Who else found out they were having a baby and immediately saw dollar signs flash before their eyes?! (Yes, my hand is raised!)
Or, after the initial excitement you realized how expensive baby stuff really is – and on top of that you have to take maternity leave.
If you weren’t quite (or AT ALL) prepared for a baby financially then this is the post you NEED to study.
I’m going to give you the basic steps to prepare for a baby financially even if you’re already pregnant.
What you’ll get out of this post:
- 5 need-to-do steps after finding out you’re pregnant
- A complete baby budget
- Peace of mind before baby comes
My experience:
To say that I was terrified to find out I was pregnant would be an understatement.
I bawled my eyes out for two full days after seeing those positive tests (I took 3 just to be sure!) I didn’t feel like we were ready, I wasn’t ready myself but most importantly I was scared for our finances.
Sure, we’ve been following Dave Ramsey’s baby steps but I thought we’d have more time to prepare for a baby.
Not only did we find out we were pregnant, we had just signed a contract to start building our first home. Talk about FINANCIAL STRESS!
The point is – no one is ever completely prepared to have a baby financially. No matter how prepared you think you are, you’re going to second guess yourself the moment it happens.
To help myself stay sane and calm I created a ‘Prepare for Baby Checklist’. Now obviously there’s some things we would have done differently if this was better planned, but what exciting adventures in life ARE planned??
For all those new parents (or even parents already!) here’s the complete guide that you can check off on how to prepare for a baby financially – after finding out you’re pregnant.
How to Prepare for a Baby Financially
Step 1 – Evaluate your current financial situation
You’ve officially confirmed you’re having a baby. After the initial shock, panic and excitement you’ve realized that now you need to start PLANNING.
BUT – before you start planning nursery decor and names there’s something very important (and not so fun) that you have to do.
Evaluate your financial situation.
This is the most critical step you can take – you don’t want to go in blind having this baby. You need to know the current state of your finances and here’s how you’re going to do it:
– Before starting your financial eval you’re going to need a notebook (or just a piece of paper) and a pen or pencil. If you have a Financial Planner already I’d encourage you to use it. However, a pen and paper will work just fine too.
1 – Evaluate Current Debt
Write all of your debts in order from smallest to largest (this is based on the snowball method and is the EASIEST method to follow.)
Second, write the minimum payment amount of each debt next to it.
Third, start paying the minimum payment amount only on each debt until baby comes. (This is so you can start funding maternity/paternity leave and a baby fund.)
2 – Check Emergency Fund
In your notebook, write the amount you have in your emergency fund.
Your emergency fund will start out at $1,000. If all debt is paid off (besides mortgage) you need an emergency fund of 3-6 months. (this is based on teaching from Dave Ramsey which I fully agree with and do myself!)
If you don’t currently have a $1,000 dollar emergency fund – start funding it! Any extra cash or debt payments you were making will now go to funding that $1,000 dollar emergency fund.
If you already have the $1,000 dollar emergency fund (or have even started/completed your 3-6 month fund) you’re going to evaluate other savings you have.
Have you started a baby or maternity savings fund already?
Is there something else you were saving for that is now being put on hold for baby?
Write in your notebook any additional savings you have.
PS – on step 3 we’re going to figure out the exact amount we need saved for a maternity and baby fund. Right now, we’re just going through the evaluation phase.
3 – Evaluate Living Situation
One of my big goals was to have purchased our first home before we have a baby. Although I’m a big fan of renting and there are A LOT of benefits of renting, we knew the place we were at wasn’t ideal for a baby.
On the next line in your notebook write down what you’d like your living situation to look like when baby arrives.
Is your current home suitable for your growing family?
Are there any home projects that need to be done before baby arrives?
Do you need to find a new place either before or shortly after baby is here?
Remember that most babies sleep in a bassinet or crib in the parent’s room for the first little while until feeling comfortable enough to put them in their own. You may be able to wait a few months even after baby is born to find something with more space.
4 – Start thinking about work
After you’ve figured out where you’re going to live you’ll need to start thinking about what work options you have.
