Every year in August, the U.S. Department of Agriculture releases its annual report, letting us know how much it costs to raise a child from birth to adulthood. Last year, the average cost was $245,340, for food, shelter, education and all other expenses. When it comes out again this year, it's a pretty safe bet the number will be even higher and more frightening.
Babies are expensive. They're also loud and demanding, and if they weren't so darn cute and cuddly, you may well wonder why people become parents.
So if you're expecting, congratulations. You really are in for a wonderful ride, but on the downside, it's an expensive trip. But like any journey, if you plan ahead , you may have a smoother ride. These are just a few of the many things you'll want to consider when it comes to baby-proofing your budget.
Budget for hidden baby costs. You know the obvious costs. You're going to be spending money on diapers. If you aren't breastfeeding, or aren't sure if you will, you'll be outlaying money on baby formula. You have furniture to buy. Clothes. A car seat. If you haven't already, you'll want to get life insurance, or possibly get more. If you're able to swing it, you should start a 529 plan for your baby and start diverting at least a little money every month to help pay for his or her college.
But don't forget to budget for those hidden costs. Patty Cathey, a financial advisor and president of Smart Retirement in Denver, Colorado, observes that while new parents often neglect to think about how those frequent smaller expenses can really decimate your budget .She says these can include:
Co-pays. During your baby's first year, you'll be visiting the pediatrician a lot. "A baby will go to the doctor an average of six to 12 times," she says. "Co-pays can range from $10 to $30 per visit. The result, hundreds of extra dollars out of your pocket."
Restaurant food. There are going to be many times during the first year, and especially in those first months, when you won't want to cook, and you'll probably order in or go out to eat. That's understandable, and you should do that, Cathey says. She also adds: "For many new parents, it's not part of the baby budget. But it should be."
Diapers . No, as noted, you aren't going to forget about diapers in your budget, but Cathey says parents often underestimate how many diapers they'll need. "In just that first year, a newborn can go through 2,700 diapers," she says. (That sounds like madness, but do the math. That's about seven diapers a day.) "You can blow out a diaper budget in no time," she says.
When making purchases, think used and cheap. There are some caveats to this advice. As a general rule, you should never buy or borrow a used crib. In fact, all cribs manufactured and sold after June 28, 2011, were mandated to comply with new and improved federal safety standards, so if you were to buy or get a hand-me-down crib from, say, 2009, it may not even be up to today's standards. When it comes to car seats and strollers and any other item that's supposed to keep your baby safe, obviously, purchase the best product you can afford.
But if you're in the market for things like baby books and baby toys, there's no shame in embracing your inner cheapskate.
"Craigslist is a wonderful resource for second-hand baby items, just make sure to check item numbers to make sure the products weren't part of a recall," says Abbie Schiller, who runs TheMotherCo.com, a website devoted to parents who want to raise good people. "So are parenting Yahoo and Google groups – there are plenty of parents to offer items for free. Friends are also a wonderful resource for gear, clothes and other items."
You can definitely get away with being thrifty on baby clothes. "Especially during the infant months when they outgrow things quickly," says Michael Clark, a certified financial planner in Orlando, Florida. He says that one of his clients is a big fan of the website ConsignmentMommies.com. And in your own neighborhood, there are probably consignment shops, which is basically a fancy term for secondhand store.
Think about child care costs . Nobody needs to tell you this. One of the first things you probably began thinking about, when you realized you were expecting, was how this would impact you and your spouse's careers.
But if one of you is planning to stay home with your child, Cathey suggests you start acting like the changes are effective immediately.
Sure, it means getting the financial pain started early, but you can pocket that second income while you've got it, or invest it in baby purchases, and at least by the time the baby arrives, you'll be used to living off a certain amount of income.
Keep tinkering with your budget. In the beginning, you may have little choice but to guess how much you're going to spend a month with a new mouth to feed, and hope that what you spend is close to what you thought you'd spend.
But quickly, you'll want to revamp your budget, says Julia Kline, a Chicago-based sales trainer and marketing consultant.
Even though she specializes in helping business with their sales and money issues, Kline has some useful advice for households that want to keep their own budgets in line.
"Don't make up a number that you think you can or should spend and then try to force yourself into that ill-fitting shoe. It will never work, long-term," Kline says.
Instead, she suggests you begin tracking your spending and then three to six months after your baby is born, you can designate what you're spending on clothes, books, toys and such for your baby.
"Many people's budget problems are the result of impulse buying. And impulse buying often comes as the result of stress and being overwhelmed. If you have a more realistic budget, you'll be less stressed and you'll splurge less often," Kline says.
In other words, your baby will eventually be a toddler and before you know it, learning how to use an iPad and riding a bike. So naturally, you can't expect your budget to remain the same , too. It's just a fact of life. Babies and budgets – they grow up so fast.