Written by Sara Bailey of thewidow.net
Having a baby opens you up to an entirely new world of excitement and joy. It also brings with it a lot of costs that you’re probably not used to. Though it can be overwhelming and stressful, there are some things you can do that will help you navigate the costs of parenthood. Here are some tips on how to financially prepare for your new arrival.
Calculate your assets
Before you do anything else, it’s good to figure out your net worth if you haven’t already. Your net worth is basically everything you own minus any debts you owe. There are many helpful online calculators that can give you a good idea of your net worth simply by entering in your assets (e.g., car, 401K, savings) and liabilities (e.g., credit cards, student loans, mortgage).
One of the most important things to figure out is the value of your home. If you own a home, that value is considered part of your assets, and the mortgage you still owe is a liability. You can grow your net worth by knocking out debt, saving and investing money and cutting back on spending. It’s good practice to check your net worth regularly; some people even check it monthly.
Expand your emergency fund
If you don’t have an emergency fund, it’s important to start one. An emergency fund is money that is set aside for unexpected events such as medical emergencies, job loss, car troubles, unforeseen home repairs and so on. Life is unpredictable, and everyone is hit with financial surprises every now and then. Having that money available can lower you and your spouse’s stress levels, as it will allow you to pay for those surprises (or at least soften the blow). It’s generally recommended to have enough money to live off of for three months. If you already have emergency savings in order, plan to boost it to include the costs of caring for a baby.
Research the costs of childcare
Whether you will be a two-income household or one of you will be staying home with the baby, you need to prepare for the costs. The costs vary by the type of care and geographical location, and some families will need full-time, part-time, or an alternating schedule due to work hours and other factors. Sending your child to day care full-time typically costs about the same per year as college tuition at a public university. A full-time nanny costs even more.
If a parent will be staying home, or if you have extended family or friends that are willing to help look after the child, it could save you a lot of money. However, child-related expenses still cost the average family about $12,500 per year. So even if you choose not to use any day care, you should be prepared to fork out the dough.
Get adequate healthcare coverage
Newborns require a lot of care and children tend to catch germs easily, so you’ll be no stranger to the doctor’s office. If you have the cheapest health insurance policy you could find, you might want to consider upgrading it to one that covers frequent doctor visits. When you have kids, higher premiums are not the enemy. A plan with higher premiums can save you money in the long-term because they offer lower copays and deductibles, and you’ll end up paying less in out-of-pocket expenses.
There’s nothing more exciting or stressful than becoming a parent for the first time. The good news is that you can do some things to make it more exciting than stressful. Calculating your assets will give you an idea of where you stand financially. Creating or building your emergency fund will allow you to provide when life surprises your family. Figuring out child care and getting a solid health insurance plan will bring you more peace of mind. The joy of caring for a child is worth every penny. It just helps to prepare a little bit before they arrive.
Get started creating a financial plan today with FamilyMeans Financial Solutions. Our certified consumer credit counselors can help you to make a personalized plan to help you begin paying off debt and saving for a baby on the way! Visit FamilyMeans.org to learn more or call 651-439-4840 to get started!