Pregnancy is a major life event, but it can be a financial disaster without planning. Here are some steps to help you get your finances in order.
Start by tracking your expenses with a budget app or spreadsheet, and double-check the beneficiaries on your insurance policies and 401(k) accounts to be sure they reflect your current situation.
Budgeting
Embarking on parenthood can feel like a thrilling adventure, but it also carries with it the weight of a new financial responsibility. From baby clothes shopping to carefully selecting the perfect crib mattress, there are numerous expenses associated with welcoming a child into your family. While you may be familiar with some of these costs, others may come as a surprise. In many cases, budgeting can make these costs easier to manage. Moreover, you also need to account for the midwife cost for your pregnancy.
Before a baby arrives, it’s important to begin budgeting regularly. This can include tracking your spending on a spreadsheet or using an app to better understand your spending habits and see where the money is going. During this time, it’s also a good idea to pay down any debt or credit card balances that carry high interest rates. This will help you build a stronger credit score, which could make it easier to obtain future loans and help you save more in the long run.
In addition to paying down debt and setting up savings accounts, a great way to prepare for pregnancy-related expenses is by opening a health insurance policy that includes maternity coverage. This can be done before the end of the first trimester, but it’s wise to begin this process sooner rather than later as insurance costs are often higher during pregnancy and may vary between providers.
In addition, you can practice living on a budget before the baby arrives by adjusting your lifestyle in the last trimester and even taking part-time work. This will give you a taste of how to live on a single income and can help you adjust to the reduced expenses associated with parenting.
Insurance
While you can’t predict everything about pregnancy, you can prepare for some of the costs. Having insurance can help with medical bills and the other expenses that accompany childbirth, such as well-mother visits and tests, and newborn care. To learn about the specifics of your plan, review the Summary of Benefits and Coverage and speak with a member of your team at work to make sure you understand what’s covered and how much to expect.
Before the Affordable Care Act, pregnancy was considered a pre-existing condition, which meant insurers could decline coverage or charge more for care for pregnant women. Under the ACA, however, all health insurance plans now include pregnancy care. The costs for specific services can vary by plan, however, as the deductible, copayments, and metal tier can impact out-of-pocket costs.
You should also consider buying life insurance while you’re pregnant. Though it may be more expensive, a policy can pay for your funeral and burial costs as well as provide an income for your family in the event of your death. It’s fairly simple to buy a policy while you’re expecting, but you’ll likely have to disclose your pregnancy on the application and take a medical exam as part of the process.
If you are unsure of your current health insurance coverage, it’s important to sign up during the open enrollment period or the special coverage window that follows a qualifying event (such as marriage, having a baby, or losing a job). You can enroll in the health insurance marketplace in your state, through an employer, or as an individual. Each health plan will offer a plan summary, which can be accessed on the marketplace website and can also be used to compare the cost of each plan.
Savings
When those two lines appear on the pregnancy test, it’s time to start getting your financial act together. First, clean up any existing credit card debts that carry balances of thousands of dollars. That’ll save you hundreds in interest costs and make it much easier to get new loans for things like a minivan or a home.
Next, consider setting up a health savings account that’s part of your current medical insurance plan. This is an excellent way to pay for the upfront, one-time expenses that a baby creates. Ask your insurer for a list of typical out-of-pocket expenses related to prenatal care, labor and delivery, as well as post-delivery care. These can help you better determine whether or not your current coverage — including deductibles and premiums — is appropriate for a family of four.
Finally, start thinking about recurring expenses that will change after the baby arrives, such as increased food and child care costs. If your income will be reduced during the early months of parenthood, you may also want to set aside some money for a housecleaner or subscription services that provide meals and diapers.
Lastly, don’t forget about any gifts that friends and family members might be able to contribute — whether cash, big-ticket nursery items or smaller purchases from your baby registry. If you can, spread the gifting out so you’re not burdened with a single large bill or spending spree. That will help your budget stay in place as you adjust to life with a new addition.
Taxes
Pregnancy requires many doctor visits and procedures to ensure both mother and baby stay healthy. These costs can add up quickly, even if you have insurance to cover some of them. Fortunately, the IRS allows pregnant women to deduct significant medical expenses if they itemize deductions.
According to Villamena, pregnant women may be able to claim the amount they pay out of pocket for each visit (including co-pays), any medications not covered by insurance and travel expenses to and from the doctors. She also notes that birth control pills, a weight loss program prescribed by the doctor and sterilization procedures are all deductible.
Pregnancy is a whirlwind for most new moms, but the more financial goals you can set and meet, the less to worry about as you’re changing diapers and waking up for 2:00 a.m. feedings. The sooner you take steps to establish sound financial practices, the more prepared you’ll be for the future when your child begins school. And the more money you have in savings, the better prepared you’ll be for your eventual return to work.
Debt
Debt is an obligation to pay a sum of money over time, usually with interest. A debt may be owed by individuals or by governments. Increasing debt through excessive interest rates is often called usury.
Those with significant debt should try to lower their monthly payments as much as possible, while building savings for a rainy day. Start with the largest bills and payments, then look at non-essentials to see if there are things you can do without, like a gym membership or TV subscriptions.
Having a baby is an exciting, life-changing event, but it’s important to consider the financial and practical implications before becoming pregnant. Be sure to talk with your partner and make sure you are both on the same page about finances. It’s also helpful to track your spending regularly, so you can see if there are areas where you can save before the baby arrives. Ideally, you should try to eliminate any debt before becoming pregnant. Having less debt will help ease the transition into motherhood and reduce the amount of money you have to pay out each month.