Budgeting for New Parents: How to Build a Baby Budget

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Budgeting for a baby
- 50% for needs such as household bills, minimum loan payments and expenses such as child care, diapers and formula.
- 30% for financial wants.
- 20% for savings and payments on toxic debts, such as payday loans and credit card balances.

How to build a baby budget in 4 steps
1. Determine your financial priorities
- Retirement savings: To make sure you’re saving enough for the future, try this retirement calculator. You should ideally set aside 15% of your income, but save at least enough to qualify for the maximum employer match on your 401(k), if your workplace offers one.
- Toxic debt payments: Pay off debt that is hurting you. Balances on payday loans, credit cards and title loans, for example, cost you daily and prevent you from focusing on other financial priorities.
- Contributions to an emergency fund: Build your emergency fund from that $500 seed, aiming for enough to replace several months of income.

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2. Practice living on less
3. Anticipate changing expenses
- Estimate the amount you'll spend in the first year using this cost of baby calculator. Fine-tune this amount by getting quotes from local child care centers if you plan to put your baby in day care.
- Research ways to reduce that cost:
- Compare the cost of adding a child to all working parents’ health insurance plans.
- Buy secondhand or find ways to get free baby stuff.
- Request must-haves at your baby shower(s).
- Shop around for child care.
- Anticipate how long these costs will last. Many costs to first-time parents are one-time expenses, including the crib and the strollers. Others continue for just a few years, such as child care until your kid goes to school.
- Review upcoming expenses monthly when you sit down to pay your bills. You don’t want to be unprepared, so find space in your budget as best you can in advance.
4. Prepare for when there just isn’t enough
- Ask for a raise or find a better-paying job.
- Refinance your mortgage and/or consider refinancing student loans.
- Consolidate and comparison shop for your homeowners and auto insurance.
- Eliminate unnecessary monthly subscriptions, such as streaming services or unused gym memberships.