Congrats: The two of you decided you want to become parents! You’re looking forward to all the changes and milestones up ahead–ultrasounds, baby showers, setting up the nursery and meeting your baby.
However, as you look further ahead past the big events, the two of you start talking about upcoming plans and baby expenses. One issue that couples discuss is whether one of them will stay at home with the child or if they will pay for child care.
It’s a big decision that should be thought out carefully. If it’s rushed or not planned out, it could prove to be a big problem in your relationship.
Avoid Hurting Yourselves Emotionally and Financially
While catching up on some reading with some of my favorite sites, I found a story of a couple who didn’t prepare well for the transition from two to one income. They not only were hurting themselves financially, they were putting their relationship under strain.
The gist of the situation and their dilemma:
- A couple who both were making six figures had a baby last year.
- After they had their little one, the mother decided that she wanted to become a stay at home mom.
- The problem with that big change is that their lifestyle doesn’t really accommodate it; their house purchase was based on two incomes and according to the story, she doesn’t want to move out.
- She had this idea that her husband would put in more time at work to make ends meet.
She and her husband didn’t plan for the transition properly and they’re now having problems with paying all of their bills. Not only are they hurting themselves, their situation can hurt their baby more if it causes division and resentment in their marriage.
For them, having her become a stay at home parent has led to some big issues, but that doesn’t have to be the case for you if you want to make the transition.
Is it possible to go from a two to a one income family in relatively short period of time? Can Mom or Dad become a stay at home parent without hurting the family financially? I think so–you just have to get ready together.
Be Prepared: Have the Talk
The first thing you two need to discuss is how you think the change will go. The fantasies and realities of stay at home parenting can be different as night and day. Ask others about their typical schedule to get an idea if this is something feasible, considering the additional cost of having a baby.
Some questions you may ask include:
- Who wants to stay at home with the child?
- Will the stay at home parent work part-time or on the side?
- How will the stay at home parent receive discretionary money if they don’t work outside the home?
Run the Numbers
After having the talk, you have to figure is what your current monthly budget is and if you can meet it on one income. My tool of choice is Mint. It’s a free online tool that can examine all your bank accounts and allow you to see spending trends and set budget goals. It saves a ton of time–you don’t have to pour over all your bank statements in the last year and upload it to a spreadsheet.
Once you have the numbers in front of you, you’ll have an idea of what to do next.
Creating a Baby Fund
To help you weather the first year of baby expenses, you two need a bit of money in a baby fund, if possible.
If you’re not sure where to start I’ll share some areas:
- Hospital Bill: Chat with your Human Resources Department to find out what your health plan will cover and how much you can expect to pay for the doctor and hospital visit. For example, my husband’s employer offers a higher deductible plan ($2,500) for employees, but if you get the paperwork submitted, a big portion of it will be reimbursed.
- Diapers: A recurring expense if you go the disposable route. Make sure you include them on your baby registry and use programs like Amazon Mom to save up to 30 percent. That knocked down our baby’s diapers to around $20/month.
- Food: Breastfeeding has its financial benefits as well as health ones. However, if formula fits your circumstances, you don’t have to go broke feeding your baby. Sites like BabyCheapskate.com offer great deals that you can use to lower the costs.
- Baby Gear: We’re discovering that all the “must haves” for babies aren’t always necessary. You may want to hold off on buying some items until you see if your baby really needs them. You don’t need to get the bassinet, crib and changing table all at once. You may want to get a Pack N’ Play that offers the bassinet and changing station with play pen option for later.
Baby funds are insurance; some couples may find that their baby expenses are reasonable and they can go about it month-to-month, even with their income decreased.
However, if you’re not sure about the new expenses or you want to play it safe, you may want to build a bigger buffer. The good news if you’ve saved up more than needed, you can use the money for other financial goals like paying down debt or investing more. Having a baby fund is about flexibility.
Create a Plan to Make the Transition Painless
Cutting expenses in half is unrealistic for most people. Instead, a more sensible way to approach it is by finding ways to slowly decrease your expenses into something manageable over time.
Avoiding Budget Busters
There are two routes you can take to keep your expenses down:
- Cut across the board. Draw down your expenses 10 percent each month until you can afford everything under one income. I think this is a better option for most people as they can get used to it over time.
- Go for some huge wins. If you can qualify, see if you can refinance your home with a lower fixed interest rate. If you have two car loans, sell one vehicle and buy a replacement with cash. See if you can negotiate a better deal with your cable company or just drop it all together.
I doubt you’ll give up everything (nor should you) when you decrease your monthly expenses, but you have to be realistic and understand that to stay at home, you have to make some adjustments.
If you decrease slowly over the 9 months before the baby is born, it may be easier for you to make the changes. However, if you can make some drastic changes on things that don’t matter, then go for it.
Next time, I’ll discuss some specific tactics you can use to slowly trim down your bill along with a few bigger options that will allow you to get more money in your pocket.
Until the next post, please share with me any questions you may have. How many of you are thinking of becoming a stay at home parent? How many of you have made the transition?