Thinking of having a baby? A new USDA report might make you think twice. According to data from the U.S. Department of Agriculture, the cost to raise a child from birth to age 18 now costs right about $250,000 — and that’s not including the college fund! Of course, that doesn’t mean everyone in the 99 percent needs to invest in a lifetime supply of birth control just yet. There are plenty of ways to budget and cut costs that will allow you to start the family you’ve always dreamed of:
Assess Current Expenses
How are you currently allocating your income? Mint.com can help you track your spending.
Estimate Future Income
Consider how your income might change after the baby. Will you or your partner stay home part time or full time? Will you take any unpaid parental leave? Will one of you be finishing school? What are the chances you’ll advance in your career?
Estimate Future Expenses
Once you know what your post-baby income will look like, try to estimate new expenses that you’ll be footing, both one-time (maternity clothes, hospital costs, car seat, crib) and ongoing (childcare, food and diapers). Babycenter’s child-cost calculator is a great help in gauging baby costs. Don’t forget to factor in the cost of basic protections like life and disability insurance, which can help ensure your child will still be provided for if a parent dies prematurely or is seriously injured.
Set Financial Priorities
If faced with a choice, would you save for college or purchase a new home? You can set up the 529 plan and contribute monthly toward such goals, then use what’s left for living expenses. Just remember your spending priorities are connected, and the kind of car you drive might affect where you live, which can then affect how much you save for college, how you take vacations, and so on.
If you find that your future expenses with baby exceed your income, you’ll want to look for costs you can cut, such as recurring expenses that require a one-time effort to change like switching to a cheaper cell-phone plan, cutting cable or even moving to an area with cheaper rent. Don’t forget to still save for emergencies, since as a parent you will surely be faced with a few along the way.
Create a Baby Budget
While it may be difficult to fully realize how much you might spend once the baby comes, with some research, you can estimate a budget for the baby. Understand that day care is one of the highest costs associated with having a baby, whether it’s a direct cost incurred by paying someone or a lost salary of a parent who chooses to stay at home. You can prepare for childcare expenses before the baby arrives by determining what you will do about childcare after delivery and understanding the costs associated with that decision. You’ll also want to prepare for feeding expenses, in case breastfeeding doesn’t pan out, as well as the cost of diapers (cloth or disposable), doctor’s visits, and an ongoing supply of clothing as the baby grows.
Be sure and consider where you need to splurge and where you can save. For example: while newborn-size clothes may be irresistible, you can realistically start with 0- to 3-month sizes. And while car seats should always be purchased new, strollers and furniture are often just as good when purchased from a yard sale or second-hand store.
Practice Your Budget
Once you’ve figured out your post-baby budget, start living on it—even before you get pregnant. Take the extra money you save before baby and set it aside for emergencies. The savings cushion will relieve a lot of the financial anxiety that can come with a growing family. As a general rule, try to have cash reserves equaling six months of living expenses.
Save On Necessities
All babies need diapers and clothes, but once baby arrives there are a variety of ways to get these necessities at a lower cost. Coupons are available for store-bought diapers, so start stocking up while you are pregnant. Clothing-swap with friends who have older babies that have outgrown their wardrobes. Check consignment shops that cater to kids, as they often offer gently used brand name clothing and toys at a lower cost. You can even organize a book, movie or toy swap with friends.
Having a child is an exciting but scary step, and money can be a big part of that worry. Just remember that 4 million babies are born in the U.S. each year, and most of their parents adjust just fine to the new costs. After all, if you wait until you feel completely financially ready, you may never have the family you’ve always wanted.