Little Bundle, Big Bills
April 4th, 2017 by Bunch & Brock
Having a baby is an extraordinary and exciting time. The energetic buzz surrounding a new family member can put a person on cloud nine. The snuggles, the giggles, and each precious moment fills your heart with a kind of warmth that’s hard to describe. It’s also very exhausting to have a new baby and it can be a difficult adjustment, especially if you’re already on a tight budget. According to the U.S. Department of Agriculture, a middle income family can expect to pay more than $233,000 over the first 18 years of the child’s life, which doesn’t include college. Tack on an extra $157,000 to $355,000 for that.
There are ways to make this work though, that don’t include undue stress and guilt. Humans have been raising children since before the days of game consoles and $150 sneakers. Think of it this way: it’s not like you need hundreds of thousands of dollars available the day the child arrives. The research group Hamilton Project estimates that a parent with a bachelor’s degree is likely to make anywhere between $800,000 and $2,000,000 during their careers, and a high school graduate may make approximately $580,000. So, when you consider what’s coming in, what’s going out seems a little more manageable.
Regardless, it’s easy to get caught up in the basic costs of a decent standard of living, especially if you have more than one child or a limited income. For example, the choice to leave a job and stay home with a child can cost a parent to lose precious dollars in retirement and social security savings. If you’re in the planning phase of growing your family, saving money is the best way to avoid the sting of financial strain and potential bankruptcy. To save in the years before getting pregnant, it may be wise to maximize 401Ks or IRAs. This way, if income becomes a cause for concern, you can dial back your contributions for a couple of years without feeling like you’re depriving your retirement savings.
Another thing to do is challenge yourself to live below your means for a while. This isn’t possible for all families, but if both parents are working, try putting away all or part of one person’s income each month. Putting aside $1,000 each month adds up incredibly quickly, and you’ll likely find yourself being able to suddenly afford daycare or preschool when the time comes. Doing this also establishes different spending habits. Another good idea is to delay the purchase of a new home. Moving into a bigger, more expensive home might be a good long-term decision, but a new, larger mortgage payment on top of everything else you have going on usually puts couples on the fast-track to Stressville – and sometimes even bankruptcy.
If you don’t have tons of time to plan, here are some more tips to help you save:
- Instead of buying new equipment such as cribs, swings, toys, and clothes, borrow from friends and family (but be sure to check they are safe to use).
- When buying clothes and toys, stick to mostly gender-neutral colors, so that you can easily re-use the items for future children.
- Sit down and review all the money you have coming in and all the bills you owe. Even putting away just $25 each week from a paycheck adds up to $100 at the end of the month. Do that for a year and you’ve suddenly saved $1,200.
Having a baby should be a joyful experience, and some wise financial decisions can help make that happen. At Bunch & Brock, we know it can be hard to get out of debt and even harder to save, but with more than 35 years of experience in the state of Kentucky, we have helped many people develop the best plan for their situation. To get started, or if you have any questions about this topic, call us at 859-254-5522 or fill out this online form.