New parents, you’d better budget for that baby

When I was having my first child 19 years ago, my friends and family were very concerned.

Knowing my penny pincher nature, they weren’t sure I would buy much of anything for my newborn. So they threw me a shower. I received some wonderful and very thoughtful gifts.

But you know what? Most of the clothes and items were barely used.

If you’re expecting, focus your finances on the big-ticket items, such as day care. Consider this sobering news from the U.S. Agriculture Department, which releases an annual report on the cost of raising a child. A middle-income family with a child born in 2012 with an income between $60,640 and $105,000 can expect to spend about $241,080 until the child is 17 for food, shelter and other necessities. For a family earning less than $60,640, expect to spend $173,490. A family earning more than $105,000 can expect to spend $399,780.

After the cost of putting a roof over the head of your child, the next biggest expenses you will face are for care and education, including baby-sitting, day care, books, fees and supplies, and if you send your child to private school the cost of elementary and high school tuition.

You can go to usda.gov and search for “cost of raising a child.” The calculator can be tailored to give you an estimate of your costs based on where you live, your household size and income. You can compare what you spend to the national average.

Here are some steps you can take to prepare for your little bundle:

Baby step 1: Start collecting price information. Before you can budget, you need to know what things will cost. Don’t wait to find out after the baby arrives. Check out the major expenses from diapers to day care.

Baby step 2: Baby-proof your budget. How are you going to pay for the expenses of raising a child? Either you’re going to make more money or you’ll have to cut current expenses, or both. If it’s just the latter, something’s got to give. There are a number of free budgeting sites online. One of the most popular is mint.com. The site also has articles that will help you save. In particular, search for the posting on mint.com on baby gear money traps.

Baby step 3: Dump the debt. Do as much as you can to get rid of it so that you can have more money for baby expenses. I favor a debt buster method in which you list all your obligations starting with the one with the lowest balance. Throw any extra money at that debt while making the minimum payment on the rest. When you’ve paid off one, move on down the list.

Baby step 4: Build a savings safety net. Just like you have to baby-proof your house, you need protection in case of emergencies. Start or build up an emergency fund aiming for three to six months of living expenses.

Baby step 5: Start saving for college soon after the baby is born. In fact, when people ask what you need or would like, tell them you would love a contribution to your child’s tax advantaged 529 college savings plan (but only if they ask and insist on getting the baby something). One of the best sites for information on 529 plans is savingforcollege.com.

Right about now you might be thinking, “A pet would’ve been cheaper.”

Just kidding. As the mother of three, I know you’ll get priceless joy from having children. Just plan and be prepared for the stuff that costs money.