5 Ways New Parents Can Manage Debt

By Ashley Eneriz on 15 March 2018 0 comments

Bringing a new little one into your family is an exciting time, but it can also be stressful if you have to juggle new baby expenses on top of debt repayment. Don't get overwhelmed. These tips will help you to pay off debt faster so you can enjoy your baby's first moments without so much stress. (See also: 7 Signs You're Financially Ready to Start a Family)

1. Don't add to your debt burden

Babies can be costly, especially when you're buying diapers and formula weekly. Be as cost-effective as possible when shopping for your new bundle of joy. Do your best to pay for diapers, baby food, and formula out of your normal grocery budget. This may mean juggling some of the normal things you buy to fit in an extra $25 to $50 each week.

That can feel like a stretch, but it doesn't have to be a drastic one. It might just mean you eat a rice and bean meal once per week, or eat only chicken instead of steak and fish. You won't have to make this grocery trade forever, it's just a means to an end.

As far as baby gear and clothes go, buy used or use hand-me-downs when possible. The first six months of your baby's life go fast, and items like swings, baby wraps, bath tubs, and rockers are not needed after that time frame, so don't waste your money. Any baby items that require strict safety regulations — like car seats — should be bought new. (See also: 8 Things You Definitely Don't Need for a Baby)

2. Don't be afraid to ask for help

There is no shame in admitting to family members and close friends that you are working hard to pay off debt and raise a baby. They might be able to take care of the baby one or two days a week so you can go to work, or they might have a lead for someone who is looking to hire out a side job. Many times, parents or grandparents are happy to have you over once a week for dinner, which can save you a small amount on your grocery bill.

Outside of your family and friends, check to see if you are qualified for WIC benefits or food stamps. Furthermore, if your debt is a federal student loan, you might be able to lower your payments based on your income.

3. Refinance and rebalance your debts

Write down all of your debts and their APRs. Are you getting the best deal for them, or are you throwing your money away on high interest rates?

If your credit score is healthy, try refinancing your auto loan, student loan, or mortgage to an arrangement with more favorable terms. The difference from a lower monthly payment can go toward expenses you need for your new baby.

If you're struggling with credit card debt, consider moving that balance to a balance transfer credit card with a promotional 0 percent APR. During that promotional window — typically between six and 21 months — interest does not accrue. This can be a tremendously effective way to pay down debt while saving on interest, especially considering that typical credit card rates can exceed 16 percent. Just be sure to pay the balance off in full before the promotional APR ends and the normal rate kicks in.

4. Try to survive on one income

Another strategy to tackle debt before and after the baby comes is to try to live on one income. Devoting one income to living expenses and the other income to debt repayment can quickly reduce the debt you owe. It takes a lot of sacrifice and budget cuts, but you will get out of your debt situation faster.

After debt is repaid, one parent can choose to stay home with the baby, which might be a better option financially than paying for child care. Or, both parents can keep working and continue to practice living on one income to supercharge their emergency fund and retirement savings. (See also: How to Go From Two Incomes to One)

5. Make drastic cuts

What drastic cuts can you make during this period of your life? Huge budget cuts are not fun, but they don't have to be permanent changes. Can you sell an extra household vehicle and get by with one? Could you sell some of your clothes, gadgets, or furniture? Can you cut your cable subscription for a while? Could you do a spending ban on anything that isn't an absolute necessity? (See also: Becoming a One-Car Family: 5 Points to Consider)

These options aren't for everyone, but talk them over with your partner to figure out how you can get serious about your debt repayment. Remember that it is better to go extremes now and pay off your debt so you can enjoy growing your family with the comfort of being debt-free.

Like this article? Pin it!

5 Ways New Parents Can Manage Debt

0
No votes yet
Your rating: None
ShareThis

Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.

Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.