How to Budget for a New Baby

Children might be priceless, but raising them certainly isn't. A recent
survey by the U.S. Department of Agriculture estimated that the cost
of raising a child from birth to age 17 is a quarter million dollars for
a middle-income family. But you don't have to be a millionaire to raise
a family--you just have to create a budget and stick to it.

Difficulty:

Moderate

Instructions

1. Get familiar with your spending patterns. See 228 Design a Savings Plan and 227 Get Out of Debt, then clean up your financial act before the new arrival.

2. Ask friends with children what various pieces of baby gear and other necessities cost. See 254 Prepare for a New Baby.

3. Create a list of your current, prebaby expenses (see 226 Set Up a Budget). Once you learn where your money is going, you'll be able to figure out how much of it you can save and reallocate toward baby expenses. If you need to use fertility services such as a sperm bank or in vitro fertilization, add those costs to the equation. See 252 Plan for Artificial Insemination and 253 Prepare for an In Vitro Fertilization.

4. Assume that your household expenses will rise after having your baby, and adjust your budget accordingly. Include essentials like diapers, baby food, clothing, doctor visits, prescription drugs and medicine. Initially, set aside about $200 extra for household bills, and adjust that figure upward as you get a better handle on your monthly budget with baby in tow.

5. Act early to find child care, since many day-care centers have waiting lists. Take the time to do your homework and find the right one for your child and your budget without rushing. See 263 Arrange Quality Child Care.

6. Make sure your home is energy efficient. Conserve water and energy, replace inefficient furnaces and water heaters, and bolster insulation. These measures will help keep utility bills in check despite the larger household.

7. Be cost-conscious about baby clothes. Enjoy the largesse of friends and relatives who happily pass on their children's outgrown clothes. Buy used kids' clothes at deep discounts. Check out manufacturer outlets for bargain buys, and shop during sales and inventory markdowns. See 255 Organize Your Maternity Wardrobe.

8. Start your baby's college fund now. By socking away as little as $50 per month, you can build up a formidable college fund by the time your child reaches 18 years of age. See 235 Plan for College Costs.

Tips & Warnings

• Save for school. Any extra money that isn't needed for bills, debts or regular expenses should be added to savings for your child's schooling.

• Leave that convertible on the lot and opt for a solid, dependable, safe family car. (Sigh.)

• Factor in one-time charges for essentials like a car seat, a crib, a changing table, a stroller and maybe a new coat of paint in the nursery.

• For a breakdown of average prices for baby items, check out surebaby.com/costs.php.

• Food is one of the biggest chunks in your budget. Take measures to reduce food spending--less eating out, more shopping the warehouse stores--to improve your bottom line.

• Talk to your employer's human resources person before your baby is born and ask about how your benefits package will change.

• Add your baby to your health insurance as soon as he or she is born--it's not automatic.