Dealing With Debt While Preparing for a Baby
Updated: Sep 13, 2022
Dealing With Debt While Preparing for a Baby
by Rue Jyoti
Having a baby is more than just about bringing a new life into the world. It means a lifetime commitment and dedication to guide and shape your child. That said, welcoming a baby shifts your priorities, including your finances. Based on the most recent report published by the USDA, raising a child up to age 17 in the U.S. could cost approximately $284,570 for food, shelter, and necessities. And this can be very challenging when you still have debt to take care of.
However, that doesn’t mean that you must pay off all your debts before your baby arrives. What you need to ensure is that you’re able to get your debts down to a manageable level without compromising your savings or household budget. Here are a few ways to deal with debt before your little bundle of joy arrives:
Re-evaluate Household Budget Allocation
Americans in their childbearing years (18 to 34) have an average of $36,000 in debt; 34% of their monthly income is put aside for paying for this debt. That, in combination with running a household and preparing for a baby, could seem a lot. If you’re a first-time parent, we’ll let you in on a secret: Babies don’t need much to be happy and healthy. They don’t need the fanciest gadgets or toys. Instead, choose items that are practical and useful like JPMA’s Most Innovative Baby Products. Buying new baby things is exciting, but don’t go overboard.
You may also need to cut back on certain things you previously spent a sizable portion of your budget on. Do you really need all those streaming services or do you just need one for the household? Does it cost you more to get takeouts than cooking at home? These things may seem insignificant at first glance, but when you put them together, you’ll find that there’s room for you to cut down on these expenses. Then you’ll actually have more money to put into paying off your debt.
Consolidating Debt
Having debt stacked in multiple accounts, let alone in different institutions, makes it hard to keep track of all of them. When that happens, the interest rates could quickly snowball into ridiculously high amounts, and then you’re really in trouble. Consolidating debts means that you combine all your debts into a centralized debt, such as a loan.
While it may seem counterintuitive, Marcus details how a debt consolidation loan could actually benefit you in the long run, as it simplifies your finances and even saves you money through lower interest rates. You are essentially consolidating multiple balances into a single payable account, but since most consolidation loans offer much more favorable payoff terms, you’re better off with one debt than juggling multiple debts. As expecting parents with a lot on your plate already, simplifying your debt will be one less stressful thing to think about.
Halt Debt Acquisition
Stop overspending, since that alone can rack up a large amount of debt. A simple way to do this is by halting all unnecessary credit card spending. A U.S. News finance columnist even advises removing all credit cards from your wallet and leaving them at home when going out to shop. She suggests that you stop using credit cards altogether until you have your finances under control — cash back and credit rewards considered.
If you do a lot of online shopping, odds are that you have your credit card details saved on the merchant sites. While you may argue that it’s more convenient this way, it’s also a quicker way to buy items that you don’t really need (and we bet you have already bought more than you need for your baby); so clear that online information too. For essential recurring services payments, consider using a debit card issued from a major credit card service provider that’s linked to your checking account instead.
Becoming a parent means that you’re personally, emotionally, and financially responsible for your child. It’s a huge undertaking, but it’s absolutely one of the most rewarding things, too. Just make sure you are financially prepared by following the above tips.
Specially written for firsttimeparentmagazine.com by Rue Jyoti.