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Finding out you’re unexpectedly expecting a baby means your life — and your budget — are about to change dramatically. According to the Guttmacher Institute, 27 percent of U.S. pregnancies happen sooner — even years sooner — than the mother had planned, so you’re not the only one suddenly trying to figure out how to feed and house a tiny human.
There’s still time to prepare financially before the baby arrives, even if you have only a few months to go. Re-evaluate your money goals, get a handle on hospital expenses and trim costs. Follow this crash course in pre-baby money management so you’ll be (slightly more) ready for the brave new world of parenthood.
STEP 1: REPRIORITIZE FINANCIAL GOALS
Money is about to become an even more precious resource. If you got by with $500 or $1,000 in emergency savings before, now is the time to crank it up, aiming for three to six months’ worth of expenses. You’ll need a cash cushion if your baby requires unforeseen medical care or if one parent becomes unemployed.
In the short term, having available cash is more important than saving for your child’s college education, says Matt Becker, a certified financial planner and founder of Mom and Dad Money. You have time to save as your child gets older, and grants, scholarships and low-interest federal student loans can make up for a shortfall later on. The same goes for buying a house: Don’t feel rushed to put your savings toward a down payment if you’re renting. Saving now will help prevent credit card debt later, and you can work toward other goals once your budget has stabilized.
STEP 2: PLAN FOR HOSPITAL COSTS
If you have health insurance, confirm which hospitals, doctors and tests are covered, and how many days in the hospital your insurer will pay for.
Hospitals charged a median amount of $17,184 for childbirth stays in 2014, according to a NerdWallet analysis of U.S. Department of Health and Human Services data. If all doctors and hospitals are in your insurance network, you can expect a bill for 10 to 40 percent of that cost. Using the 2014 data as an example, that would come to $1,718 to $6,874, depending on your plan’s deductible.
Uninsured expectant mothers below certain income thresholds may qualify for Medicaid , which covers childbirth and maternity care. Or you may be able to join your parents’ health insurance plan if you’re under 26.
STEP 3: START LIVING ON LESS
Your income will likely decrease during the baby’s first few months. Just 12 percent of U.S. employees work at private companies that offer paid family leave, according to the U.S. Department of Labor. Only three states offer paid family leave: California, New Jersey and Rhode Island (and, starting in 2018, New York). Outside those options, if you work at a company with 50 or more workers, you can count on 12 weeks of unpaid leave under the Family Medical Leave Act.
Estimate how much more money you’ll spend once the baby arrives and how much less you’ll earn. Start saving as close to the amount of those new expenses as possible. For expectant parents, the time is now to ruthlessly triage your budget.
“They’re in a crucial needs versus wants situation,” says Roslyn Lash, a financial educator and coach at Youth Smart Financial Education Services in Winston-Salem, North Carolina.
Some new costs are nonnegotiable, such as life insurance. It will replace your income if you die, which is vital now that another person will rely on you completely. Even if you receive life insurance as an employee benefit, each parent should get an individual policy. You’ll be covered if your employer decides to end its program, Becker says.
Trim discretionary costs that aren’t high on your list of values, he says. Getting used to a tight budget isn’t easy, but at least money is something you can stockpile in advance. If only you could bank sleep the same way.
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