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Pregnancy vs. paying down debt

How to fit a baby into your financial future

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The price of parenthoodYour heart -- or your ticking biological clock -- says it's time to have a baby. Your credit card bill, however, may be saying something else. That heart-versus-head argument is forcing a number of prospective parents to make a tough decision: Throw finances to the wind with the birth control? Or postpone having children until you pay off your cards?

The price of parenthood
In a recent BabyCenter.com poll, 68 percent of the new parents surveyed carried credit card debt when their baby was born, but 51 percent believed families should be debt-free before having kids. Why the disparity? Blame newborn sticker shock. Housing, clothing, food, child care and other necessities for a baby can cost a staggering $15,000 a year, according to the U.S. Department of Agriculture. Add to that a maternity leave or a part-time postpartum work schedule that reduces income, and the resulting cash crunch can wreak havoc on your finances. "A lot of people don't realize how expensive a child can be," says Erica Sandberg, author of "Expecting Money: The Essential Financial Plan for New and Growing Families." "If you already have debt, you're already behind."

The biggest baby expenses
The baby is tiny, but the costs of having him can be enormous. Plan now for these budget busters:
  • Prenatal care and delivery: From the first prenatal visit to birth, the average cost of a normal pregnancy and delivery is around $7,600. Make sure your insurance covers maternity care before you get pregnant.
  • Child care: Depending on where you live and the type of care you want, you could pay anywhere from $3,900 to $14,600 for full-time care for an infant -- or more if you opt for a nanny or in-home provider.
  • Health insurance: Your monthly premiums could go up by $100 or more when you add a new infant to your plan. Call your provider to get an estimate.

For Kristina Windt, of Easthampton, Mass., those were reasons enough to ditch her credit card debt before trying to get pregnant. "Kids and debt are both stressful," she says. "If I'm going to be up most of the night with a screaming baby, I don't want to be lying awake the rest of it wondering how I'm going to afford day care." 

Still, plenty of parents are winging it. Ellie Kay should know. The financial expert and author of "A Tip a Day with Ellie Kay" was $40,000 in debt when she quit her job as a stockbroker and had five children in seven years. "There's this hidden factor that can't be measured on the bottom line, which is, 'Is having a baby right for us?'" she says. Still, she adds, being baby-hungry isn't enough to keep a family financially afloat. "When we had our children, we accepted a much lower standard of living. We got creative in the ways we paid down debt and made ends meet. In two-and-a-half years, we were debt-free."

Counting the cost
While in an ideal world, everyone would erase their debt before becoming parents. "The reality is that if you wait until the perfect time to have a baby, it'll never happen," says Karin Maloney Stifler, a financial planner and owner of True Wealth Advisors in Hudson, Ohio. "The decision always involves a certain leap of faith."

Do your homework beforehand and you can ensure that your new baby won't break the bank. Here's how:

1. Analyze your debt. If you can afford to pay more than the minimum on your credit cards, have started to chip away at the total and have a cash cushion at the end of each month, your debt probably shouldn't stand in the way of your plans for pregnancy. If you're struggling to keep up with minimums or continuing to add to the balance, then you're already living above your means. A new baby will only make your bad financial situation worse

Kids and debt are both stressful. If I'm going to be up most of the night with a screaming baby, I don't want to be lying awake the rest of it wondering how I'm going to afford day care.

-- Kristina Windt
Easthampton, Mass.

2. Crunch the numbers. Make a spreadsheet of the expenses you expect a child to add to your tab, including prenatal care, diapers, formula and child care. For estimates, talk to other parents, call day care providers and pediatricians in your area and browse baby stores. Also consider how the little one will impact your income if you decide that one parent should stay home and care for the baby -- even if that's not in the plan right now. "When I had my first child, I thought I was absolutely going to continue to work full-time," says Maloney Stifler. "But once I had that baby in my arms, I changed my mind."

3. Overhaul your budget. Want to make room for a baby? Slash your spending. "My wife and I made use of a 0 percent credit card transfer to consolidate our $8,000 of credit card debt, then we cut our expenses on things like cell phones, auto insurance, garbage bills and eating out," says Joe Morgan, who lives in Schuylerville, N.Y., and blogs about paying off his credit card debt.

4. Do a test run. Once you've made a rough estimate of how much you think you'll need when the baby comes along, set aside that money now for credit card repayment and see if you can hack the tighter finances. "We knew that when the baby was born, my fiancee was not going back to work, so we practiced living on my income alone by putting hers toward debt reduction and savings," says Shaun Ramos of Denham Springs, La. "We managed to pay off $9,300 in debt."

The price of infertility

Wait too long to try for a baby and you could end up shelling out more to treat infertility.

According to the American Society of Reproductive Medicine, one cycle of in-vitro fertilization averages $12,400 -- and not only do many insurance providers refuse to cover the procedure, a successful result isn't guaranteed.

That reduced their credit card payment by $550 a month -- money they now use to care for their 6-week old daughter, Hailey.

5. Keep your eyes on the prize. To keep herself from blowing the money from a better-paying job on extras, Windt had part of her paycheck direct-deposited into a savings account, which she used to pay off her credit cards. She also continually reminded herself of her ultimate goal. "I really tried to associate paying down the card with getting what I wanted: babies."

6. Lower your expectations. While it's tempting to spend on high-end strollers and designer onesies, avoid amping up your lifestyle for your baby's sake. "Yes, you want the best for your baby, but the best for your baby is a good financial future for your family," says Kay. "You might be buying a $60 car seat instead of a $300 one, but that's OK." Borrow gear such as swings and slings, stockpile on-sale diapers and hit consignment sales and garage sales for clothes and toys. If you really want a baby, you'll be happy to outfit her for less.

The bottom line
For couples dreaming of pregnancy, tackling credit card debt probably isn't at the top of the to-do list. To Sandberg, that's like starting your own business without a business plan. "People say, 'Oh, everything will work out,' but the moment you get pregnant is the moment you need to start looking at your finances and say, 'How can I make the most safe, secure financial environment for my growing family?'"

Whether that family comes now or later.

See related: Hiding credit card debt from your significant other; 11 signs your mate has credit problems

Published: September 2, 2008


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