you may start to worry about your finances.  (Most new families, regardless of their level of financial comfort, experience some degree of worry about the financial impact of children.)  It’s ok to think about your finances; that’s just being realistic.  Don’t get discouraged, though; just sit down and prepare a well considered budget . . . and then stick to it!  But how do you plan a budget for life with your new baby?

Income

Will you return to work after your maternity leave?  If so, will you return in the same job that you held before your maternity leave (as opposed to moving from a full-time to a part-time position, for example)?  How long will you be on maternity leave?  Will it be paid or unpaid leave?  Do you receive investment income of any sort?  What type of childcare will you be using?  Will you take your child to daycare?  Hire a nanny?  Budget your income accordingly.

Do you have a spouse or life partner who earns income for the family as well?   Is there any other household income?  Budget that income accordingly as well.

Expenses

Will you stay in your current home?  If so, your current rent or mortgage payment will stay a constant.  If not, you will need to approximate the cost of a different rent or mortgage payment.  (Note: if you will be buying a home to accommodate your new family, don’t forget to budget for closing costs, moving expenses, and other related expenditures.)

What are your anticipated monthly bills (i.e., electricity, natural gas, landline telephone, cellular telephone, cable or dish television connection, etc.)?  Will any of these change with the birth of your baby?  For example, if you are accustomed to keeping your house at a constant 68*F, you may need to turn your furnace up a bit in winter, thus increasing your winter gas and/or electric bills.

What are your anticipated monthly bills associated with your automobile(s)?  Will any of these change with the birth of your baby?  For example, if you will be trading in your sub-compact for a minivan, you must budget for the purchase, maintenance, insurance, and gas mileage of your minivan rather than your sub-compact.

Once you have these items budgeted, take a moment to visit with some of your friends who have young children.  What lifestyle changes did they experience when they brought home their first child?  What purchases did they make to accommodate the baby?  How many diapers did they need each week?  What budgetary surprises did they experience?

Next, think about how your life will change when you bring home your precious child.  You probably won’t go out clubbing every Saturday night any more.  You may, instead, take Mommy-and-me swimming classes during the day on Saturday and have friends over for a quiet dinner that evening.  While you’re thinking about life after you’ve brought your baby home, you’ll need to decide if you will breastfeed or bottle feed.  You have myriad decisions to make about what you want your life to be like once you are a family, and almost all your decisions will affect your budget.

Also think about creating a college savings account for your child.  If you save even a small amount every month, that will accumulate over 18 years and become a considerable savings account to fund your child’s college education.  You may also consider separate savings accounts for other life events for your child:  his/her first car, his/her wedding, etc.

Determine if you have any sources of savings.  Does your sister have adorable baby clothing that she is willing to share with you?  Can you and your best friend co-employ a nanny so that her toddler and your baby can spend time together . . . and you can split the cost of the nanny when you return to work?  Can you find a like-new baby stroller, changing table, etc. at a garage sale in a respected neighborhood?

Running the Math

Once you have all your budget numbers assembled, your next step is to assemble your numbers on an annualized basis, add all your income and, from that number, subtract all your expenses.  If your resulting number is positive, you will have more income than expenses.  If your resulting number is negative, you will have more expenses than income.  You will then need to decide if your draft budget needs to be adjusted, and, if so, what adjustments you can and want to make.

Next, as a final step, you should review your cash flow.  If your budget is projected to have marginally more income than expenses, you may still have a problem.  For example, if your payday is this Friday, your electricity bill is due this Wednesday, and your checking account is insufficient to pay the electric bill prior to payday, you have a problem.  You need to ensure that your cash flow is coordinated or that there is enough money in your checking account from your prior payday to cover the bill that comes due before your next payday.

Summary

With thorough planning (and perhaps a little creative problem-solving), you can create a reasonable budget that should minimize the financial worries associated with becoming a new family.  Congratulations on expecting your first child!  You will do great!

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