Money Moves To Make Right After You Find Out You’re Pregnant

Over the years, I have developed a network of other fiduciary financial planners. From time to time, I invite one of these individuals to contribute an article of interest. Today, Phillip Christenson of  Phillip James Financial shares his thoughts about Money Moves to Make Right After you Find Out You’re Pregnant.

Congratulations! You’ve recently discovered that you are going to be a parent. After the initial elation wears off, you are likely to feel the pressure of having to care and provide for another human being. That takes time and money, but fortunately you’ve got several months of time to prepare and save up for this new responsibility. Raising a baby isn’t cheap the costs run into the five figures per child, per year.

Regardless of your income level, there are always steps you can take towards softening the initial blow. The following four steps will help guide you in financially preparing for your new family member.

1. Plan and save for the initial costs

The cost of having a baby can be considerable, and much of that is incurred in the first few weeks of life or even before they are born. Think of this as a down payment – you need to buy clothes, infant formula, diapers, toys, a crib, electronics, books…the list goes on and on. You could easily be looking at a four-figure sum of money, especially if you make an entire room dedicated to the child. Plan a budget beforehand, figure out exactly what you’ll need and how much it costs. Depending on how much savings you have, this will allow you to decide what adjustments you need to make, as well as keeping you informed of the cost.

2. If you don’t need to buy it, don’t

Many parents continuously buy infant formula, diapers, forms of entertainment – a lot of these things can be done at home without having to buy them again and again. Instead of buying formula you should try breastfeeding your baby? It offers a considerable number of health benefits, aids in bonding and it doesn’t cost anything. Now some mothers aren’t so fortunate as to have the time to constantly nurse (primarily working mothers) so you can use a breast pump to save the milk for later use. Then either you or a caretaker can do the regular feeding for you with a bottle. Buying cloth diapers is cheaper, and they can be re-washed and reused without having to constantly purchase new ones. Some parents love it, others hate it. So, give it a try, you can always switch back to disposable diapers later. Or if you decide right off the bat that cloth diapers aren’t for you, then just try to make sacrifices elsewhere.

3. Take advantage of tax credits and leaves of absence

Check to see if your company offers maternity leave. Some companies offer it as a perk, others through the government – California passed the Family and Medical Leave Act, guaranteeing several months of leave to new mothers at 55% of their original pay rate. If your company doesn’t offer a paid leave but will still give you time off, you should consider purchasing a short-term disability policy to help cover some of the costs of your time off. In addition, you might be able to claim a $1,000 tax credit for a new child, a $4,000 dependent exemption, and day care expenses on y our tax return. These all depend on your reported income for that year. You should also look into subsidized child care through your employer and/or find family members who can help out – even if it’s not a matter of financial necessity, it’s always nice to have a backup option in case you need someone to watch your child on short notice.

4. Plan for the future

The immediate costs of having a child are steep, but it does not end there. The cost of raising a child to 18 stands at about $245,000/year for the average family. Saving for college counts for a lot of that, and if you decide to send your kids to private school it will be even higher. As they age, you will need to frequently replace their clothes, buy them new toys and electronics, feed them, shelter them, provide medical care…the list is quite long. You may also need to move to a new house at some point, bring with it a whole host of additional costs.

Creating a budget is one of the most important steps in being able to plan and save for your child rearing years. It is difficult to forecast your future income, but you can predict and control your future expenses to some extent. Saving for college is often the largest expense you will account for, but many smaller expenditures over the years add up to a considerable amount. As long as you keep an eye on your finances and avoid spending more than you can afford, you will be well-positioned to provide for your child in the upcoming years.