Solutions to Make Better Decisions with Your Taxes and Money

What Babies Really Cost and How to Set a Budget

What Babies Really Cost and How to Set a Budget - TaxACT

When my husband and I first got married, we had an instant family of four with his two daughters as my “bonus” babies!

Then we added five more children in the first seven years of marriage. So I know a thing or two about economizing when it comes to baby.

Most military families are very prolific when it comes to introducing future generals to the world. Coincidentally, a lot of these babies make their arrival about nine month’s after that military member comes back from a deployment.

Thus, the term “reunion babies.”

A recent USDA report estimates it costs more than $240,000 to raise, clothe and feed a child born in 2012 –and that figure does not include education. Tweet this

What Babies Really Cost and How to Set a Budget - TaxACT

You can find a “Cost of Raising a Child” tool that will calculate these expenses based on demographics and location.

But it doesn’t have to cost as much if parents use simple savings strategies starting from the moment they realize they are expecting.

First Trimester

Go through the baby’s room, take inventory and make a thorough list of what is needed.

Prioritize essentials such as a crib, car seat and stroller, as well as nonessential “wish list” items such as wall hangings or a comforter set for baby’s room. Set a “baby budget” for priority items without going into debt.

Begin to shop store sales, garage sales and eBay to find the best values for the essentials. Be sure to comparison shop online by using MySimon; even Amazon is a good place to compare prices.

Remember that before you purchase anything online, go to the RetailMeNot app to find coupon codes that can offer free shipping, discounts and even free gifts.

Other good sites for baby deals are zulily and babysteals. For an added bonus, go to ebates to qualify for rebates on what you are purchasing.

Most new parents are likely to be gifted by grandparents, siblings and other relatives and friends. If the new baby’s grandparents have expressed a desire to give a larger gift, then make sure it comes from the priority list rather than the wish list.

Try to choose something that can be passed on to future siblings—such as a quality high chair, durable car seat or crib that can be converted into a single bed.

But be sure to purchase the bed conversion package at the time you purchase the crib or it may be discontinued.

Second Trimester

Most baby shower hostesses will ask for a list to be included with the invitations.

The list should also state: “Please ask your department store for a gift receipt” to make for easy returns on duplicates.

You might want to register this list electronically at department stores offering this service such as Target, Babies R Us, or Walmart.

If you are blessed to have more than one baby shower, you could ask each group for different size clothing starting with ages three to six months.

Be sure to request six to12 month size clothes from one group and 12 month or larger sized clothing from the other group.

Final Trimester

This is the trimester when new parents are most likely to overspend.

It’s a good time to add up what you’ve spent on baby items, assess your inventory, and determine where you are on their baby budget.

If the priority items have been covered, then it’s time to allow for some of the “wish list” items.

If you are having more than one shower, another option at this time could be to have a “diaper shower” or a “dad shower” where everyone brings disposable diapers and wipes.

But a diaper shower doesn’t have to be exclusively for a new dad.

This is a great way to gift the couple with minimal time and effort, and financially helps the parents for as long as the first six months after the baby arrives.

The Baby’s Here!

After the baby arrives, it’s easy to get caught up in the responsibilities of caring for a newborn and forget to exchange baby shower items you can’t use (clothing that is too small or for the wrong gender, or duplicate gifts).

Let friends or family make exchanges for you. This will save you time and money and it gives them an opportunity to help in a practical way.

Upon return, a gift certificate can be given and you can save it to purchase exactly the size and style clothing the child needs at a later date.

One savvy mom received two little boy outfits that were too small and they cost $65 each. She shopped the sales on the return and bought 12 outfits with her credit!

(If you want us to send you my very own baby wipe recipe, then email us here and request the “Baby Wipe Recipe.”

I saved about $500 a year by using this and with all those kids I had, it really added up. Tell us that you read about it in the TaxACT blog and we’ll send it to you free.)

Tax Advantage

Don’t forget to review all the new tax advantages you will have for your growing family in TaxACT.

This goes beyond the Child Tax Credit and your tax advantages start with the out-of-pocket medical expenses you have if you itemize deductions and meet the threshold for out-of-pocket costs.

The tax code allows you to claim these unreimbursed medical expenses that exceed 10% of your adjusted gross income.

There’s also the after-tax cost of health insurance, mom’s follow up appointments, the well baby checkups, and lots of other deductions as well.

Now is the time to set up a folder to track all of your receipts for medical expenses and child care expenses so you can also claim the Child and Dependent Care Credit.

In fact, if your employer offers a pre-tax Dependent Care Benefit (DCB) program, then you may want to look at taking advantage of that program.

Parents may be eligible to put up to $5,000 total per year in their DCB account, tax-free.

The money may then be used to pay childcare expenses during the year, reducing your taxable income.

One of the things I love about TaxACT is that you are asked all the right questions about your family to claim every deduction and credit you may qualify to receive.

No matter the cost to raise that new baby, just remember #YouGotThis. Any new parent will tell you that baby’s first smile is, well . . . priceless. Tweet this

TaxAct makes preparing and filing your taxes quick, easy and affordable so you get your maximum refund. It’s the best deal in tax. Start free now or sign into your TaxAct Account.

Photo credit: AP Photographie via photopin cc

About Ellie Kay

Ellie Kay is a regular expert on national television with ABC NEWS NOW’s Money Matters and Good Money shows. She is also a national radio commentator, a frequent media guest on Fox News, and CNBC, a popular international speaker, and the best-selling author of fourteen books including her newest release, The Sixty Minute Money Workout (Waterbrook, 2010). For money savings links visit Ellie's blog.