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Preparing for baby should come with an operating manual.
So many decisions to make, so little time. Within the next 9 months, you’ll have to select a name for your baby, find a health care provider, schedule routine doctor visits, register items for your baby registry, enroll in parenting classes and the list goes on.
When I learned that I was pregnant, my thoughts immediately shifted towards my finances. What effect would this new baby have on my finances? I am working on a job where I feel overworked and underpaid. So, how will I be able to afford the additional costs that come along with becoming a parent?!
Being a mom is challenging but it’s very rewarding. I’m slowly learning that mistakes will happen and it’s apart of the parenting process.
If you’re reading this blog post, you are already one step in the right direction. Initially, it felt like I had a grasp on everything. Once baby arrived, reality kicked in and I realized I fell behind. The good news is I’ve been able to recover and still am recovering.
This blog post is guide of the three money moves & mistakes that I made as a new mommy. I hope these tips guide you as you financially prepare for baby’s arrival.
Money Move #1 – Planning Ahead/Establishing A Baby Fund
Planning ahead prior to baby’s arrival is a great way to avoid making bigger mistakes after they arrive. You should sit down with your partner and develop a spending budget.
A few years ago, I decided to participate in the 52 week challenge. This challenge is a quick and easy way to establish a savings account. The first week of the challenge, you would deposit $1 into your savings account. The following week, you deposit $2. The next week, you deposit $3 and so on. The point is that by the end of the 52 weeks, you would have $1378.00. I committed to this savings plan for 4 years. At the time of my pregnancy, I had $5,000 sitting in this account.
My partner and I decided that we would use the funds in this account while being out on maternity leave.
Money Mistake #1- Overspending on Baby Gear
We planned ahead and established a baby fund, however we did what all new parents would do. We overspent on baby gear. Initially, we refrained from spending. However as the pregnancy progressed, the excitement of becoming a new parent overshadowed EVERYTHING and we spent almost all of our money that was sitting in the savings account.
Fortunately, everything that we purchased could be found on sale/clearance rack. Wait, did you notice how I justified why I overspent?! LOL – Mistake #1: Justifying a purchase that you KNOW you had no business completing. If you set a goal not to spend STICK TO IT. NO QUESTIONS ASKED!
I found a bedroom set at Buy Buy Baby that I just had to have. We purchased the crib and the matching dresser. We paid for it in cash. For the first year, my baby slept in his crib probably 15 times. Looking back, this was an item that I did not have to purchase on a whim. In fact, I should’ve waited to see if I could’ve gotten a deeper discount, especially since he just started regularly sleeping in his crib (one year later).
Money Move #2 – Adjust Your Budget
Anticipate your expenses!
Now with baby in the equation, it’s important to adjust your budget. Start making revisions now as opposed to starting later. Think about it this way, the more you cut from your budget today equates to more cash you’ll have in the future to spend.
According to the United States Department of Agriculture, a middle income family will spend approximately $12,980 annually per child. Over the course of eighteen years, that is $233,640.00.
One expense to anticipate early on is daycare fees. If you aren’t aware by now, the cost of daycare is astronomically high. If you are planning to enrolling a newborn into a daycare, be prepared to pay $235+ a week (That equals $900 a month). This fee does not include the enrollment fee, annual fee or waiting list fee.
If you’re living on a tight budget, make adjustments where you can. If you cant make any at this time, hold off and revisit in a few months. Develop a plan and start with small goals.
Money Mistake #2 – Mismanaged Bills and Late Fees
I was induced three weeks early. I had to have my baby early due to a condition called cholestasis. To read more about my labor and delivery story, click here.
I delivered my son on 06/29, I was not discharged from the hospital until 07/02. My bills are usually due on the 30th or the 1st or 2nd of the following month. Since I was in the hospital, I completely forgot my bills which resulted in me incurring late fees. I hate late fees..ugh! Fortunately, I called the card company, informed them of the situation and they waived the fees as a courtesy.
I’m not a fan of automatic payment options but in this situation, I should have used it for a few months so that I wouldn’t have to worry about remembering to pay my bills. To all of my expectant parents out there – develop a plan well before your due date. Use the automatic payment option. This option will be beneficial for you in as your entire focus will be centered around the baby for the first few months.
Money Move #3 – Taking Advantage of the Flexible Spending Account (FSA)
When I found out I was pregnant, it was during my employer’s open enrollment period. I already used a flexible spending account but I decided to take a little more out to pay for doctor fees.
My FSA covered the copays for my doctor’s visit, the cost of the hospital stay and the anesthesia bill. Having the flexible spending account was great because I did not have to worry about paying out of pocket for these expenses or setting up a payment plan.
What is a Flexible Spending Account?
According to Healthcare.gov, Flexible Spending Accounts are arrangements through your employer that allows you to pay for many out-of-pocket medical expenses with tax-free dollars. Allowed expenses include insurance co-payments and deductibles, qualified prescription drugs, insulin, and medical devices.
When you enroll in an FSA during open enrollment., you can decide how much money to place in an FSA. I believe the maximum allowable amount with my employer is $3,000. This money comes directly from your paycheck with pre-tax dollars. If there is any money is left at the end of the benefit year, you can either carry over a certain dollar amount up to $500 or you can get an extension on your account to spend the remaining funds.
Keep in mind, if you do not use the money that was placed on your FSA you will lose it.
Money Mistake #3 – Thoroughly Review Your Company’s Maternity Policy
Sit down with your employer and discuss the maternity leave policy.
I should’ve asked more questions when discussing maternity leave options. In our initial conversation, the benefit analyst informed me that I was eligible for Family and Medical Leave Act (FMLA) and I may take up to 60 working days with my position guaranteed. However, FMLA will not pay out my salary. Since I was eligible for Short Term Disability, I would receive 60% of my salary during the time that I was out.
While on leave, I did not receive my short term disability payout until 30 days before I returned to work.
Upon returning from leave, in fact it was the day before I was scheduled to get my first paycheck The benefits analyst called me and said that she forgot to mention a few things to me. Long story short, I had to repaying my portion of health benefits from the time I was out as well as pay the portion for the current period. My first paycheck and subsequent checks were $650.00 for two weeks of pay. My pay remained at this amount for six months. This resulted in a huge financial setback for my family and this is the reason why I accumulated so much credit card debt.
I know now that I should have prepared a list of questions for the benefits department. I asked other mothers in my department how they dealt with this but I did not get good feedback as I was the first person in my office to have a baby in 15 years.
Don’t make one visit and assume all is good. Visit them early in your pregnancy and ask EVERY single question you can before you deliver.
Now that you have reviewed my money moves and mistakes, what move will you make? Take a stance and follow the money moves, I can guarantee that it would make like so easy. Let’s chat about it, comment below. I’d love to hear from you.
