According to Statista, in recent times, around 3.6 million babies are born in the US every year. The birth rate is below replacement, so every new life is an extra reason to celebrate.
However, new parents can’t deny that having an additional mouth to feed can be difficult. This is especially true if one or both parents need to take some time off work to care for the infant.
Here are the ways Virginia parents can rework a budget so that they can take care of their entire families with fewer issues.
Reassess your household income after bringing home a baby
Your household income may be affected by several factors after a new baby arrives, such as:
- Unpaid parental leave
- Reduced working hours
- Temporary career break
- Shift to remote work
So instead of looking at your previous income, calculate your expected monthly take-home pay. If one parent plans on staying home, then work out how much income the household will lose, as well as which expenses will remain unchanged.
Figuring out the above can give you a starting point on how to budget for the next 3-6 months.
Build a new budget around your baby’s recurring expenses
After figuring out your new income, the next step is identifying the recurring expenses of raising a baby. They include:
- Diapers
- Wipes
- Formula
- Feeding supplies
- Clothing
- Routine medical appointments
These may seem like small costs at first, but when you add them up, it can be a significant amount.
To be smarter about spending, you should separate essential expenses from occasional purchases, such as toys or upgraded baby equipment. In addition, review your current household expenses to see where you can cut some costs.
Compare childcare costs with the income it allows you to earn
One of the biggest expenses you’ll face as a parent is childcare, especially if both parents plan on going back to work. According to TOOTRiS, the average cost of child care in Virginia ranges from $481 to $1,400 per month, depending on the age of your child.
When comparing your options, consider:
- Tuition
- Registration fees
- Deposits
- Extended-hour charges
- Potential costs of care not on regular days
Compare these costs against your take-home pay to figure out if things will be tight or not. If they will be, look into employer childcare benefits and dependent care flexible spending accounts.
Update your health insurance budget for your growing family
After having a baby, your health coverage needs may change, which will then affect your monthly insurance costs. No matter what kind of coverage you have, you should understand how adding a dependent can affect:
- Premiums
- Deductibles
- Copayments
- Out-of-pocket maximums
There may be expenses that insurance won’t fully cover, either, such as prescriptions and medical equipment, so don’t forget to budget for those, too. You should also check enrollment deadlines and the documentation you need to add your new baby to coverage.
Balance emergency savings against your new financial responsibilities
Naturally, a bigger household will need a larger emergency fund. If you already have one, then reevaluate whether it’ll still cover a few months of expenses now that you have a little one.
Other things to calculate are:
- Housing
- Food
- Utilities
- Insurance
- Childcare
- Minimum debt payments
Although having 3-6 months of emergency funds can be good, each family will be different. For instance, if you’re relying on only one income, it might be better to have a larger cushion.
Reevaluate which family members depend on each income
No matter how much each of you earns, should one parent temporarily lose that income, it affects the household differently. Even if one parent stays home to take care of the child, you should still include their financial contributions. For example, in addition to caring for the baby, they may cook, clean, and take care of administrative work, which is all unpaid “work” still.
Take a look at how long your family could realistically survive on one income. In addition, consider whether relatives or close friends could provide temporary support. Your answers are important in determining whether you need additional financial protection.
Review life insurance as part of your family’s financial protection
You never know what could happen in life, so you want your family to be well taken care of, even after you’re gone. Start by calculating the resources your household would need if either parent passed away, including:
- Mortgage or rent payments
- Childcare
- Daily living expenses
- Outstanding debts
- Future education costs
Subtract your current savings, relevant employer-provided benefits, and any life insurance you already have. The result is a great starting point for estimating how much coverage you need.
Compare standard term life insurance with return-of-premium coverage
After you’ve estimated your family’s coverage needs, the next step is comparing the available policies. With standard term life insurance, you’ll get coverage for a specified period, and survivors will be paid a death benefit if the insured person dies while the policy is active.
Otherwise, if you survive the term, the policy ends without a refund of the premiums paid. You can avoid this with return-of-premium life insurance. A household comparing term policies can weigh the higher premiums of return-of-premium life insurance against standard term coverage to decide whether a refund at the end of the term justifies the added cost.
Make room for long-term goals without undermining today’s budget
The last step is to revisit your longer-term financial goals. Some common ones include:
- Paying down high-interest debt
- Contributing to retirement accounts
- Saving for a home
- Setting aside money for future education expenses
The good news is that you don’t have to pursue each one aggressively, nor do you have to do so simultaneously. The smarter thing to do is to rank them by importance and urgency.
Plus, you should have a quarterly budget review. It’s likely that your household’s needs will evolve, so your financial plans should change alongside them.
Have a solid budget as you grow your family
You’ve probably already financially prepared to have a baby, but you need to look beyond their first few years. When you know what your rough family budget is, you’ll have a smoother time financially, and as a result, you can focus on making memories with your loved ones.
This content is provided for informational purposes only and is not a substitute for professional advice. AFP editorial staff were not involved in the creation of this content.
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