Take a few lines in your notebook and write:
-What you’d like to do after baby comes (if you and spouse will be working or if you’ll be transitioning to staying home when baby comes)
-How long you would like for maternity/paternity leave
-If both you and your spouse will be working do you have family or friends to help babysit or would you need to pay for childcare
5 – Check your Credit Score
It’s always a good time to see what’s going on with your credit (remember, ignoring it doesn’t make it go away.)
This will also give you time to clean up any dings on your report before adding another family member.
Step 2 – Double and triple check insurance
This step could save you from having to deal with a giant headache when baby is here.
Unless you’re a cave woman, chances are you’re delivering at a hospital. The chances are also very high that they’re going to want to get paid.
Instead of waiting until last minute to get insurance figured out, you need to do it now so you have more time to relax towards the end of your pregnancy.
Here’s what you need to find out:
1 – Who is your insurance through and what provider takes them?
When having to financially prepare for a baby your thoughts aren’t really on where you’re going to deliver when it can seem so far out.
Figuring out what insurance you have and what providers in your area take it will help you determine who you want to deliver your sweet baby.
2 – What insurance coverage do you have?
If you’re not familiar with the insurance world, they don’t typically pay 100% towards the birth and hospital stay. Like, what?!
Not only do you have all these extra things you have to buy for baby, now you’ve got to prepare for added hospital bills at the end of this. (This is worth it, right??)
Give your insurance company a call and find out what coverage they have for maternity. Ask them what the general patient cost is from others on your same plan.
3 – Set up a payment plan now
A lot of hospitals will let you start a payment plan now, even before delivering. Since you won’t be buying most of the baby things until the latter part of your pregnancy starting a hospital payment plan for what you can now can help with the end cost later.
Insurance Tip: Found out that your insurance really isn’t as great as you thought? I finally signed on with Christian Healthcare Ministries and they have been a breeze to work with! Their maternity option on their Gold Program is incredible and such a low deductible (only $500!). They do require you to be on the plan at least a month before conceiving so if you’re already pregnant it won’t help much right now, but it’s a great option for your next!
Step 3 – Create a baby budget
If this is your first then you’re probably a lot like me and didn’t quite realize how expensive baby items are. There’s so many options and those prices can get verrrrrrry steep.
One of the things I did to financially prepare for a baby (and let’s be honest, mentally too) was create a list of items we needed and priced it all out.
I scoured Pinterest for all of the need-to-have baby items and wrote everything down. Next to it I put the store and price of each item (after Googling for a million hours what the best and cheapest crib was).
Here’s how you’ll create your baby budget:
1 – Create a list of baby items needed
Using Pinterest and Google, look up the need-to-have baby items and write them down.
After researching the items, write the price of the item on your list along with the store you’re going to purchase from (so you can remember which store is cheapest to get it at!)
2 – Start a Separate Baby Savings Account
Now that you have a better idea of how much this little bundle of joy will cost (really it’s a little bundle of money bags) you will need to start a separate savings for just baby items.
Start adding any extra money into this account so you’re not mindlessly pulling from your checking account or putting it on credit cards.
You can have a savings with just cash that you keep at home or one at your bank, whatever is easier for you to use and access.
Take the total amount of the baby items and divide it by how many months you have left minus one month. So if you have 7 months left, you’ll divide your baby total by 6. This is how much you’ll need to put into the baby savings account each month for the next 6 months.
You don’t want to increase your stress and be ordering things last minute. You need to give yourself some time to relax in that last month of pregnancy.
2 – Start your Registry
Something really awesome can happen when you become pregnant – people buy you stuff! And if you want them to buy you things you actually WANT and NEED then you better have a registry.
The best registry I’ve found is through Amazon. I’ve found all of my baby items that I wanted on Amazon – and you even get 15% off the items that haven’t been purchased starting 60 days prior to baby’s due date. (The 15% off is only for Prime Members, you will get 10% if not a member though!)
Start setting up that registry and send it out to all your friends and family well before your baby shower so they can start ordering gifts ahead of time.
Step 4 – Create an After Baby Plan
As much as I’d love to pretend it’s all sunshine and rainbows after the baby comes, the reality is there’s still financial steps to take after the baby gets here. Planning out those after baby steps now will make it a much smoother transition.
