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 When it comes to starting a family, one of the questions that most people struggle with is to figure out if they could afford it. Remember, raising a baby just doesn't mean changing diapers alone. Most couples budget their expenses until their baby is out of diapers and then expect things to go back to normal. But expecting parents need to realize that raising a child will be an ongoing financial commitment to support the child until he or she can support themselves. In many cases, this obligation could last a life time. Planning for a baby is never easy but here are some considerations that couples need to take into account when they are planning to start a family:
Preparing Your Home
First thing to consider is your home. Do you have enough room for a baby? Remember, baby will not be a baby forever, so you need to look beyond first couple of year to figure out if you need to move to a bigger house or renovate the house. Also, if you live in an apartment, you may realize that a one bedroom apartment might not be big enough for three people so moving in to a bigger apartment of buying a home should be discussed before starting a family. You may also want to consider things that may not be safe for a baby/child in your existing home and preparing your home to be "baby safe".
Childcare Expenses
Most families only pay close attention to food, clothes and diaper as far as baby expenses. However, if both of you have jobs, your biggest expense will be childcare or daycare cost. You may want to compare different options such in in-home daycare as well as a full service daycare/preschool center. Sometime it is easier to hire a babysitter or nanny if you have two or more children to care for. Also, check to see if your employer offers an on-site daycare facility. If they do, it may have a long waiting list so you want to put down your name in early stages of your pregnancy. You will be buying a lot of baby food and diapers so make sure you have a membership of a wholesale store such as Sam's club or Costco. These stores usually charge you $40-$60 per year for membership but you will save far more on baby food and diapers alone. You could also save on big ticket items such as cribs, car seats etc. by checking out the manufacturer's web sites for ongoing promotions and coupons.
Taking Time off from Work
Employers are required by law to allow you to take maternity leave as well as FMLA leave. However, most employer will only allow you to take standard six to eight weeks of maternity leave and anything beyond that timeframe may require prior approval as well as possibility of an unpaid leave. You have to budget this loss of income in your monthly budget and if you are tight on money. You may want to consider saving some extra cash to carry you through early period of your maternity leave. Couples need to decide who will take time off and when to care for the infant. Parents can take maternity/paternity leave or paid or unpaid leave (or a mixture of both). Also account for the time that you will spend for doctor's visits for baby. Many employers allow flexible schedules so check with your supervisor to see if you could work an alternate schedule or switch to work from home during this period. Also, if one parent is going to stay home permanently after the baby, you need to make sure that all financial needs can be met with a single income including unexpected expenses such as car repairs and medical bills.
Prior to the Birth of Your Baby
Make sure you're aware of any prenatal care program offered by your employer's health plan and take advantage of it. Determine whether you will need to apply for time off under Family and Medical Leave Act (FMLA). If you are not eligible for FMLA yet, you may request a Working Caregiver Leave (WCL) or personal time off. Remember, most employers require that you submit Family Medical Leave of Absence(FMLA) packet no sooner than 6 weeks prior to due date. One of the important piece of information is finding out how much of your pregnancy and delivery expenses will be covered by your health insurance? Plan accordingly if you plan to save some pre-tax money in Flexible Spending Account(FSA) offered by your employer. This could be a big help as most health insurance plans have a sizeable deductible for maternity services.
After the Birth of Your Baby
First thing you want to do is obviously apply for a birth certificate for your baby. Most hospital can do this for you as long as you have a baby name picked out. You can also apply for the social security number at the same time. You want to make sure you update your records at your employer. Submit a new W4 form to reflect your family status. Also, update your beneficiary information. If you have a group life insurance policy through your employer or individually, consider adding the baby to your Group Universal Life (GUL) coverage.
Consider Participating in Tax Deferred Programs
Sign up for Dependent Care Account (DCA) to pay for childcare expense with pre-tax dollars. You can save up to $5,000/year in a DCA. You and your spouse can also split it up with two DCAs with $2,500 annual limit each. If you're enroll in High Deductible Health Plan(HDHP) with HSA, it might be a good time to change the monthly contribution and increase the amount to cover for the additional expenses that you'll have to pay for the routine visits and checkups for the baby. You should also consider opening a college savings account such as 529 plan to pay for the college education of the child. It might seem a little too early but if you don't act now, it may be difficult to plan and save for college at a later stage and you will miss out on the opportunity to start saving early.
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