Baby costs can often be drawn out over a significant period of time. The costs leading up to having a baby can stretch for months and can take plenty of planning to cover. After our first child, I realized that there was a sort of pattern to our financial planning for having a baby, something along the lines of a continued string of smaller costs over time, followed by one bigger, final lump sum payment. This realization helped us plan and budget better for our second child.
Maybe the most important aspect of our being able to budget for our most recent baby was having an understanding of our health insurance coverage. There were several aspects of our insurance that we needed to take into account. First off, there were the deductible and total out-of-pocket amounts. Our deductibles per person were $1,100, but in a baby birthing situation, it's almost guaranteed that we would not only meet our deductible but that we would hit our maximum out-of-pocket costs as well, which were $3,100 per person. Therefore, to be on the safe side, I took this $3,100 total and doubled it (one max out-of-pocket amount for my wife and one for baby) for a $6,200 maximum insurance cost. But this wasn't the end to our insurance figuring. My wife had an employer contribution account of $1,400 to help with her annual insurance costs that would be applied before we ever had to contribute a penny of our own money; therefore, this lowered our actual budgeted out-of-pocket costs to about $4,800.
Estimating Other Costs
There are a variety of costs that we encountered during our baby preparation period in addition to the health care side of things. Getting ready for baby occurred in numerous aspects and in a variety of ways. From the feeding side of things in which we bought items like supplemental formula and water, got some new bottle nipples, and ordered some extra breast pump supplies, to preparing for diaper changing in which we bought new changing table sheets, diapers, wipes, and similar accoutrements. Then there was clothing items, things like a new swing, a playard, and all the rest, which added to the slew of items that we had to buy in order to prepare for baby. Each month we'd add a few more items to our baby buying list so as to ease into the next step or our budgeting process, breaking costs up over time.
Breaking up Costs over Time
As just about anyone who has ever had a baby knows, it's usually an extended period over which baby costs add up, sometimes covering an entire year or more. There are piecemeal insurance bills that arrive monthly. There are those supply costs that hit $20, $50, or $100 at a time as we buy things like a new baby swing, clothing, diapers, formula, playard, etc. Then there is usually that big bill or two that hits several months after baby is born for the final birthing costs.
Therefore, when I do our budgeting for baby, I tend to break up our lump sum amount over time. I'll start portioning our $200 or $300 a month over a seven or eight month period to cover all those smaller expenses that arrive, and then I'll stick a big chunk of additional expense coverage into our budget about two to three months after baby is born. Doing this helps even out our budget over time, covering regular costs, but also planning for that last big hit when a large chunk of remaining out-of-pocket medical costs arrive.
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