1 – Prepare for maternity and/or paternity leave
As much as I’d like to be up and back on my feet after delivering, the reality is your body (and baby) need time to rest. Plan now when you’re going to take maternity leave and what it’s going to cost you.
Ask yourself these questions:
Do I want to work up until delivery or start maternity leave before baby comes?
There’s been a new trend of starting your maternity leave a few weeks before baby is here. I’m all for giving yourself what your body needs and by the end of pregnancy the last thing you feel like doing is going to work.
If you also have a high risk pregnancy or complications early on it may be best to consider starting your maternity leave before baby arrives.
How long would I like to have before returning to work after the baby is born?
Average time of maternity leave after baby is born is 6-8 weeks. However, you know your body best and how it recovers. Start thinking of how long you’d like to take.
What is my work policy for maternity leave?
If your work has a maternity leave policy find out what it is. Is there a certain number of weeks they allow or is it what you feel comfortable with. Talk with HR and your employer to find out what options you have.
Will I get maternity pay?
This is an important question to find out. If you won’t be receiving maternity pay you need to start thinking of what options you have to supplement your income while you’re on maternity leave. You may need to start a maternity savings or re-check that emergency fund.
Do I even want to return to work after having the baby?
This is the million dollar question. Some moms are ready to get right back into work after maternity leave and others ….. not so much.
Not wanting to go back to work after the baby comes is a completely normal and valid feeling.
So is WANTING to go back to work.
You know yourself and your family best, a happier mom equals a happier family. If you find you’re happiest when working then go for it! If you’re dreading going back to the 9 to 5 schedule then it might be time to start considering staying home with the sweet babe.
Either option will take some prep work.
Key points here are to find out how much you’re going to need to supplement your income while on maternity leave and if you are planning on returning to work after having the baby.
How to supplement income while on maternity leave:
If you rely on your income then there’s a few things you can do to prepare for it.
– Find out the exact amount you’ll get paid for maternity leave through work.
– Start adding to your emergency fund or baby savings fund to supplement the income you won’t be getting. For instance, if your work doesn’t cover any maternity costs then take the amount of weeks you’ll be taking off and what your regular pay would have been during those weeks. That is the amount you need to have in savings.
– Check and see if your employer will allow you to work from home 1-2 days a week.
– Start checking out Pinterest for some work-from-home options that you can easily do. (My favorite one is doing transcription work at Rev.)
2 – Find and Plan for Daycare
If you are going back to work you’ll need to figure out what to do with the baby while you’re gone.
With daycare costs rising it’s best to start planning and getting on waitlists now.
3 – Set up or Raise Life Insurance
This is something that majority of new parents forget about when financially preparing for a baby, setting up their life insurance. As much as we’d like to hope for the best, we do need to plan for the what-ifs.
Both spouses need to be on some type of life insurance. The cheapest policies we have found have been through Zander.
The peace of mind it will bring is well worth the cost.
4 – Set up your Will
As immortal as I feel sometimes I know that the unexpected can happen. While this isn’t the funnest or even joyful thing to do it’s definitely necessary. You want the best for this new baby, make sure you’re ready to prepare that for them.
5 – Start Budgeting with the Added Baby Costs
Now you’re going to put it all together and start budgeting with these added baby costs.
Your budget may look a little different for the next few months as you financially prepare for a baby, but it will be well worth it in the end.
If you don’t have a regular monthly budget then you can find out how to set one up here with the Beginner’s Guide to Budgeting.
Step 5 – Relax and Take Time for Yourself
All the prepping and planning can get overwhelming. On top of that you’re growing a little human! Remember to take some time for yourself and enjoy the time you have with your family before it changes.
With so many extra costs it can get a little scary, but now that you have a financial plan for the sweet baby to be you can take a deep breath and trust that you can handle whatever situation comes your way. Messy diaper and all!
Having a baby doesn’t have to be a big, scary cost. Now that you feel a lot more financially prepared for a baby you can start planning on the fun stuff like names and newborn outfits.
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