3 Careful Moves I Made With My Money Before My Baby Was Born

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As a financial planner working with clients in their 30s and 40s, I have helped countless families prepare financially for major life milestones.

Because my planning firm focuses on that specific age range, we tend to see the same goals and events over and over: starting with investments outside of retirement accounts; buy a first home (or move to a “forever” home); and add children to the family.

Most of our clients beat me to that last milestone. But in the fall of 2021, I joined the parent cohort. We had our first child, a daughter, in October, and I finally got a chance to practice what I preach in terms of financial planning to welcome a baby into our home.

Here’s what my wife and I did to prepare our personal finances for the new addition, including what worked, what didn’t, and what we learned in the process.

1. We were proactive in planning for health insurance and other costs related to the baby

We spend a lot of time scanning the horizon for upcoming events and possible changes in our clients’ personal financial landscape. With any event (baby or not), being proactive often works in your favor.

Planning ahead gives you the opportunity to think through your options, make conscious decisions, and choose your actions with intent and care.

Of course, there is not much you can control when it comes to children. But if you have growing your family on your mind, it’s not too early to consider things like:

  • What will your health insurance cover for a standard pregnancy and delivery, and why will you be on the hook?
  • What can you save for ahead of time? Can you start filling your emergency fund? now to be better prepared to handle any unexpected results?
  • Do you need to make changes to your living situation, or can you make adjustments to your current living arrangements so that where you live now will work for a larger family?
  • Are there specific parenting philosophies or child care preferences that impact your finances (such as one spouse staying home and transitioning to a single-income household, or both parents maintaining their careers and need full-time child care support)?

For my wife and I, being proactive seemed like doing a lot of research into health insurance plans to pick the best one for us. We also got an estimate of the maximum out-of-pocket cost we might have to pay and started putting money aside each month just in case.

We also investigate all stuff we would really need. We started with a general list and then identified what wasn’t really essential, looked for lower cost options, or reached out to family and friends to see if anyone had anything secondhand they’d be willing to share.

2. We made sure our cash flow could handle the new addition

Most people just want to know how much they need to save before they have a baby. While that is a very valid question, there is are Start-up costs, from medical bills to furnishing a nursery and the seemingly endless number of diapers you’ll need, won’t get you very far once baby is actually here.

That’s because children are not a one-time expense. A baby introduces a series of new, in progress costs to consider, from the aforementioned diapers to clothes, toys, and all the other supplies you need to care for a child.

And those costs don’t stop once your children are no longer babies. If anything, costs only increase as children get older.

We knew it wouldn’t be enough to save a lump sum of cash. We would also need to create a budget to support the new and ongoing expenses associated with having a larger family, so we focused on answering the question: Can our cash flow easily handle more costs?

For us, that meant waiting to add a baby to the mix until we felt we had more financial clout. Although we considered growing our family years in advance, we ultimately decided to wait. None of us wanted financial concerns to overshadow this great election in our lives.

That’s not the right choice for everyonebut it was an important part of our planning process. We were willing to make some concessions in the decision to wait and focus first on our personal financial position.

We also think about what ongoing costs would change or increase, and build them into our budget even before we get pregnant, to test if our cash flow could really handle those increased expenses while maintaining our high savings rate. What if we had extra money that was not spent? We put that aside, too, to increase our cash reserves.

3. We prepare for the unexpected

Not all of the financial decisions we made in preparation for our daughter’s arrival worked out. There were some things that we just couldn’t have predicted beforehand.

For example, hiring a doula seemed like a smart choice. We thought the additional support would be worth the cost of having another professional on our side.

It turned out that my wife was in labor for about three hours total and was in the hospital for an hour before our daughter was born…and the doula missed it all.

There were also several other items that we thought had have before the baby came, but I didn’t need anything. Our daughter hated her $200 bassinet and we moved it into her crib sooner than we expected.

It wasn’t wasted money, but we do wish we had taken up a family member’s offer to give us a bassinet her baby had just outgrown instead of buying a new one.

And despite all the work we put into choosing the right health insurance, our daughter ended up having a few extra pediatric appointments, lab tests, and ultrasounds in her first four months of life. The initial concern turned out to be a false alarm, but because the extra visits and specialty care were coded as diagnostic rather than preventive, we were in for roughly $1,500 in unexpected medical bills.

Fortunately, in all these places where things didn’t go exactly as we imagined, our proactive planning helped us: we intentionally increased our cash reserves before our daughter was born to cover unexpected costs.

You can’t plan everything, but you can anticipate things going wrong every step of the way. Allowing yourself some wiggle room to handle events or expenses you might not have anticipated will help keep your overall financial plan from falling apart, and that goes for none major event, milestone, or goal you want to achieve in your life.

Finally, be willing to iterate. It is a variation on the theme of not everything will go as plannedAnd that’s fine, if you can stay flexible, curious, and open to exploring different ways of doing things as life unfolds.

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