How to baby-proof your budget

Having a baby can be expensive — but it doesn’t need to break the bank.

For many, finding out you’re pregnant is one of life’s best moments — and then fear often sets in. With baby expenses and changes in income looming, it’s easy to be daunted by how much babies cost. It’s why formulating a baby budget is so important.

A budget can help you feel in control of your finances at the best of times, and budgeting for baby’s arrival is no different. Here are the steps you can put in place to get your financial house in order before bub arrives.

Step one: plan ahead — if you can

It’s not always possible, as surprises do happen, but if you can it’s a good idea to put a financial plan in place as soon as you find out you’re pregnant.

“If you have the capacity, planning a budget before you have a baby will put you in the best position for when the baby arrives,” suggests Australian Unity’s Head of PFS Business Partnerships and Senior Financial Adviser, Elise Michelmore. “Even if your pregnancy is a surprise, you still have nine months to plan.”

Increasing your savings should be a key aspect of your forward planning. “Before the birth, put aside as much money as possible,” Elise says. “That means reconsidering any unnecessary large discretionary purchases.”

Step two: get crystal clear on your expenses

If you or your partner are taking leave after the baby arrives, your income will probably be reduced for a period of time. Getting a handle on how much you spend can help you to work out how much you need to live off — and where you can make cuts.

The big one is discretionary spending — you might find you swap expensive dinners out for cheaper takeaway nights in, for example.

“Look through your last three month’s bank statements to see what you spend. Then work out what are necessary expenses, such as bills, and what is discretionary spending. You will then be able to understand what your obligations are if you’re living on a reduced income. You can start to put this money aside while you’re pregnant to spend when your baby arrives,” Elise advises.

Step three: estimate how much you need for baby items

Once you know how much you need to live off on a monthly basis, you should figure out how much your baby will cost — both in one-off purchases and ongoing expenses. It’s also worth adding any pre- and post-birth medical costs to the tally.

Of course, you can choose to buy everything new — and this can be surprisingly cost-effective if you are planning on having more than one child — but there are plenty of ways to save money on the basic items. Second-hand sites, such as eBay, Gumtree or Facebook, are your friend, but always make sure you check items for safety. Friends who have already had children can also be a great source of hand-me-downs.

Here are some of the things you’ll need to consider purchasing:

  • cot or cradle
  • car seat
  • pram
  • change table
  • baby sling
  • clothes 
  • nappies and baby wipes
  • baby monitor

While it can be tempting to buy up big, there are lots of products marketed for babies that are not strictly necessary. Babies actually need very little other than to feel warm, loved and safe. And that doesn’t cost a thing.

 Step four: be prepared for changes

Australian couple Jarrod and his partner Honey had their baby, AJ, in October 2018. Jarrod says everything, including his budget, changed when they had a baby. 

“Little things soon add up. You can plan for the types of nappies or bottles you want to use. But if your baby doesn't like them, you need to find something they do,” he advises. 

Cloth nappies are an example. The couple preferred this more environmentally friendly option and set out with good intentions to try cloth nappies, but soon changed their minds. 

Says Jarrod: “The amount our baby needed his nappy changed overnight meant we had to get disposables as well, which we hadn't budgeted for. Also, AJ was breastfed, but there were plenty of times we used a bottle. Plus, we put a lot of trial and error into finding the perfect bottle nipple he preferred. Then just when we thought we’d found it, he outgrew it and we had to start again.”

Jarrod found that this meant they had to put aside money for the unexpected expenses as they cropped up. “This meant we had less in our entertainment budget, but luckily having a baby to look after and play with was entertaining enough.”

Step five: put together your baby budget

Once you understand your own expenses and your baby’s costs, it’s time to prepare your budget for the lead-up to the birth, and for after the baby arrives.

Jarrod recommends adding between 25 percent to 30 percent to your budget when planning for initial costs. “Let's call it baby fat,” he jokes. “For ongoing costs, we found continuing to put away the same amount of money as we were saving pre-baby really helped.”

After your baby is born, there are plenty of ways to lighten the financial load if you’re going to be living on a reduced income for a while.

“If you're entitled to three months’ parental leave, consider having the amount paid over six months to help you budget during that time. If you’re entitled to six months’ leave and you’re taking a year off, you could consider spreading the money over 12 months,” Elise recommends.

It’s also worth speaking to your bank, she adds. “Talk to your financial institution about your options when you go on parental leave. For example, if you have a mortgage, switching from a principle-and-interest loan to an interest-only loan for a year might help to reduce your outgoings temporarily.”

Above all, says Elise, focus on what you can do to support your baby in their first year of life. “It’s different for everybody, but your baby should be your focus.”

Step six: look to the future

When the baby brain fog finally starts to clear, consider thinking about your baby’s future. Starting small but early with a regular savings program can help to pay for bigger-ticket items — like your child’s education — later down the track. Getting financial advice can also help put you on the right path.

Having a baby is one of life’s gifts, and while it often brings a dip in your income levels, there are also too many priceless moments to mention. By baby-proofing your budget, you can be prepared for whatever life throws at you.

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