Can you believe that having a baby can ruin your credit score? It seems unlikely right? How can your bundle of joy ruin anything in your life?
It is difficult to blame babies when it comes to your finances but if you think about, there is some truth to the statement. Having a baby changes a lot about your life. As unfortunate as it may sound, your baby will ruin your sleep. They will ruin your social life. They will ruin even your moment of intimacy with your spouse. In fact, they can ruin every waking moment of your life. Everything changes once the little one is brought home from the hospital.
Of course, we do not mind all the things that babies ruin. We love them that much! But even if that is true, we can take control of certain things that they are bound to change.
Take for instance our finances. This is a major concern for a lot of people – starting with the hospital bills. WomensHealthMag.com compiled accounts from several women about their experience after giving birth. As they struggled with the coming of a new baby, they had to deal with the medical bills that started to pour in shortly after. If you look at the real stories provided, you will see how even those with health insurance are forced to pay huge sums after giving birth. It is surprising to see that those with similar procedures done had to deal with different costs. These differences were sometimes caused by varying health practitioners and insurance coverages.
If you look at the article, you will realize that having a baby can be very expensive. Take note that this is just the beginning. You still have a lot of expenses before you. From the baby equipment, clothing, vaccinations, check-ups, and the toys – all of these expenses can add up. If you factor in the child-care costs, you will feel a bit overwhelmed with the financial burden of raising a child.
It is quite a lot to take in – that is true. But even after all of these changes and responsibilities, you are probably still wondering – how does your credit score fit into all of these?
Different ways that your credit can be ruined after you have a baby
Believe it or not, your credit score is in danger after you have a baby. While your little one is not directly to blame, the changes in your situation can lead to certain mistakes that can cost you a good credit score.
Here are some of the things that you need to look out for because they can increase the chances of you getting a bad credit record.
Setting unrealistic baby costs
It is understandable that you have no idea how much your baby costs would take. However, it is your responsibility to find out. If you fail to consider the amount that baby expenses would cost, you might find yourself using your credit card a lot and failing to pay it off in time. Set realistic baby costs and include it in your budget so you can allot funds for it. This is how you avoid using your credit card on these expenses. According to BabyCenter.com, among the expenses that you need to consider includes the following:
- Formula (up to $100 per month). You can save a lot by breastfeeding as long as you can.
- Diaper (up to $85 per month). You can save by using cloth diapers instead. It is messier but a lot cheaper. Or you can buy diapers in bulk.
- Childcare (up to $1,000 per month). This will depend on what you will choose. Babysitters cost less but is not as reliable as daycare centres – which will cost up to $1,000 a month. It is difficult to save on this especially if you really need to work. If you live near a relative, it may be possible to ask them to look after your child.
- Baby gear (varies). You can save by opting for second hand gear – as long as these are not broken and you clean them very well.
- Clothes (up to $50 per month). This is another purchase that you need to buy second hand. Babies grow out of their clothes so fast that buying them new will waste your money.
- Food (up to $100 per month). This is an expense that you have to deal with after a few months. To save, you may want to make your own baby food. That will be cheaper.
- Toys, books and DVDS (up to $40 per month). This can also be bought second hand. As long as it is not broken, clean and safe to use – buy them used.
Failing to pay bills on time.
Another way that your baby can make you ruin your credit score is by keeping you too busy! This is expected because babies do need a lot of care and attention – especially during the first year. Your lack of sleep, feeding, bathing and other baby needs that has to be met every now and then will really take its toll on you. This will make you forget a couple of things – including bills payments. When you forget to pay the bills, your credit score will suffer in return. Set up reminders to make sure this will not happen.
Being overcome by medical bills.
As mentioned earlier, your hospital bills will be a major concern months after you gave birth. This can be overwhelming at times. Although recent developments made medical bills less of a problem, it is not something that you should put in stride. With a few tips, you can probably keep your hospital bills from becoming too much of a burden. For instance, you need to double check with your insurance company the details of your coverage. You should also double check what is written on your bill. According to the Women’s Health article, 30% to 40% of medical bills usually contain errors. So take a look at yours. Do not be afraid to ask questions if there are things that you need to clarify. Even if they insist and you believe that there are entries that should not be there – dispute your bill. Do not pay for something that was not given to you.
Eating out all the time.
It is a given that expenses usually bloat when a baby gets in the picture. But some of the expenses does not have to happen. One of the bloated expenses involve food because new parents usually develop a habit of eating fast-food instead of cooking at home. There are two reasons why you need to stop this habit. First is the cost. It is more expensive. The second reason is it is unhealthy. Meals cooked from scratch at home will always be the better option. But we all know that the baby usually takes most of your time – that means you cannot cook as much as you used to. This bloated expense could wreak havoc in your finances that could end up compromising your credit score too. This does not have to be a problem if you implement some time management skills. There is this show – Rachael Ray’s Week In A Day, that teaches you how to make meals for the whole week in just one day. When your spouse or partner is at home, you can allocate this time to make your meals for the rest of the week and then store it in the freezer. It just takes a bit of time management for this to happen.
How to keep your child-related costs from destroying your finances
Raising a child is a lot of hard work and it is expensive but the rewards that it will bring to your life is so great that you wouldn’t really mind. However, that does not mean you should let it turn for the worse. You need to learn how to disaster proof your personal finances so you can build a better future for your kids.
This is the reason why couples are warned against being unprepared for parenthood. You may feel like you are physically and emotionally ready for a child. However, if you are not prepared for it financially, then you might end up ruining what you have built so far.
According to the USDA Center for Nutrition Policy and Promotion (CNPP), a couple is expected to spend a quarter of a million to raise a child – at least until they reach the age of 18. What is surprising is that this amount does not even include college expenses. An infographic published on USDA.gov revealed that the $245,340 worth of expenses are divided into the following:
- 30% housing
- 18% child care and education (excluding college)
- 16% food
- 14% transportation
- 8% health
- 6% clothing
- 8% miscellaneous
With college costs averaging at $18,390 (public) and $40,920 (private), you need to be prepared to spend up to $300,000 for each child.
Obviously, this is a very big amount. You don’t have to save up for it before you have a baby. But it is evident that you need to implement some serious financial management skills to keep your child from ruining your finances and in effect, your credit score. Here are some tips that you need to implement:
- Follow a budget plan. This will help you keep your expenses from being more than your income.
- Setup saving goals. These goals should be for both short term and long term. You need to think about what you child will need in 5, 10 or 15 years. Anticipate what expenses you will have and if possible, start saving up for them.
- Invest for your children. This is obviously referring to their college education plans. When you start early, you do not have to save too much for them.
- Build up your emergency fund. If you think that you can forego a medical treatment because you do not have the money, this might be a difficult option if it is your kid who is sick. Eliminate the possible instances that you will borrow money. Save for emergencies so your kids will not have to suffer.
- Get a life insurance. This is very important. Life is fleeting. One moment you are here enjoying your baby and the next, life plays a cruel joke on your family. Make sure that any unexpected passing will not leave the whole family wanting. Insure yourself so your kids will be financially taken care of.
All of these will help you overcome a lot of difficulties while you are raising your child. Of course, practicing the right financial habits will not only do your personal finances some good. It will also allow you to set a good example for your children.