Deciding to start a family can be the biggest decision you will ever make. When is the right time? Can we afford to live on one wage? Will we be good parents? It is a huge responsibility and life changing to say the least!
I am a mother of two adorable toddlers (if I do say so myself) and it wasn't until I became a mum that I truly understood why people say 'you can never prepare enough for a baby'.
In my case, we prepared financially very well. In fact, I had decided not to return to work and we knew we could afford our lifestyle on the income and assets we had at the time. Only problem was, six weeks after our daughter was born, we lost nearly everything due to a corporate collapse and the global financial crisis! So the best laid plans can often go astray and I'm living proof, I spent the next three years with two toddlers, working and running a business! So much for my plans of long mothers' group lunches and play dates at the park!
For most people, finance is far from their mind when they first learn they are having a baby, but at some stage you will need to address time off work and how you are going to afford a baby and young family? The first place to start is to get an idea of how much your new bundle of joy will add to the family budget in the first year. There are so many costs, both before and after the baby is born. According to a study by the Australian Institute of Family Studies, your first child costs between $3,000 and $13,000 in the first year alone!
Construct your original budget for the next 12-24 months (if you are already pregnant), depending on when you think you will need or want to return to work. Calculate a rough idea of all the medical expenses, maternity clothes, baby clothes, nursery furniture, car seat, prams etc – this list can be endless, but for the most part it will give you a rough idea on what you can spend on each item. It all adds up very quickly and can be quite daunting but don't let it get to you, there is exciting changes ahead and you know you can make it work!
Then, decide how much time you can afford to take off. This will generally be the amount of time you can survive on one wage, your savings or on Centrelink benefits or when you feel you would like to return to work. This loss of income forms a crucial part of your considerations as most new mothers don't have the luxury of choosing to stay at home for long periods of time as the choice to return to work is made for them with unyielding expenses and high costs of living.
When you are pregnant, getting your debt levels down becomes a priority, remember the gift you are giving to your new family is financial stability. The more control you have over your finances, the better decisions you are able to make in relation to work, housing and living costs.
Most new couples baulk at the cost of a new baby and all the expense that comes with it. Please be reassured that many people bring their new babies into the world without huge expense.
Some ideas to make it a little easier and more affordable could be to:
- Ask family and friends who would normally buy you a baby present to contribute to the large ticket items (such as cots and prams).
- If your friends organise a baby shower for your, suggest a list of little items you are yet to buy that they can provide as gifts – baby wraps, wipes, singlets and bath products are all fantastic gifts for a new parent. Perhaps creating a register at your local baby store too.
- Get the best possible bargains on baby clothing and equipment. Shop around and take your time because the big department stores have baby sales numerous times a year and you can find a lot of nearly new items on websites such as Ebay or Gumtree. Alternatively, you can be creative and make a baby change table out of an old chest of draws or table, as long as you have the non-roll changing mattress you can save hundreds on a specialised change table. I know genius new mums who scoured garage sales and found antique cots and furniture, scrubbed them and gave them a coat of non-toxic paint and set up the most amazing nursery – and all without breaking the bank!
- While you are on the internet, sell items you no longer want or need to create that much needed cash to purchase baby items – garage sales, eBay, consignment shops etc.
- Ensure you are receiving all the government benefits, rebates and subsidies you are entitled to as a new parent. The baby bonus is now made up of 13 fortnightly instalments (totalling $5,100 approximately) or maternity leave instead of the baby bonus if you worked in the 10 months prior to your child's birth.
- Perhaps hiring a capsule from your local baby store or Ambulance Station and waiting until your baby is old enough for a car seat, that way you can save on buying two different car seats (or an expensive dual seat) and the capsule lets your sleeping baby stay resting.
- Babies grow out of their clothes quickly so consider buying for comfort rather than the expensive fashionable baby clothes. You can never go wrong with Bonds Wondersuits!
- Consider breastfeeding (if you are able) rather than expensive baby formula
- Consider your insurance needs, especially life and private health insurance which all change when you become a parent. While we are on the paperwork side of things, make sure you update your Wills and Powers of Attorney – it is crucial you put in writing your instructions on who is to be the guardian to your precious baby should something unfortunately happen to the parents.
- Resist the urge to buy a bigger car or home, as long as you have a reliable vehicle and good back seat you good to go!
- As your baby gets older, consider making your own baby food – buying fresh fruit and veges from the local markets, cooking and then blending – you can freeze the blended mix in ice-cube trays and pop a few out at each meal.
While many things are out of your control (like when you will actually fall pregnant and what sex your baby will be), other aspects like your personal finance can be easy to control when planning for your new arrival, the trick is to start early!
As with all good planning, it is a matter of ensuring you are not spending more than you are earning, and in the case of preparing for a baby, you need to include saving in the mix too!
One of the early benefits to being pregnant is a few of life's luxuries get put on hold such as coffee, wine and fancy cheese! For some, this poses a great saving each week and even your daily coffee run can save you up to $35 a week! Eating at home, watching DVDs instead of the movie theatre are all great opportunities to save. In addition, many women find they save money on regular nail and hair appointments as they choose to refrain from chemicals or have truly beautiful nails and hair during pregnancy so no need for professionals.
In tackling the issue of how to afford a baby, here are my FIVE top tips for new and impending parents:
- Budget for life with a baby. It's easiest to start with an excel spread-sheet budget planner (available at www.equisgroup.com.au or www.moneysmart.gov.au). Get out your last three credit card and saving account statements to work out where the money is going (spending). Add in the incidentals you don't record on statements (cash withdrawals etc) and tally how much you think you spend each month. If you have a surplus, then you should either have a bank account with savings, or you can see where that surplus money goes (ie. your mortgage). If you don't have a surplus, you need to start now to reduce your expenditure, reduce your debts and budget for your future.
- Pay off your credit cards while you have two incomes. Try and pay down your credit cards whilst you still have a reasonable income, it is too hard when you are meeting the demands of motherhood and surviving on one wage. Consolidate debts if you need to, speak to the banks about your loans and see if they can provide some advice on how best to tackle your situation. Sometimes your lenders will suggest switching your mortgage to interest only for a year two to assist with cash flow. This is a great idea in leaner times (such as when you are on one income) but it is always recommended to be paying principal and interest on your mortgage over time to get that debt paid off.
- Live on one wage as a test before bub arrives. Live on one wage for a while (or whatever income you will have when bub comes) for a month or two as a trial. Great lessons can be learnt from this act alone and provide great insight into how you will cope in the future with bub in arms.
- Start a savings account for baby. You can put a few dollars each week, and these funds can be put towards a longer goal (such as children's education etc) or you may find yourself dipping into this money during leaner months ahead.
- Becoming a savvy spender. Learn to be a good consumer, shop around and be smart with your spending choices. Over time, you will become a brilliant role model to your own children and encourage great money habits for them too!
Jodie Nolan is an author, mother, speaker and financial expert. Jodie has published two books, one "read My lips' with a range of contributing authors and 'Surviving the Storm'. Both available through Bermingham Books and leading Australian bookstores. Visit www.jodienolan.com for further information.
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