So, you have become parents for the very first time? You must be in an emotional churn – excited, over the moon, apprehensive, nervous, and sometimes just plain scared. Especially the earlier financial plan, budget and saving you had, must expand to make room for the new child, his/her goals, etc.. Don’t worry, you are not the first or only ones to face this roller-coaster ride. It is natural for new parents to feel a little out of depth. It takes a while to adjust to the new reality.
Generally, the most pressing concern for new parents is money. The arrival of the first-born is exhilarating on an emotional level, but daunting from a financial perspective. Parenthood does not come cheap. For a middle-class couple, raising even one child properly can assume nightmarish proportions. Right from medical bills, to baby shopping, to nannies, everything is expensive.
The way out is to start budgeting for the new family. Make a financial plan, and stick to it. It will give you visibility into your expenses, and help you pull back if you are over-spending.
Here are some tips to help you stay on course vis-a-vis your finances.
Figure out Your Income
Figure out your monthly income. This does not mean just your combined salary. It includes interest on any fixed deposits, rental income, funds you might have received as gifts from your parents, your spouse’s parents, or friends, some money that might be lying around in long-forgotten accounts, and so forth.
Find ways to supplement your income and make room for a lot of new stuff as well. The best way to do that is to find the unnecessary stuff lying around at home and put them up for sale. After all, your house has just that much space. It is also a good practice from Vaastu point of view, getting rid of broken and unuseful stuff with a lot of negative vibes, to make room for new and positive stuff. The best part, it is financially rewarding too.
Remember your budget can only be as high as your income, so income is one of the most important components in budgeting exercise.
Review Your Spending
You need to review your spending as a couple. You cannot start budgeting for the new arrival until and unless you know what your present expenses look like. Tracking your spending can help you determine whether you are spending on the right kind of things. You might assume you know what you are spending on. “I have a rough idea,” is what most of us think.
Say bye bye to the “rough” idea and get a clear picture instead. Write down every expense head. Chances are you will be surprised at how much you spend on things that are not really necessary. Expenditure-tracking is often an eye-opening experience, do it once in a while with your partner.
Budget Your Baby Expenses
Having a child will throw your finances into a tizzy. Right from nappies and diapers to cribs and strollers and feeding bottles and medical care for the child, a host of new expenses will suddenly emerge. You will definitely need to prepare a new budget, keeping in mind your present monthly expenses, and the projected expenses. It might be a good idea to rope in your family members and friends for leftover usable supplies.
Budget for An Emergency Plan
You might already have a contingency fund to take care of those emergencies that can crop up anytime. But now you need to revisit it as you have to be prepared for emergencies that might strike three people, not just two. Assess your present living expenses, add the additional expenses you will incur now that you have a baby, and then put aside a sum that is enough to take care of at least four-to-six months of your expenses.
Both partners should put away some amount every month in the emergency fund, which should be separate from your savings account and other investments. Additionally, you need to ensure that your baby is covered under your family health plan as soon has he/she becomes eligible for it.
Minimum eligibility age to include your kid is 16 days for inclusion in your family health plan.
Review your Budget
Reviewing the budget does not mean you create a new budget structure every month. Though, you should create a new budget each month to accommodate the special expenses for that month. But you will only need to bring a major change in the following scenarios:
- Your Income has changed (up or down)
- You have a new dependent (childbirth may require one of you to stay at home)
- You are shifting to a new city (some fixed expenses )
To conclude, first-time parents have a lot of re-thinking to do. The best way to start budgeting for the baby is to stay calm and be practical about expenses. You can either panic or prepare for the changing times.