The most common question my husband and I have been asked since we got married a couple of years ago is “When are you guys going to have kids?” Each time, we give the same answer — that were not ready for a baby yet. We’ve often received the following response: “If you try and wait until you have enough money, you’ll never be ready.” This response often bugs the both of us because we strongly disagree.
I’ll admit that if a couple were to not take into consideration the extra costs of having baby and don’t plan for that, then they would be severely surprised and indeed realize how un-ready they were when that baby comes. I also know that there can be certain expenses that come with a baby that aren’t typical or normal. However, I do believe that you can have a financial plan in place with measureable goals and, for the most part, really be financially ready for that baby.
Sometimes I think people use the “you’ll never fully be ready for a baby” excuse as just that — an excuse to not financially prepare. Some people would just prefer to take the hit as it comes and deal with things as they happen, but that is not me. I am a planner and if I can have a plan in place, I will. That’s why we have a financial plan in place so we can actually be financially ready to have a baby. We want to make sure we can afford all our bills and still have money to save and invest when we take that huge step into parenthood. We want to be able to do all this on only one income so I can stay home with our kids, which is an even more important reason for us to have a plan. Below are the steps of our plan that we are presently carrying out (we are currently on number 3 at this time so we’re almost half way there).
Pay off all credit card debt: There will undoubtedly be extra expenses in our budget with the addition of a new family member. We want to ensure that we don’t have more than necessary tugging for a portion of our income. No credit card debt means no credit card payments and peace of mind knowing that we don’t have to figure out a way to pay off our balances.
Buy a house: While I would recommend everyone to pay off their credit card debt before having a baby if possible, this one is more of a personal preference for us. I wanted to be in our own home first for a few different reasons. First of all, it was a lot easier putting money down on the house and paying for all the initial home costs with two incomes. We were able to buy furniture, window coverings, yard supplies and various other things we didn’t need in an apartment. In addition, I know we don’t have to worry about our landlord deciding to sell our house or raising our rent. We have a fixed rate mortgage and we know that will be the amount of our payment until we sell the house. And a third, more personal reason I wanted to own our own house is that I wanted to feel settled before starting a family. Having our own home puts me at ease because I know we’ll be here for a while (and I like the idea of being able to paint my baby’s room).
Have 6 months living expenses in an emergency fund: We broke this step into a 2 year timeframe. Our goal was to fund 3 months of expenses in our emergency fund last year and our next goal is to fund the additional 3 months this year. We completed our goal last year and are now working on the second half. I know that we won’t have as much extra money at the end of the month on one income as we do now on two incomes, so I want to take advantage of our extra earning power right now and make sure we have our emergency fund established and fully funded. We like having the peace of mind that we will still be able to feed and clothe our baby if an unexpected expense were to come upon us while we are only living on one income.
Buy a family friendly car: Right now we have two two-door cars that are extremely fuel efficient and pretty cheap to drive. Plus they are both paid for. While our cars are wonderful, I know that a 2 door car will not be ideal when I need to put a baby in the back in a car seat. A four door car that has a little more room than our current 2 door Honda Civic will be a bit more practical when our family starts growing. We still plan to keep our Civic as my husband’s commuter car, but we also want to buy a more family friendly car. Since we want to keep our monthly expenses to a minimum when we are living on one income, we plan to pay cash for the car, or at least pay off the loan before we have a baby if we do decide to finance. I know many people who are perfectly content having a monthly car payment (or even two) but we’re pretty fond of not having any car payments. This goal is really helping us in our search for a newer car as well because we’re not concerned with only monthly payments, but we are heavily interested in the bottom line and how soon we can pay the car off. This helps us stay focused on what we can actually afford (or should I say what we actually want to spend) and not get trapped by the lower-monthly-payment-but-longer-loan deal.
Finish our basement and complete other major home improvements: Before we have a baby we want to finish our currently un-finished basement and move our spare bedroom down there and also create a rec room. This will enable us to put a nursery upstairs where our current guest bedroom is, as well as have a play area for our kids. We have more than a few plans to remodel additional areas of our home in order to increase the value when we sell later. My father-in-law is a contractor and knows how to do pretty much any project so with his help we are able to do a lot to our house without hefty labor costs. Of course, we still have to pay for materials so we need a certain amount of money to be able to put into the house. Since we won’t have a lot of extra money left after our one income, we again want to take advantage of the double incomes we have right now. Our goal is to raise the value of our house quite a bit so that when we need to buy a bigger house for our growing family, we will be able to take the equity from our current house and use that as a 20% down payment on another house.
Wait for our one income to increase enough to cover our expenses: We already know that my husband will be the one to work while I stay home to take care of the kids, so we are also waiting for him to be established enough to make enough money to cover all our expenses. Now this isn’t a long shot for us — we’re not waiting for his salary to double or anything because we realize that would be pretty unrealistic. In fact, we’re only a couple hundred dollars off from our monthly goal. We’ve already done what we can to lower our monthly expenses so that we won’t outspend our income and honestly we could probably live on only his income at this point in time, but we want to have an extra cushion to be able to continue saving and investing. In addition to this, I am also looking into ways that I can make some extra money per month while I am staying at home. Whether it be blogging, watching other people’s kids, running errands, etc. I know that I can make a bit of money on the side to help with saving and investing. As long as my husband’s income can pay all the mandatory bills, any income I am able to generate in addition to that can be used at our discretion.
So when people tell us that we’ll never be financially ready for a baby, I know this in fact is not true. Sometimes I’ll share the steps of our plan, and sometimes I won’t in order to not to start an arguement. But the truth of the matter is that we are taking steps be ready for this big new step in our lives and I believe when the time comes, we are going to be thankful we did.
Image courtesy of kton25