5 Tips for Preparing Finances for a New Baby

Having a baby can be an incredibly exciting experience in any young couple’s life. You might have been planning for this moment for years, or it was more of a surprise to you than anything else. Regardless, you and your loved one are probably busy making arrangements for the new baby’s arrival. While it’s important to paint the nursery and secure the car seat, you also need to be aware of your finances and prepare them for the extra weight of having a dependent.

Plan for Maternity/Paternity Leave

After having a child, you and your partner should plan to be out of work for at least four to six weeks. This gives you both time to adjust to life as new parents. During this time, you may or may not qualify for benefits and monetary compensation. If this is the case, you’ll be left without any income for about a month or two. Prior to the time coming when you need to leave work, you should have some funds stored away specifically to pay bills and expenses.

Consolidate or Refinance Old Debts

If you have old student loans, you should consider consolidating them to improve your current financial situation. If you have multiple loans taken out, it can be confusing, daunting and expensive to try to pay them all every single month. When you consolidate, you’re essentially lumping all of these accounts onto one new loan. The new account will normally have a longer repayment term and a lower interest rate, so it’ll be more affordable for you when you have extra expenses coming into play.

Create an Emergency Fund

Emergency funds are incredibly underrated, which is why a lot of people don’t necessarily create them. The fund is specific to when an emergency expense comes up. It’s a good idea to try to save up at least $1,000 in the event that you need a new home appliance, car repair or there’s a temporary loss of income. The fund prevents the need to tamper with your checking account to pay for these expenses.

Prepare for Childcare Costs

There is no lie about it, childcare can be downright expensive. Many childcare facilities charge by either the week or the month. Some people have found that many daycare systems cost as much as a full-time income. This is where you’ll need to determine if it is worth paying for childcare or if you’re better of watching the child yourself at home. If you absolutely need to go back to work after maternity/paternity leave, you’ll want to look for a facility that offers more affordable rates.

Create a Specified Budget

Budgeting is a way to take your expenditures and income into consideration to see what you are left with at the end of the month. Budgets are essential for a growing family because they prevent you from getting into the common paycheck-to-paycheck mentality. Get rid of expenses that are not necessary, and do your best to avoid frivolous overspending as much as you possibly can.