Having a baby impacts your life in a number of ways, but one of the most drastic changes you'll notice as a new parent is your financial status. If you and your partner are expecting a baby, consider the three things mentioned below to financially prepare for your new bundle of joy.
1. Understand Your Health Insurance and Out-of-Pocket Costs
Even an uneventful delivery and healthy baby can set you back tens of thousands of dollars, which is why it's important to understand what your health insurance does and doesn't cover and figure out what out-of-pocket costs you'll be required to pay.
Your first step should be to talk to your health insurance agent about pre-natal and post-natal care costs, and ask for a thorough breakdown of which services are covered and which are not. While it may be too late to change health insurance providers at this point, even if you're unhappy with what your current insurance provider covers, it's still best to go into the situation with your eyes open, and maybe even consider just paying for the entire procedure out-of-pocket. Believe it or not, many hospitals and care providers will significantly reduce your bill if you pay up-front.
2. Compare Pre-Baby and Post-Baby Budgets
To get a good idea of how much a baby will impact your overall budget, it's vital that you sit down and compare your pre-baby and post-baby budgets.
With the help of a financial advisor, you can get a clear picture of what your finances will look like once your baby has arrived, and even take a look in to the next five or even 10 years. If the post-baby budget seems excessive, work with your advisor to find areas in which you can cut down. Perhaps you can invest in cloth diapers, which come with a larger up-front cost than disposables but pay for themselves over time. Or maybe, if one parent will be staying at home for the next few years, consider downsizing from two vehicles to one.
3. Plan for Parental Leave
Unfortunately for new parents in the United States, parental leave isn't all that generous. This means it's absolutely necessary that you sit down to discuss parental leave with your partner months in advance.
If you work for a company in which parental leave is unpaid, consider what you and your partner can be doing now to add to your financial cushion for the time after your baby is born. If your work allows it, you may be able to pick up a few extra shifts here and there, or maybe even volunteer for overtime. If you'll be financially strapped, perhaps consider working a part-time job from home that will provide you with enough extra cash to make it through those few months.
To learn more about how you can financially prepare for big life changes, consult with a financial planning company such as Duff & Associates.