Are You Financially Prepared?

Here is some REALLY basic information on how to be financially prepared to have a baby. Please note that I am NOT a financial planner and this is information from websites/books and some personal experience.

Basically, I don’t think that you can ever feel totally “ready” financially to have a baby. One of our biggest changes will be that I will be staying at home instead of working. That’s a huge cut in salary! My husband and I both finished PT school with a TON of student loans, which really has been stalling factor in our financial plans. For me, one of the toughest things has been to balance repayment with the age that I want to be when we start having kids. Especially working in pediatrics, I know that the older you are when you start, the greater your chances are for a child with a disability, and to me that is terrifying. So are we totally financially ready for this? Absolutely not.   But here are some resources and tips that helped us decide when a good time to start trying would be.

  1. You’re never truly financially ready, so when you think you’re ready to try for a baby, have at it!
  2. Start creating an “emergency fund” as soon as you have the discussion about trying. This fund should have enough to cover between 3-6 months worth of bills JUST IN CASE something happens that you or your spouse can’t work, or you have some unexpected bills.
  3. Pay attention to what your company will pay for maternity leave. Some places even will grant FMLA to the husband for a paternity leave. This is huge and can be a big part of your financial plan
  4. Decide whether or not having a baby will be feasible in the space you live in right now. If not, no problem, but definitely calls for a little more planning. We live in a medium sized apartment that will be tight with one baby, but definitely not big enough for 2, so we know that we will have to move before #2 is on the way!
  5. Check our your health insurance coverage. Look into the labor/delivery sections to see what is and what is not covered. Also pay attention to copays for check-up’s and how to add a dependent
  6. If this is baby number one, think about friends/family who may be able to chip in for your baby shower. Will they be purchasing you some of the big nursery furniture? Or will they be buying lots of diapers, creams and onesies? This may help to allow you to begin to estimate what that first year will cost in baby things.
  7. Finally, make a list of all of your expenses. See what is fixed (you can’t do without it) and what is flexible (you could live without it). Do some math! Where can you cut corners? Is just your husband’s income enough to cover all of the fixed income? Will he have to be the stay at home dad because you make more? Is daycare or some form of childcare an option? Can you go part time without overlapping your hours so you don’t have to pay for childcare? All great questions to start asking.
  8. I created a very detailed excel spreadsheet for our finances.  See the attached document for an example of how you can divide your fixed  and flexible expenses and how to start budgeting.  You should be able to plug in estimates from 2016 into column B and then just start logging things in whatever month we are in and it should do all of the calculations for you.
  9. Financial Planning
    1. Some things you may be able to totally cut out….We are fortunately or unfortunately at that age where we are invited to A LOT of weddings. This year along, we have 7 to go to! It’s ridiculous! And definitely an extra cost. Also, our health insurance is pretty terrible. Our deductible is $6800, before anything at all is covered, so we tend to rack up medical expenses throughout the year, which you may be able to avoid. And of course, our student loans take up a HUGE chunk of our income, which you may not have.
    2. What I did was take an average from 2016 and then look to see where we could cut some corners. I created a budget column to see if we could stay within some boundaries form a lot of our flexible budget. Once baby arrives, we will probably have to tighten these down a bit more because I’ll likely stop working. (see the link above for the excel sheet that you can download and edit for your use!

How much will a baby cost you ask? Here are some ESTIMATES on cost from pregnancy through the first 18 years of life.

  1. Prenatal care, labor and delivery – $500-$16,000 depending on insurance coverage, your health, and where you live
    1. Other estimates from 2014 are $9000-25000, so make sure you look into your insurance!
  2. First year expenses (for things like nursery furniture, doctors visits and diapers) – $3000-$13000
    1. This source estimated these figures in 2013 for a middle income family (making a combined gross income of $61-106K/year)
  3. Birth-18 years (for a middle-income family) – $165,000 -$245000 not counting fertility treatments, adoption, private schools, tutoring or college

I really liked this website. It broke things down really well and was useful!

This is a GREAT TOOL that lets you plug in your income and spits out an estimate on how much you’ll spend on Baby’s’ per year. Now I did this for our income and it looked to be a bit high. I also wasn’t sure if the “housing” section meant an increase in cost for housing because of the baby or if that was just what we were expected to pay for housing for the three of us (which we already pay).
Brott, Armin and Jennifer Ash, The Expectant Father: The Ultimate Guide for Dads-to-be. New York: Abbeville Press, 2015.
Smith, Ryan, Pregnancy Week by Week: Your Ultimate Guide for Having a Healthy Baby, Kindle Edition, 2015.

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