A Dime reader asks:
How do you prepare yourself financially, for a baby on the way?
Raising a child is not cheap! According to the United States Department of Agriculture, a child born in 2010 will cost $226,920 to raise from birth to 17. This doesn’t include college and a host of other expenses. With housing being the largest contributor of the expenses, the USDA went on to report, “The report by USDA’s Center for Nutrition Policy and Promotion notes that family income affects child rearing costs. A family earning less than $57,600 per year can expect to spend a total of $163,440 (in 2010 dollars) on a child from birth through high school. Similarly, parents with an income between $57,600 and $99,730 can expect to spend $226,920; and a family earning more than $99,730 can expect to spend $377,040.” read article.
So, as you can see, preparation is key when a bundle of joy is on its ways! Getting your finances in order before your little one arrives will allow you spend less energy on financial worry and more energy on the important things, like spoiling the baby with hugs and kisses and cleaning poopie diapers!
Here are some tips that can help you to prepare for the arrival of your newborn:
Check your debtYour current debt will play a big role in your ability to take on the additional debt that a baby will incur. Let’s say that you plan on starting a family a year or so from now. That means that you should be devising a plan to minimize your current debt within the next 9 months. Assess all of your debt and see where you might be able to cut back. For things like auto loans, student loans and other monthly obligations, shop around for lowest possible interest rates and maybe even a consolidation loan. If your objective is to pay your debt down before baby comes, determine what your debt goal is and calculate how much more it would cost you in order to reach that point.Example: You want to have $20,000 less in debt by next year. Use a loan calculator to determine how much your monthly expense would be to pay $20,000 in one year—which according the calc is about $1,721 at 6%.If it’s doable, go for it! If not, re-work your plan into something more realistic for your family goals. We’re not aiming for perfection here, this is just to give you some ideas of what your options are.
Do some pricingNow is a perfect time to start pricing baby expenses such as: furniture, clothing, diapers, food, insurance, daycare, etc. Estimate what the monthly expense will be and factor it into your current monthly expenses. The Cost of Rasing a Child Calculator may be of some help here.
Do a test runBorrow a child! I bet you know a few parents that could really use a break from the kiddies! Ask if you can keep them for the weekend and insist on paying for everything! I assure you that the parents won’t mind! Keep track of everything that you have to spend money on and keep in mind that this is merely a fraction of what your actual costs will be for your own child.
Ask other parentsOther parents love sharing do’s and don’ts with new parents to be. Join a parent group or ask friends. They will offer up a host of things that you probably haven’t considered or even thought of.
Arm yourself with information, but at the same time, don’t allow all of this information to burden you. You’re already headed in the right direction by checking your financially stability prior to having a baby. Lots of us have kind of mucked through it and have managed to do alright.