Can I Afford To Have A Baby?
Can I afford to have a baby?
My parents always said if they had waited until they could "afford" a baby, my brothers and I would never have been born. It's the same for most people who want to have a child. Still, it's smart to think through the effect a child will have on your finances to know where you stand. Here's how to start.
1. Run the new numbers
If you had a budget before, you need to tweak it. If you didn't, you definitely need one now. Having a child can add anywhere from a few hundred dollars to several thousand dollars every month to your outlay, depending on your health insurance plan, childcare costs, whether you use cloth or disposable diapers, whether you breastfeed or buy formula, and more. You need to know where that money is going to come from and what you're going to do to stay afloat.
2. Weigh the question of staying home
Affording a child is one thing. Opting to transition from two incomes to one is another question entirely.
Some other factors to consider before you make the decision not to go back to work: Would you still have health insurance? Would you be able to get back into your field when you want or need to work again? And, finally, do you have an emergency fund? I would think twice about quitting your job unless you answer yes to all three of these questions.
3. Practice living on one income
The best thing you can do if you want to quit your job to stay home with your baby is to practice living on one income beforehand. You should do so, ideally, for your entire pregnancy, banking the second income. By the time the baby's arrived, you'll know how to live on a tight budget (or know that you just can't do it), and you will have built up considerable savings to fall back on if need be.
4. Factor in the tax breaks coming your way
Some of your new expenses will be offset by the child tax credit, as long as you don't forget to claim it. (Surprisingly, many people do.) Married couples who file jointly, have one child, and earn no more than $110,000 a year can claim $1,000 a year, in addition to the $4,050 exemption you can claim for each dependent.