Financial Planning When Expecting Your First Child

Summary

Eric Purcell is a Wealth Advisor at Clayton Wealth Partners, a fee-only investment advisory firm in Topeka and Lawrence, Kansas. He enjoys his part in making financial planning the least stressful aspect of people’s lives. Here are his tips for one aspect of getting ready for a new baby.
 

You're expecting!

You then meet with your doctor, who confirms the good news. You’re expecting! Now what?

Once the mixed bag of initial motions subsides (e.g., confusion was first for me, followed by joy, excitement, happiness, nervousness, and back to confusion), you’ll want to accept reality, roll up the sleeves and get to work. Let’s dive into planning and cashflow management tips when making purchases over roughly 40 weeks of pregnancy to prepare for your firstborn so you’re not left scrambling with last-minute purchases as the due date approaches.

One of the first things you’ll want to do as you prepare to make necessary purchases you and your baby will need as you welcome your first child into the world is to create a budget. The purpose of budgeting is to monitor your income and expenses, provide clarity into your spending patterns, and serve as a guide when considering changes to your spending. Several different budgeting software and apps are available to assist in creating a budget, and they can operate very differently. Find one that fits you, and remember, always incorporate an emergency fund in your budget. An emergency fund is critical to your financial success no matter your situation, but one is even more imperative now that a child will depend on you.

Once you've created your budget, you should have clarity on your discretionary spending or what you spend on nonessential items like vacations, eating out, and going to the movies. Your discretionary spending is what you'll want to target as you change your spending pattern from spending money on nonessential items to essential items necessary for your future child. For example, some ways to reduce your discretionary spending are buying store-brand items at the grocery store, limiting or eliminating television subscriptions, and changing your cell phone plan to a lower monthly rate.

Buy This or That

Now we are ready to start prioritizing baby purchases, but where do we start?

I found a tremendous Newborn Baby Checklist from Pampers.com that worked well for me. I’d recommend you do the same or find a checklist that works for you. The Pampers checklist groups necessary purchases for your baby into categories. For instance, categories include nursery, diapering, bath time, playtime, on-the-go, feeding, clothing, health and safety, and education and preparation.

As you go through the checklist, prioritize anticipated purchases by sorting them into high, medium, and low categories. When reviewing your priority list, you’ll want to know what each item costs and then go back to your budget to see how many or which purchases you can make based on your budget. Your budget should tell you what you can afford to spend per pay period and still meet your non-discretionary obligations like rent and utility bills while maintaining your budgeted standard of living. More expensive items may require two or more pay periods to save for.

Baby showers are a great way of having items checked off your list if this is something you intend to have. So, as you review your checklist, highlight the items you intend to put on your baby registry. Requesting cash and gift cards for your baby shower also works if used for baby purchases.

Some family members or friends who know they will not have any more children will ask or try to push baby items onto you as they want to clean out their storage room full of things that will not be used again by them. Items typically include books, clothes, and bassinets, among others. Often, more oversized items that friends or family members no longer need will offer to sell to you at a friends and family discount, like baby cribs, strollers, and car seats. If you do not mind reusing an item rather than buying new, then hey, what better way than to buy from friends and family, ideally at a steep discount.
 

A Little Planning Goes A Long Way

Budgeting and creating a plan will prepare you and your home environment to welcome your precious child into this world. These tools also help alleviate stress, so you’re not panicking as the due date approaches and maxing out your credit card. In turn, the benefit of this stress alleviation improves healthy baby development during pregnancy.

I am excited for you and know you’ll do great on your journey as you welcome your firstborn into this world.