Becoming a parent is very exciting…and also terrifying. Raising a small human being can seem like a daunting task for first-time moms and dads but don’t worry. Most inexperienced mommies and daddies learn on the job! And while there are some things you can never prepare for, the financial challenges of looking after a child are worth planning for before they arrive.
Here is our no-nonsense plan for getting your finances in order before you welcome your bundle of joy into the world.
1. Aim for debt-free parenting
As far as reasons to clear up debts go, having a baby is a big one. You don’t want to go into this important phase in your life weighed down by a lot of debt. Before anything else, try to pay off as much as quickly as you can—the sooner you start, the less you’ll have come due date. This will take some of the financial pressure off and put your mind at ease. It will also give you the enthusiasm to start saving and planning for your baby’s future.
2. Become an expert on your spending habits
Put together a complete list of your current monthly expenses, from regular bills and shopping to ordering food and subscription services. Categorize them according to priority: Needs, Wants and Likes to make your spending decisions clearer to yourself. ‘Needs’ are essentials that you must have to survive – for example, electricity and groceries. ‘Wants’ are things that are very important to you but not needed for day-to-day living – for example, a TV streaming service, magazine subscription or getting a takeaway once a week. Your ‘Likes’ are things that may make you happy but you can easily do without, such as impulse buys, trendy outfits and gadgets. Putting down and tracking your spending habits every month will give you a clear idea of where you can cut down to save money.
3. Remember that expenses occur even before birth
Don’t forget to focus on budgeting for the costs that pop up during pregnancy such as doctor’s appointments, prenatal tests and scans, prenatal vitamins and medication and new dietary requirements. Other costs could include transportation (for example, taxis instead of rickshaws or riding a bike), domestic help (in case of illness or recommended bed rest) and bills due to medical emergencies. Giving birth in a hospital or nursing home itself can cost lakhs of rupees. Good health insurance can help ease the load of hospital expenses, however, additional funds should be kept aside for everything else.
4. Account for birthing costs
As mentioned above, giving birth comes with its own set of expenses. Doctor’s costs, room cost, anesthesiologists charges, consultations by lactation experts and pediatricians – different hospitals offer different services and rates. Check with your medical center about the cost of delivery (most will have packages at a few varying price points) so that you are not in for a surprise when your baby arrives. While you may want to have a natural birth without an epidural (pain relief), an emergency cesarean section could be needed, upping your overall bill. Recovery time for both mother and baby will also determine how many days need to be spent at the hospital and you’ll be charged extra for each day there.
5. Pin down your post-baby income
Think about your financial position after your child is born. Are you planning on taking unpaid leave or reducing your work hours after the baby arrives? Are you in the midst of a career change? Do you have any new large EMIs to pay each month? Get a number on your post-baby income so there won’t be any unexpected dips in your bank account once your baby makes their appearance.
6. Plan for baby-specific costs
Once the baby arrives, your expenses will no doubt increase significantly. You may not even realize how much. Think of everything you will require and make an estimate of how much it will cost you each month for at least the year ahead. Remember to include spends on baby essentials such as diapers, bottles, clothes, special washing up liquid, medicines and child care. There are other costs too such as nutritious food for mom and the family, post-birth medical care, baby equipment like a car seat, bouncer, carrier and pram – these one-time purchases can really add up. Get tips from other parents, and overestimate to avoid surprises. And don’t forget to include investing in the baby’s future and protecting them from the unexpected, such as with health or life insurance. Understanding what these new insurance and savings needs will cost is crucial to your family’s financial plan.
7. Ask for support
Moms and dads often need to take a few days off (excluding maternity/paternity leave) in the first 6 to 12 months of having a baby for doctor’s appointments or illness. This may affect your paycheck if you’ve used up all your leave. Support from extended family, friends and workplaces can make all the difference to new parents so don’t be shy to ask for help and understanding when you need it. It could save you money and a lot of stress.
8. Create the ultimate baby budget
Once you have figured out the numbers, you’re ready to put your post-baby income and outgoings together and see if the books balance. If not, think about how you could spend less by cutting expenses from your ‘Likes’. If necessary, move on to your ‘Wants’ and rethink your child-rearing costs. For example, could support from friends and relatives reduce childcare costs? Maybe you could buy baby equipment second hand? If you still find yourself short, consider whether you and your partner could grow your income through reduced parental leave, increased hours or a career change.
9. Start using your budget now!
Time for a trial run. Even if your baby’s due date is several months away, spending like you are already a parent will help you get used to your budget and give you the flexibility to make adjustments before you are immersed in the hectic world of parenting.
