Babies are wonderful and cute, but they also change EVERYTHING, especially financial and time management priorities. Let’s face it, they aren’t exactly cheap or low maintenance. When you consider the costs of providing for your soon-to-be bundle of joy, the numbers can be staggering – the average cost of childcare in the U.S. for kids between 0 – 4 years old is a whopping $9,589 a year. Plus you have to add in the cost for diapers, clothing and formula, on top of your current monthly expenses, such as car payments, utilities and a mortgage or rent payment. And don’t forget about lost potential income during maternity leave. But the good news is that if you start financially preparing for your baby now, budgeting and transitioning once he or she arrives will be much easier on your wallet.
1. Know your Benefits and Research your Hospital Options
Polices differ between companies and health plans, so start by clarifying your options around health insurance, using vacation and paid time off as part of your leave, collecting partial payment for maternity leave, and claiming short-term disability. For instance, you may have the option to adjust the amount you contribute to a pre-tax savings plan. And when it comes to actual medical expenses for the prenatal care, labor and delivery and for your newborn, which hospital or birthing center you choose will make a difference. Prices for procedures may vary, so the price of a C-section at one hospital could be much higher or lower at another. Some hospitals also charge extra fees for private rooms, toiletries and even TV privileges. Get a good idea of how much you’ll be paying, and if you have any questions, check back with your insurance company to see what’s covered and what’s not.
2. Buy Smart
Have you been to a baby store lately? They are full of so many super cute specialty items, if you aren’t careful, you’ll end up with a basket full of nice-to-have instead of need-to-have items. Ask your friends or family members what is most important to have when you bring your baby home, and only register or buy those items. Better yet, request gently used items from friends or check out consignment stores, especially for clothes items your baby will outgrow quickly. If you don’t already have one, consider getting a membership at a retail warehouse store. You can save quite a bit of money by buying items like diaper, formula and clothes in bulk.
3. Eliminate Low Hanging Fruit Expenses
If you tend to buy your lunch during the week, you’re not alone. The average American spends $20 a week on restaurant lunches, according to USA Today, which adds up to $1,043 a year. Bringing your own lunch from home instead can help you cut down on costs significantly. If you need some inspiration for what to bring, here are some healthy, tasty options. Also look for ways to cut back on monthly expenses such as cancel premium cable channels, carpool to work or cut-back on nonessentials like mani/pedis, personal trainers and movies out. You may be surprised at how many free or lower-cost options you can replace them with.
4. Economize with DIY Nursery Décor
Nursery furniture by definition is used for a short time, so don’t overspend. Whether it’s your rocking chair, the crib, the dresser or shelving, consider shopping for them at local garage sales, used furniture stores or even on Craigslist. You can make a fun project out of it by painting it, but always check for recalls, paint chips, and loose pieces. In particular, when selecting a crib carefully review the latest standards and safety features. If you aren’t comfortable with buying a used crib, buy a new crib mattress. Once you have your furniture selected, don’t overspend on decorations either. Instead, make your own decorations. Even if you don’t consider yourself to be very crafty, there are tons of ideas online you can get inspiration from.
5. Take Advantage of Savings Opportunities
Becoming a parent changes your status in many ways. Make changes to your insurance elections and deductions designed to benefit families with children. Check to see if your out-of-pocket medical expenses, including prescription medications for the mom-to-be, prenatal care, ultrasounds, blood work, and other medical tests, are deductible. Just in case, separate and save these receipts throughout the year. Don’t forget to take advantage of tax credits, too. For example, you may be able to claim the Child Tax Credit for the year your baby was born (depending on the time of birth), deduct qualifying child care expenses, and contributions to a College 529 savings plan. All of these will reduce your taxable income, leaving more money in your pocket.
For some families, the time may be right to consider a cash-out refinance for their mortgage. This is a great way to turn your home equity into cash you can use however you want, including to help cover the costs of a new baby. If you want information on cash-out refinance, or you’re in need of a new home for your growing family, we can help you find the right loan product. We offer a wide variety of mortgage options for different budgets and financial goals. Contact a PrimeLending loan officer today to learn about your options.