Budgeting For Baby

Starting a family can take quite a financial toll on any couple. Kate Kelly, Managing Editor of American Baby Magazine, has some tips for sticking to your budget.

The first thing you can do to help ensure your family's financial success is to pay down your debt, specifically your credit cards. "Try to negotiate a lower rate," says Kelly. "There are a lot of competing offers out there." If you're like many Americans, you're probably getting a few unsolicited credit card offers in the mail every week. Instead of trashing them, look at their interest rates. If you find one that's much lower than your current card, contact your creditor and ask them to match it. Otherwise, tell them you're going elsewhere.

Try to use any extra money that comes your way to pay down your debt. That includes a bonus from work, your income tax refund, an inheritance, etc. Any money you can put towards your credit card bill ends up being that much less you'll owe in interest later on. Also, keep in mind that "If you don't have the money in the bank, you shouldn't buy it in the first place," says Kelly. Don't live beyond your means. Take a realistic look at what you can afford and make purchases based on your actual income, not what you'd like to make.

Another tough decision facing new parents is childcare. Should you look into day care, a nanny or have your spouse be a stay-at-home mom or dad? Furthermore, can you survive on one income? Kelly suggests taking this option for a test drive before you even give birth. While you're pregnant, try living on your spouse's salary only.

If you keep track of your spending along the way, you'll be able to see exactly where your money goes and where needless spending is occuring. For example, do you really need that $6.00 latte every morning? Most grocery stores sell a bag of coffee for less than that, and depending on your coffee consumption, that bag may last you two weeks or more. "[Keeping track] can be painful and tedious, but then you'll see where the non-essentials are and where you can cut back," says Kelly.

Another trick? Put away the plastic - and that includes your debit card. If you pay in cash, you'll physically see your money disappearing as you spend it, making it harder to part with it in the first place. Try withdrawing a set amount of cash from the ATM each week and spend only that money. When it's gone, that's it. You'll be forced to budget more wisely.

Every family has dreams, and for many, that dream includes owning their own home. "Before you even start shopping, you should get your credit score," says Kelly. It's extremely important that you pay your bills on time and only use a portion of your credit line. Maxing out your credit cards will lower your score.

Also, keep in mind that there's more to a home than just the purchase price. Remember that you'll also need to pay taxes, purchase homeowners insurance and have an emergency fund for immediate repairs.

It's also important to shop around for a home loan. "You want to make sure you understand all of the terms," says Kelly. Just because the bank approves you for a loan doesn't mean you can afford it. Crunch the numbers yourself and be sure you can afford the monthly payment. If not, save a little more and then shop around again.

For more information on family financial planning, as well as additional parenting advice, click here to visit AmericanBaby.com.

By Erin Petrun