By: James May
If you and your partner have recently become parents for the first time and one of your main concerns is money management, you're not alone. According to a survey conducted by Visa, 21% of respondents said it was their biggest worry. However, just because there are other like-minded parents out there doesn't make tackling the topic any easier. Make the right money management decisions now and you set yourself up for a world of financial success. Here are eight tips to get you headed in the right direction.
1. Create a household budget together
New expenses like baby food, diapers, childcare, and life insurance are tough to keep track of. If you haven't already created a household budget, now is the time.
Be sure that both parents have input in the process. For example, you may have different long term goals that you want to prioritize. These discussions are the perfect arena to work this out. If you don't openly discuss these topics, overspending and financial arguments may follow. Create your budget as a couple, just like you plan to raise your child.
2. Determine top financial considerations
Now that you have a kid, reducing credit card debt should be a top concern so you can free up money for all your new expenses. Getting started on a 529 college savings program is always a good idea, and retirement savings is important to ensure you're not a financial burden to your child later in life. Plus, life insurance is a priority for all new parents. It all depends upon your personal situation, though, so make sure you outline the most important considerations for you and your partner, and set goals so you can address them appropriately.
3. Save on baby expenses
There are a number of ways to save on baby expenses. For starters, understand the things you simply don't need in the beginning, such as shoes for your newborn (they're not necessary and can cause health issues), a baby bottle warmer (running it under warm tap water should suffice), and tons of stuffed animals, which can actually increase the risk of sudden infant death syndrome, according to the Mayo Clinic.
In addition, there are plenty of baby food recipes available online, which can save you money compared to purchasing it at the store. And, using cloth diapers or a diaper service might make more financial sense than buying disposables at the drugstore.
4. Have regular money talks
Many of the money management tips new parents need require communication, but it's important to remember that this should be an ongoing dialogue. Set aside some time once per month to see how your finances are holding up as you move forward. Make sure you and your spouse are able to talk about money and finances openly, willingly, and without judgment.
5. Look for childcare alternatives
Instead of just dialing up the nearest daycare facility for your newborn, understand that there are other, often cheaper forms of childcare available. Splitting a nanny or a babysitter with another family is an option, and an independent childcare business run out of an individual's home could be less expensive, as well. This can be a great antidote if you're still undecided on the long-term care options for your child. Also, be sure to take advantage of the Child and Dependent Care Tax Credit if you qualify.
6. Contribute to your Dependent Care Flexible Spending Account
If your employer offers a flexible spending account for dependent care, get signed up and start contributing. Money is taken out of your paycheck automatically on a pre-tax basis. You can contribute up to $5,000 annually if you're married and file a joint return. This money can then be used to pay for childcare expenses. Typically, though, you must use your funds before the end of the year, or lose them - they do not carry over into the following year in most cases. (You should also be putting money in your flexible spending account for medical expenses.)
7. Consider a credit card balance transfer
For any of the baby expenses you've already incurred, consider using a credit card balance transfer to avoid interest. Transfer $3,000 worth of debt over to the Chase Slate card, which has a 0% APR for the first 15 months and no annual fee. If you make the monthly payment of $200 during that time frame, you can pay off those expenses interest-free. There is a fee of 3% of the balance transfer, but that is likely less than what you'd pay in interest with your existing card. Just be sure to never miss a payment and use the card for the balance transfer only, not purchases.
8. Find free entertainment
There are plenty of free entertainment options for you and your baby. There might be playdates at local community centers you can join in on for no cost, or free admission to your local zoo on a certain day of the week. Every penny counts as a new parent so be sure you're saving as much as you can on the fun stuff.
Mistakes are part of being a great parent for your kids, and how you react to them is more important than the fact that they even happened. Take the same approach with your finances. If you overspent on some baby expenses, do not beat yourself up. Correct the mistake as best you can or put plans in place so it doesn't happen again. Then, forget about it and move on.
This article is courtesy of James Mays, a personal finance contributor for Money Crashers.