The Financial Impact Of The New Baby

Back in April, my wife gave birth to our third child, a beautiful baby girl.  Prior to the birth, I wrote about some changes that we were making to our budget, to prepare for life with the new baby. I made some predictions, based on what I thought we might have to deal with, once the new baby arrived.  Let’s see how I did (items in italics are quoted from the original article):

Categories That Have Increased –

Grocery – When the baby arrives, we’ll be buying diapers, pacifiers, formula, food, wipes, etc. Plus, we’ll be eating-in even more…

Indeed, our grocery spending has increased, by more than 20%!  I attribute this to the fact that a) I have less time to focus on my shopping and b) grocery prices have increased, across the board, for everyone.

Electricity – A new baby means more loads of laundry, more baths, and more lights (turned on during the middle of the night). Plus, our two older kids now have televisions in their rooms so that they can watch and…

Our electric bill was very high last month.  It has been very, very hot here the last six weeks.  Hopefully, as it cools, we can run the air less and conserve a bit of electricity.  Plus, with the new baby, we are constantly washing clothes!

Medical – Our doctors are all located about 50 miles from where we live. (We also have a ‘back-up’ doctor here in town, but we’ve been with our pediatrician for almost a decade…

Our medical expenses were actually a little less than I had anticipated, until last week, when baby girl had to be admitted to the hospital.  (She’s home now and doing well!)  Our insurance will pay the bulk of the hospital bill, but we’ll still have to cover our part.  We may actually go over budget in this category, once all of the bills have come in.  If so, I’ll have to borrow from some other category.

Clothing – A new baby needs new clothes. Of course, with four awesome grandparents, she’ll probably have enough newborn outfits…

As expected, the grandparents and friends bought more clothes than a dozen babies could wear!  We are so blessed.  But, Mommy needed some new clothes, after the baby was born, and both of the older kids needed back-to-school stuff.  Still, all expenses were covered by our new budget.

Daycare – In August, we’ll have two kids, not just one, in daycare…

We’ve been preparing for this added expense for almost a year, so we are prepared.  Baby girl started daycare yesterday, and she did great!  Big brother is SO proud to have little sister with him.

Categories That Have Decreased –

Entertainment – Let’s face it. With a new baby, we just won’t have the time (or energy) to go to the movies or rent DVDs. We are pretty much homebodies anyway…

I pretty much nailed this one.  Our lives have settled into a pretty steady routine.  Once in a blue moon, Mommy and I will rent a DVD, but we spend most of our waking hours taking care of the kids.

Eating Out – Not only am I trying to lose weight, but we’ve grown tired of eating out…

Actually, we still eat our more than I’d like.  But, we have eliminated expensive meals.  Instead, we’ll grab a sub sandwich or grilled chicken sandwich.

Vacation – We will, more than likely, not go on a true ‘vacation’ in 2008…

Uh, ignore the above sentence.  The baby is so well behaved, we were actually able to go on vacation – when she was just 5 weeks old!  We spent a wonderful week at the beach and had a blast.  I actually suspended our savings plan for two months, and use the money that would have gone into savings, for our vacation.  Bad form?  Perhaps.  Great time?  Indeed.

Other Financial Impacts –

When I file our 2008 income taxes (in 2009), we’ll be able to claim a third dependent. This should reduce our taxes for 2008…

Not only will we be able to claim a third dependent, by my wife’s gross income will be less in 2008 than it was in 2007.  She took off the last few weeks of school to stay home with the baby.

I did a pretty good job of predicting our new budgetary needs.  But, creating a budget always involves a little guesswork.  Over time, I get better at figuring out what my monthly needs might be, and I’m constantly modifying my budget to fit the actualities of my life.

By the way, if you are looking for an easy-to-use budget, check out YouNeedABudget.com

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11 thoughts on “The Financial Impact Of The New Baby

  1. Last November when we had our little guy we went through the same thing. Our budget changes are very similar. But we were unable to breastfeed and so we spend about $125-150 per month on formula alone. EHGADS!! And it seems that recently Fiance has been getting cabin fever and our entertainment expenses have gone up. I’m still trying to work on this one. But he works hard so I have a hard time telling him no. 😉

  2. We just recently had a third baby too (she is now 6 1/2 months old). We have basically experienced all the same changes in the budget that you mentioned above. Of course, the third one does not have such an impact as the first two do, especially since we already had a girl so all the clothes can be used again, and there is no need to buy new baby gear or toys. But we have seen increases in daycare and groceries for sure. The one that we really didn’t predict well though was increases in transportation costs. We had to buy a minivan (both of us had VERY OLD compact cars previously and we could not fit all three car seats in the back). We planned to buy the minivan and paid cash, and also we knew that the minivan would use more gas and cost more on insurance. However, we were unlucky that gas prices have increased so dramatically it is especially hard on our budget because we were used to such good fuel economy with the other cars. In addition, I did not anticipate the increase in the annual registration fees for the new minivan because our other cars were so old they did not cost hardly anything to register them. Now we have a brand new (to us) minivan which costs $300/year to register, versus $60 with my old car. There is always something unexpected. Kids are really expensive, but it is well worth it. I would love more but I don’t think we can afford them with all the increases in expenses we had with the third one.

  3. And don’t forget that the extra dependent will readjust your stimulus calculation resulting in an even bigger refund.

  4. And don’t forget that the extra dependent will readjust your stimulus calculation resulting in an even bigger refund.

    pksublime – YNAB forums

  5. My wife and I just had a talk about when to plan for a second child. If we want to meet our plan of having them about two years apart, she would need to get pregnant in the next few months. With finances being one reason, we have decided to wait just a little longer.

  6. @ Curt – The number is hard to nail down.. that’s why I tried to show the impact, across the board…

  7. @Amy… we had two older tvs just sitting around, so I put them in the kids’ rooms, so they can watch movies, etc. w/ friends…

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