Managing your finances is tough. Here’s how you can make a start.
Seeing that positive pregnancy test can be thrilling and terrifying. Suddenly your future is full of big decisions. One of the things that young parents often spend a lot of time thinking about is finances. Between doctor’s bills, childcare, clothes, toys, groceries, and rent, it’s easy to feel like you’ll never have the wherewithal to support a child.
Having thousands of dollars in debt can make that future seem more frightening. Research done by an independent, consumer finance think-tank showed that two-thirds of millennials have at least a student loan, mortgage or car loan to pay off, and a third have more than one of these. In addition, most millennials carry debt on credit cards at a high interest rate, often incurring late fees as well. They consistently report anxiety about debt and difficulty making payments.
The good news is that it’s possible to get out of debt so that you’re better able to support your child. It takes work and planning, and it is rarely easy. However, it is possible, and it’s a good step towards building a secure financial future for your son or daughter.
1. Determine how much you owe.
When credit card bills and other statements come in the mail, it’s easy to just keep making the minimum payments without ever looking at the total you owe. Take some time to sit down with a calculator and make a grand total of all the debt you have – auto loans, student loans, credit card bills, cash advances, etc. This total should not include your monthly expenses, like rent, car insurance, cable bill, electric bills, or any other similar charges. For now, focus only on your debt.
2. Decide what kind of payments you can make.
Once you have calculated how much you owe, consider how much money you have left over after paying your monthly expenses. Is it enough to make the minimum payments on your debt that you owe every month? If not, what about your lifestyle can change? Can you get a roommate or find a cheaper apartment? It can be difficult to get an extra job or work more hours during pregnancy, but you might be able to make other kinds of sacrifices to save money.
If you do have enough to make the minimum payments, how much more can you put towards the balance on the card? A good rule of thumb it to try to pay down high interest debt first. Usually short term debt, like credit card debt, has the highest interest rate, so start with these balances and try to pay them off quickly. It will feel satisfying to get rid of an entire source of debt altogether and give you motivation to keep going.
3. Keep your living expenses low.
Since you may have to reduce the number of hours that you work while pregnant, focus on economizing and building an emergency fund. Since you are getting ready for the arrival of a baby, it’s easy to focus only on the things that you need or which are fun to buy, but don’t let this derail your financial goals. If you have to stop working at some point during pregnancy, you’ll want to know you can pay your rent, and having an emergency fund for this will ultimately give you peace of mind.
An easy way to stay on track financially while preparing for the baby is by shopping secondhand. Ann Arbor and Ypsilanti both have large and well-organized secondhand stores where you can find baby gear and clothes. The Once-Upon-A-Child chain is particularly well-stocked with various large items like strollers and clothes ranging from newborn to child sizes. You might also be surprised how many things you can borrow from friends whose children have outgrown the baby years. If you’re looking for a particular resource, you can contact us for a referral to relevant community programs. And Arbor Woman clients who participate in our Safe Sleep Class are provided with layettes filled with newborn essentials and pack n’ plays.
While you are pregnant, programs like WIC can help you cover your grocery bills so that you have more money to put into savings or towards your debt. And there are several non-profits that can help if your debt is putting you at risk of losing essential services like heat and water, or if you have emergency medical expenses, or need transportation or childcare. Check out the full list of these resources.
4. Assess your financial habits
What is the source of your debt? Are you an emotional shopper? Do you frequently eat out at expensive restaurants? Perhaps you have large student loans you have to pay back. Some debt is the result of a crisis, such as a car breaking down, a job loss, or an unexpected injury. But other debt is well within our control.
Now is the time to take a hard look at your spending habits and earning prospects. A pay increase will only improve your financial situation if you can manage money well. On the other hand, you have to realistically assess your earning potential. How much money do you actually need to make to live comfortably? Focus on finding a job that lets you make real progress towards your financial goals.
5. Don’t be afraid to ask for help
Be honest with your friends and family. Explain that for a while you’ll be living a simpler lifestyle to put yourself in a good financial place when your child arrives. Suggest that you go to the park instead of mall, or cook dinner together instead of eating out. This will help you stick to your goals and give you some accountability. Ask that they remind you of your financial plan if you’re about to make an impulsive purchase.
Getting out of debt doesn’t happen all at once, but by facing the situation honestly you are doing the best thing for you and baby. With support from your community and friends, you can build a secure future for you and your child.