Becoming a new parent brings joy and excitement, but it can also cause a little panic especially when you start thinking of the baby’s budget and this is normal. A recent study shows that in the first year of the baby’s life, the cost of raising one can run up to $21,000 and it triples when you raise them to adulthood.
Here are some of the things that you can expect and how you can work on your budget for your baby until they reach adulthood. However, being a parent will keep your money in flux for years and it will be very challenging. You just need to be calm about it, especially when you are budgeting, the key is to have equal parts on flexibility and preparedness.
You must stick to your budgeting basics
Your income and your expenses will change once you have a child, but your approach on budgeting does not have to. You can still stretch your income to cover your debts and your expenses plus you can add some to your savings.
l 50 percent of your money should be allocated for needs like your minimum loan payments, household bills, diapers, formula and other expenses for child care.
l 30 percent of your money should be allocated for financial wants
l 20 percent of your money should be allocated for payments on toxic debts, savings like credit card balances and payday loans.
This is the goal when it comes to splitting your budget, you can also find that your needs can take more than 50 percent of your total income and it is not uncommon for middle class families, epecially those with a child, but that is okay. The main goal is that you track all of your spending and you should aim for improvement.
You should determine all of your financial priorities
Parents often rush to create savings accounts for the education of their child, especially the new ones, and that is a great goal, however it should not come in a cost of your financial security, whether it be current or future. You can always borrow money for your child’s college, but you can’t borrow money for your retirement.
Once you have a bit of money to cover expenses that are not expected, your priorities of your finances should be in this order:
- ) Savings for your retirement
You must set aside at least 1.5 percent of your total income, but you must save at least enough money to get an employer match on your form called 401(k), especially the place where you work offers it. It should be a part of your retirement calculator.
- ) Debt payments
You must pay off your debts before anything else. You should balance your credit cards, title loans, payday loans and anything that may cost you daily and those that prevent you from being able to focus on your other priorities.
- ) Place your money to a fund for emergencies
You must have a fund for emergencies, and you must aim enough to be able to replace your months of income.
You must practice living within your means
Your monthly income will change after you have your baby, you must practice living on less so that you can save more.
Anticipate all of the changes on your expenses
You must estimate the amount of money that that you will spend on your first year of having a baby. You can get quotes from a child care center if you have plans of putting your baby in a child care center. You can also research different ways to reduce your costs, you can compare the total cost of having a child to all of the working parents’ plans on health insurance.
It is also best to buy second hands, so you can save money. If you are going to have a baby shower, you can request for items that you and your baby can use. You should also anticipate on how long all of the costs will last. There are one time expenses, like strollers and cribs, but there are those that will continue for months, and even years, like daycare.
You should also practice reviewing your expenses, the past and the upcoming ones, so that you can be prepared and so that you can find some space in your overall budget.