Food and fuel prices are creeping ever higher, the stock market and home values are in decline, unemployment numbers are getting scary -- and you’re having a baby in this mess? Well, yes! But take heart: even in the most difficult of economies, you can safeguard your growing family with a sound financial approach.
Slow down on start-up costs
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It’s easy to get starry-eyed and snap up all the fabulous infant and motherhood products for sale, but before your credit card statement swells larger than your belly, take a spending break. In today’s financial environment, random splurging is not recommended. Pare your shopping list to the essentials, and then work up to luxuries. Babies require remarkably little in the beginning: a few blankets, a dozen or so onesies, a safe place to sleep, and a whole lot of love (which is still free). Before you buy, carefully research the best price for major purchases like cribs and strollers, ask friends and family members to donate gently used items, and put the more opulent items on your baby shower registry.
Review your benefits and secure your job
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Returning to work after your baby is born? A little planning goes a long way:
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Know the percentage of your income short-term disability insurance will cover. It’s typically about 60 percent of a paycheck for up to six weeks, with an entire week of no pay before benefits begin.
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Read your employee handbook for detailed information about your company’s policy regarding maternity leave. If the answers aren’t clear, schedule a sit-down with your human resources department.
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Understand your rights. If you’d like to extend your post-labor days off, you may be able to, thanks to the Family and Medical Leave Act. However, in most cases that time will be unpaid, so make sure you have enough in savings to cover the shortfall.
On a positive note, your company may provide some very useful employee benefits. Many offer flexible spending plans, which let you pay for medical and transportation expenses with pretax income. Employee assistance programs can link you to valuable parenting resources or even help you secure childcare. Keep in good standing with your employer, too. Assure your boss that you intend to return, stay focused at work (e.g., resist the urge to interview prospective pediatricians while you’re on the clock), and maintain contact even while you are on leave.
Run the “stay-at-home-mom” numbers
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If your desire is to be a full-time parent, be certain you can afford to drop a paycheck before handing in your resignation. To determine if going from two incomes to one makes sense, do the math. There are a number of excellent online worksheets to use for precise figures, but you can get a decent estimate with this simplified method:
1) List and tally all of your work related costs for the month.
2) Estimate and add in the cost of childcare.
3) Subtract the total from the eliminated paycheck to see where you stand.
For example, let’s say your job’s expenses, from commuting costs to lunches, are about $300 and the nanny you want charges $800. The total for both would be $1,100. Assuming you bring home $2,000, you’d have $900 left over. If you can get by without that cash, great. If not, perhaps you can adjust your lifestyle to make it work. On the other hand, if childcare alone will cost more than you earn, the decision will be easy.
Recession-proof your budget
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With the cost of essential goods and services on the rise, a variety of emerging new family costs, and a potential decrease in earnings, making the most of every dollar you have right now is critical. Refine and map out your spending plan:
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Reduce waste. List every current monthly expense you have and assess each for whether you truly require or value it. After you identify areas to cut, start snipping.
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Add upcoming expenses. Many parents will need to allot at least a couple of hundred dollars just for baby. New costs include diapers and wipes, clothes, toys, doctor’s co-payments and medications, formula and bottles if you won’t be nursing, perhaps an occasional babysitter…you get the picture.
A couple of crucial caveats to remember when budgeting: first, be conservative with all estimated figures. Second, make saving for emergencies and goals a priority. Set aside a minimum of ten percent of your net income into a rainy-day account.
Increase your income
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Focusing solely on reducing expenses can be draining, and not always possible if you’re already scrimping. Therefore, consider adding to your pool of funds. Perhaps you or your partner can secure a better paying position, get a raise, work slightly longer hours, or obtain a temporary second job. If you will be a stay-at-home parent, caring for another child can bring in considerable cash, or begin a home-based business like consulting, tutoring, pet-care, bookkeeping, or blogging. Maybe returning to the office on a part-time basis will work best. In that case, ask your employer about alternative schedule options. You may even be able to telecommute. Always be open and flexible.
Bottom line
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There is nothing you can do to stabilize this tumultuous economy. It will (eventually) recover on its own. In the meantime, never forget that you have tremendous power over your own financial world. Use it well. Your new child will soon be here, and it’s up to you to create a lifetime of security for your entire family.