Six debt management tips for new parents
Let’s face it. Kids are expensive. Like, super expensive. Even if you aren’t shelling out 10k for the hand-built Silver Cross Surf Aston Martin stroller with sheepskin liner, you’re probably in for a rude spending awakening.
If you already owe money to lenders, the added costs of caring for a new baby can make this awakening even more painful. Fortunately, there are steps you can take to help reduce both your debt and new baby expenses, such as taking out a consolidation loan.
Debt management tips for new parents
To make having a baby less expensive, here are six debt management tips that can help you as a new parent.
1) Create a budget
Creating and sticking to a budget can help you avoid unnecessary discretionary expenses and prevent you from having to go deeper into debt to pay for items like formula and diapers. To create a budget, compare your post-tax income against your monthly expenses. Include fixed expenses that don’t change every month, such as rent, and variable expenses that can fluctuate, such as groceries.
If you find that your expenses are greater than your income, it’s time to tweak your spending. See what’s absolutely necessary—like baby food (duh) and what you can live without—i.e., fancy dinners out, expensive clothing, etc.
2) Purchase items secondhand
Try to purchase used items or hand-me-downs. There are a number of items required in the first months of your baby’s life that you quickly won’t need again, such as swaddles and bouncers. You’re better off not wasting money on these. However, any items with safety regulations, like car seats, should be purchased brand new.
3) Try to refinance
Refinancing your credit card debts can both simplify bill paying and lower your APR. The money saved on interest can help you afford your new baby expenses. Keep in mind that you’ll need a good or excellent credit score to qualify for a favorable interest rate. If you can’t secure a lower interest rate than the ones you’re currently paying, refinancing may not be the best strategy for you.
4) Prioritize financial goals
Knowing your financial goals can help motivate you to repay your debt. Your first goal should be paying off any existing credit card debt, since the high interest rates on credit cards can eat away at any debt repayment progress you may have made. After that, focus on other goals you’ll put money saved in interest toward, such as a 529 savings plan or a retirement fund.
5) Start a savings fund
Putting aside money for a baby savings fund can help you manage the new influx of expenses. You could automatically deposit a certain amount from your paycheck into the fund, so you’re creating a nest egg without having to think twice. Any bonuses or unexpected checks can also go toward building up this fund.
6) Plan ahead for childcare
Childcare is one of the biggest expenses for new parents. Planning ahead for how you’ll pay for it can help you stay on solid financial ground. Nanny shares or subsidized childcare can help make this more financially realistic. Take time to do your due diligence and see which options can help make it somewhat affordable.
Kids might be costly, but they don’t have to land you in financial hot water. By following these steps, you’ll be able to manage your debt and enjoy – or at least survive – the first years as a parent. We wish you, your debt, and your sleep habits the best of luck in this new adventure.
Stefanie Gordon is a content strategist with over a decade of professional writing experience. She is a former financial journalist who has spent the last several years working in digital marketing. She specializes in content strategy and creation for large and small businesses in finance and technology.