The Guide to Budgeting for Baby

Karen Carr, CFP®

The average cost of raising a child to is now $245,3401. Keep breathing. We’ll show you the way to pull it off without going broke, whether you're already budgeting with ease or a single mom who's trying to make it all work.

Budgeting can be hard with a new baby on the way. It’d be easy enough to write off the exercise completely. But a good budget doesn’t just affect how you spend your money today, it affects the options available to you – and your growing family – tomorrow.

With a new baby on the way, it may feel like there are more questions than answers. Don’t panic. We’ll start with your current situation, help you anticipate your new baby-related expenses and help get you on the right track in no time.

1. Categorize the Money You’re Already Spending

The first step to creating a budget is understanding where you’re starting from. Download your credit card and bank transactions for the last 3 months and put them into a spreadsheet. If you prefer a less manual approach, try a free personal finance app like Mint, Level Money or Albert.

Next, bucket your spending into 10 or fewer categories. Here are some examples that work for us, but feel free to tweak based on your lifestyle:

  • Housing (rent, mortgage, property taxes, maintenance, homeowner’s association fees)

  • Utilities (electric, gas, cable)

  • Auto (gas, insurance, maintenance)

  • Food (groceries and dining out)

  • Entertainment (music, movies)

  • Clothing

  • Insurance (medical, dental, life, homeowner’s)

  • Debt Payments (student loans)

  • Savings (rainy day fund, investments)

  • Miscellaneous (date nights and other romantic gestures, movies, gifts)

Averaging your total spending for each category over the last three months will help to smooth out any out-of-the-ordinary transactions that happened in one month or another. This is your starting point.

Avoid the urge to do this in your head. The numbers don’t lie. Spend the time and embrace it.

2. Add New Baby Expenses

Whether you’re preparing for your first child or expecting another, your spending is going to change. List all of the new expenses you expect to incur. Include both the big and small: diapers, formula, childcare, strollers, cribs, and clothing.

At a loss for what’s to come and how much it’s going to cost you? We’ve pulled together some of the biggest one-time costs2 and an average range of what people spend to give you a sense of where to begin:

  • Infant car seat ($60 - $150)

  • Stroller ($70 - $900)

  • Baby carrier ($25 - $120)

  • Diaper bag ($25 - $200)

  • Changing table ($80 - $250)

  • Crib ($120 - $850)

  • Baby monitor ($40 - $60)

  • Bouncer/Baby Seat ($30 - $70)

  • Highchair ($60 - $250)

Don’t forget the recurring monthly costs as well. We’ve listed some examples below, but costs vary widely by location so you will likely need to do some research to understand what you’re likely to spend in your area.

Do your best to allocate the money you think you’ll spend on each. You can always update things later.

  • Daycare center, nanny, or daycare ($300 - $3,000 per month depending on type of care).

  • Food ($0 for moms who choose to breastfeed to $100 per month for formula).

  • Diapers ($20 per month for cloth diapers - $80 per month for disposable diapers).

3. Compare Income to Expenses

Tally how much income you expect to receive on a monthly basis going forward. Subtract your total expenses from your total take-home pay. This determines if you have a surplus or deficit.

If you have a surplus, that’s great! You can use this extra cash to up your savings or increase payments on your debt.

If on the other hand, you find that you’re running at a deficit, you’ll need to start making tradeoffs to make room in your budget.

4. Revisit Quarterly

Going forward, set aside time each month to revisit your spending over the past 30 days and see how you stacked up against your budget and financial priorities. The objective is to evaluate your budget and make sure it’s working for you. You made your best guess, but you can always reevaluate and revise. Adjust accordingly.

No one can steer a parked car. To get things rolling, start by understanding your pre-baby spending. Then layer in your anticipated baby-related expenses. Check in with your budget once a month to see how your actual expenses stack up. Sometimes we all deserve a little splurge. But keep weighing tradeoffs to ensure that your money goes to what’s important and not the unnoticed extras.

Got room in the budget to check life insurance off your list? See how easy Fabric has made it.

Karen Carr, CFP®

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