Expecting? How to Budget for Your New Baby

A new baby is something to celebrate, but that little bundle of joy can also add stress to your finances if you are not properly prepared. Not counting the cost of higher education, raising a child can cost more than $230,000, according to the U.S. Department of Agriculture.

There are many steps that expecting parents should take before the birth of a child, that includes taking a good, hard look at your budget and figuring out what needs to be re-adjusted.

Following are four steps you can take to help reduce the financial stress that comes with having a child.

1. Cut down or eliminate credit card debt. Having less debt before the baby arrives will allow you to reallocate more money toward child care expenses.
2. Calculate all monthly child care expenses. Start investigating how much your child care expenses will be. Shop around for day care needs and other necessities. For example, babies typically go through 10 to 12 diapers per day. Find out how much that will cost you per month, as well as wipes, baby formula (if necessary), doctor’s visits, etc. Add everything up.
3. Create a new budget. Add your upcoming child care expenses to your budget, and determine what expenses you can reduce or eliminate before the baby is born. Make as many adjustments as needed to compensate for the anticipated expenses so you can balance your new budget.
4. Implement new budget before the baby arrives. Now that you have set a new budget, start using it two to three months before the baby is born. Since you won’t be using the child care expenses, yet, put that amount into savings to build a cushion for unexpected expenses. This will also help you grow accustomed to your new budget ahead of time.

Tips for Trimming Your Child Care Budget

Now that you have figured out how your finances will change after your baby is born, you can start to look for ways to save on child care expenses. Consider the following ideas.

• Create a baby fund. Designate a savings account for child care needs and contribute to it monthly. Only use it for child-related expenses.
• Watch for deals. Ultimately, saving money requires diligence. Keep an eye out for sales on the products you use most, so you can stock up when the prices are lowest.
• Don’t load up on newborn diapers. Babies grow fast and will not be in newborn diapers for long. Don’t buy more than you need to make sure you aren’t stuck with a bunch of diapers your baby will never wear.
• Buy cloth diapers. Although it can be a large up-front cost, using cloth diapers can save you money in the long term.
• Buy second-hand or discount clothes and toys. Again, babies grow fast. Check out local thrift stores and dollar stores for clothes and toys so you don’t overspend on clothes that will not fit your baby for long, and toys that will lose your baby’s interest.
• Make your own baby food. Look for recipes for how to make your own baby food once your little one is ready to try solids. 
• Contribute to a Flexible Spending Account (FSA) for child-care expenses. A married couple can contribute up to $5,000 per year into an FSA for child-care expenses. Having saved ahead can make hefty day care bills easier to stomach and can also reduce your taxes.