We all know that having a baby will be expensive. However, despite knowing this, it is something that many of us do not really prepare for. It is well worth thinking about though as once the baby arrives, there will not be the time or energy for planning finances and you could end up getting into debt almost by mistake. It is therefore wise to do some work beforehand to ensure that this does not happen.
Calculate baby costs (lump sum and regular)
It can be a good idea to start by calculating how much the baby will cost. You will need to think about short term expenses such as car seat, cot, high chair, Moses basket, nappies, feeding aids, maternity wear etc. You may also need a larger car and / or a larger home. You may also need to think of more long term expenses such as the cost of clothing throughout the time that they are dependent on you, all their food, travel expenses, family holidays, gifts and other luxuries. However, concentrating on the shorter term is probably more worthwhile to start with. It may be worth considering whether there could be costs of fertility treatment to factor in as well.
Look at current income and spending
It is now worth taking a look at your current income and spending amounts. Think about whether you are coping financially or not. You need to consider how you will manage to cover the expenses of the child as well as your own. You may be managing well at the moment and this is great, but you need to consider whether this will continue. If you are not managing now, then you will have some work to do on your finances in order to budget for the baby.
Look at ways to cut back on spending
It is always wise to see whether there are any ways that you can cut down on your spending. In some areas you will cut down when the baby comes along anyway, such as going out in the evenings and for meals. You could start to cut down right away, so you get used to it and you will save money too. It is wise to look at the spending that you do on luxury items such as gifts, hobbies, jewellery and things like that to see if you can cut down and save money. It is also wise to start comparing prices and switching suppliers so that you can save money that way as well.
Consider ways to boost income
It can be worth thinking of ways to boost your income as well. Once the baby is born, one or both of you may work part-time or give up work to look after them and so income could be reduced. Think about whether there are any ways to boost income in the meantime or whether there is a way for whoever is working to earn more money. It could be that whoever is providing childcare could do some work at the same time from home. It could be that both partners try to get better paid jobs and can therefore earn more before the baby comes along and then see whether those jobs can become part-time if needed. It is important though to make sure that if you do change jobs that you will still eligible for maternity and paternity leave.
Pre-birth saving plan
It is wise to come up with an idea on how much you will save up each month before the baby comes along. If you have already looked at your current finances and thought of ways to spend less and/or earn more then you should have an idea of how much spare money you will have each month. It is best to schedule a direct debit to pay a certain amount of money into a savings account each month just after you have been paid so that you can make sure that you do save it, rather than spending it by mistake during the month.
Consider any income changes post birth
It is worth thinking about how your income might change after the birth. You may decide that you will both continue working but you will have to find someone to look after the baby while you are at work. Even if you work from home and think that you will be able to manage, you need to consider whether you really will be able to manage looking after a baby and doing your work. It will depend on what you are doing and how much time it takes up. If you are going to have a significant change in income, you need to consider how you will cope with that and whether you will need to make any changes to your spending in order to manage.
Calculate how long savings will last
It is worth working out how long your savings will last so that you can calculate when you may need to consider increasing your income. Hopefully this might be when the child has started school so there is free care available.