5 Tips to Improve your Finances Before your Baby Arrives
Having a baby can be one of the most rewarding experiences, but are you prepared? Being a parent is hard work and before the baby arrives you want to make sure that you are financially stable.
Building a sound financial framework involves several steps such as eliminating debt and creating a budget as well as saving for unexpected situations. These steps may be intimidating at first, especially when added to the mix of other necessary preparations, so I have put together five tips to help you be better prepared for when your baby arrives.
• Reduce your debt: First, it is important to reduce unnecessary debt, like credit card balances. Start by paying off the highest interest rate account first in order to eliminate the interest rate that builds the fastest. In the meantime, continue making your minimum payments in your other credit card accounts. Once, you paid off the account with the highest interest rate, pay the account with the second highest interest rate, and so on. If you need help organizing your finances, credit counseling services can help you develop a payment plan that allows you to balance your resources.
• Save for emergencies: Creating an emergency plan is also essential when expecting a baby because you never know when you will need money for unexpected situations. Save a small amount every week and put it aside in a separate bank account that you don’t frequently use. Take 3 to 5 percent of your check and have it automatically deposited in that account.
• Don’t follow fashion trends: While brand name and designer clothes are beautiful they are unnecessary! Keep in mind that babies outgrow their clothes in couple of months. Ask friends and relatives who have slightly older children if they have clothes, toys or nursery room items that they would like to pass on to you for your little one to use. Try to buy clothes in stores that offer discounts such as Target, Walmart, and BabiesRUs. Apply the same strategy when buying toys. Your baby won’t play with the same toys for years, so don’t spend money on sophisticated and expensive toys.
• Create a budget: Creating a budget before the baby arrives is also one of the most effective strategies to achieve a balance, according to MSNBC. First, make a list of the monthly expenses that are necessary. You can include: rent, taxes, insurance, loans, children’s basic expenses, utilities, food and credit card debt. Then, make another list with expenses that are important but not crucial. For example, cell phone, cable, gas, clothing, laundry and entertainment. Then, add up all the expenses and subtract them from your monthly income. After that, divide the total of your expenses by the number of pay checks and other income that you receive per month. This should indicate how much money you should put aside from each check to cover your monthly expenses.
•Take advantage of your baby shower: Baby showers are a great way of getting clothes, toys and furniture for the baby’s nursery without spending money. Make a list or register for the most important items that your baby needs, and then tell your family and friends to make sure they buy presents that your baby will use!