Congratulations! You have recently found out that you have a baby on the way. This is a very exciting time with a wide range of emotions. You are about to venture into a dizzying array of information overload. Everyone will be telling you what you need to do. Listen and take notes. Don't just do what someone else says, talk with your spouse to determine a game plan. One of the most important game plans will be your finances. Below are steps to show how to make a budget for a baby. This framework will get you started on the right track.

Step 1:  Have a budget. It is important to remember that budgets are not set in stone. They are a fluid document that needs adjustments regularly. If you do not already have a budget in place, please refer to a previous blog about Budgeting: Where to Begin. Already have a budget? It is now time to factor in a baby.

Step 2:  Factor in the baby. It is best to break this up into two groups. Healthcare costs will be the first group. The second group will consist of baby stuff, hopes, and dreams. It is important to have a solid grasp of the expenses that will come. Knowledge helps to plan what to do next. Use some of the resources listed below but make sure to dig deeper into your own situation.

Two of the biggest medical expenses is prenatal care and the delivery. According to a New York Times article from 2013, the cost can vary greatly. Their totaled costs of $33,837 would not be uncommon and likely higher today. Having insurance will play a major role in drastically reducing the out of pocket expenses. Make sure to do your homework and find out what your insurance covers.

Now let's talk about the stuff. According to an article, the average cost for the first year is $12,000. Use this calculator to get you thinking about all the expenses. By knowing what to expect during the child's first year you can develop a plan accordingly. We will talk more about the subject of stuff in step 4.

Step 3:  Focused savings. It would be wise to aggressively save during the pregnancy until mom and baby are home safe and sound. If some complications arise, it is best to not make them worse by going into debt to cover the costs. Start by looking at areas where you can cut. Some great places to start are groceries, dining out, gas, cable, internet, and cell phone bills.

Another possible option to accelerate your savings is to stop contributing to your 401k during the pregnancy (a financial professional can help you determine the best course of action given your circumstances). The reason I say you might want to stop contributing to your 401k during the pregnancy is because if you desperately need the money it will come with a penalty and a tax. The only way to receive 401k money without a penalty is by retiring after age 59 1/2 or if you qualify for a hardship exemption (may still incur a tax). Also, because your contributions are pretax, it can be a sizable amount in your pocket each month. If you make $50,000 per year, you would get $125 additional dollars in your pocket each month if your current contributions are 3%. Contributing more than your company match? Great! You have the option to just lessen the percentage to still keep the employer's contributions and increase your monthly savings. Warning, stopping the 401K should not be done just because you aren't willing to say no to the fun things - such as a babymoon, maternity photos, 3D ultrasound etc. It is very important to stay focused on just the necessities. "I mean the bear necessities" (Jungle Book reference).

Step 4: Combat unnecessary purchases. Do not get trapped into the world of all the baby gadgets. Retail stores know new parents equal big dollars. Here is an article from Forbes about how Target was able to figure out that a teenage daughter was pregnant before the father. Why did Target take the time to figure all this out? Because they want to make money and they know emotions are high. When emotions are high, irrational decisions are often times made. This is where your budget will be really helpful in fighting off the temptation to buy. Every time you think about buying something refer to your budget (this is where a mobile app is great like the one our clients have). Let the budget tell you if it is ok and not your emotions while sleep deprivation is plaguing you. Asking yourself the question "who is this really for?" can be very powerful. An example would be a $1,000 crib is most likely for yourself and not the baby. The baby will never remember it and will want to be out of it as soon as possible.

Step 5: Seek out professional financial help. You now have a little one to look after and it would be wise to have some help in figuring out the confusing world of finances, one of which is insurance. All financial advisors and planners are not created equal. It is important to know their motives to ensure you are taken care of. Ultimately, you are responsible for your finances.

Lastly, it is very important to have a will.  Without one, the state you live in will determine what happens. This can be costly and it can tear families apart from fighting over what to do with everything. If you are a single parent, the state will appoint who will be the guardian of your child if you do not direct it in a will. Make sure to seek legal counsel when drafting a will.

I know a lot has been thrown at you. Just remember that you can do this. Wise Pace's mission is to provide you with unbiased coaching and planning. We are here to walk beside you as you navigate your life with finances. As always, if you need help we are here.