My husband and I are expecting our first child this summer. We've been working hard to be as prepared as we can. Our schedules have changed as we now have doctor appointments and ultrasounds. We've been reading parenting books and asking family and friends for their experiences and advice.
Besides the lifestyle and emotional adjustments, we realized that there have to be some financial changes for us to keep on track. I want to share some of the preparations we've made in hopes it can help other parents-to-be.
Give yourself time to reach your goals
If we changed everything the moment we found out we're going to be parents, we'd be even more crazy than the usual insanity new parents go through. For many parents, their baby's due date is a timeline to get certain goals met.
However, parents shouldn't panic if they don't make a goal. We have some goals we want to meet before the baby arrives but there are also some goals, such as college savings, that we'll focus on after birth. Having realistic yet challenging goals has worked for us so we are going to continue with that strategy.
Reduce your income needs
We weren't anticipating having a child at this point, but our decision to try to live as a one income family (even though we have two incomes) has been a tremendous help with this good news. We're still paying down our last nonmortgage debt while watching the rest of our monthly expenses.
Having a baby can be a big motivation in keeping expenses reasonable. Because we're both going to be working less for a portion of the year, we want to make sure we plan accordingly. I'm increasing my workload now to build the business up so we won't have to dip into savings as much later on this year.
Saving for the little one(s)
I asked some parents how kids affected their finances and most said that if you're fiscally responsible, kids aren't the money vacuum people think they are. Frugality has allowed them to give their kids some wonderful opportunities without sacrificing their long term finances such as retirement funds. It does take work, but it's doable.
We also have about three months worth of living expenses socked away in our emergency fund. For us, we want to give ourselves a little more buffer in anticipation of the baby so we want to increase our emergency savings to $10,000 by the end of June.
If you're a new parent-to-be, try avoiding baby sites until you've spoken to loved ones about their baby expenses. Talking with family and friends, we saw for ourselves that the 'must-have lists' posted online by stores and baby sites are usually bloated.
A friend pointed out that we should hold off on some purchases until the baby is here. She suggested borrowing some items from friends and seeing if our baby likes them. If they do, great, if not, then we wouldn't have wasted that money. We've also talked to friends about baby clothes and other gently used items that they'd love to get out of their house.
While we will be spending money on our child, we're still going to practice frugality. Children and all their stuff can be as expensive as we can imagine or it can be a reasonable expense that we'll adjust our budget to accommodate.
After we got married and bought a house, we decided we needed term life insurance. Because we have our mortgage and a student loan left, we got a policy that would cover for both debts in the event one of us dies. As we're both in good health, the policies' premiums are relatively low.
But having a child means we have to re-evaluate the coverage we have. We have to sit down and discuss how much we'd like to increase for the coverage. I'm thinking that we may want to have enough money to cover living expenses for a few years.
I would really love to get your personal stories. How many of you have already made the transition to being parents? How have you've prepared financially? What has been the hardest adjustment? What has been the easiest?
Elle Martinez helps families achieve financial freedom by sharing tips for reducing debt and building freelance income over at CoupleMoney.com.