Finding the Financing for an Unexpected Baby

A lot of people find their parenting and financial groove between baby births. You’ve had a baby, and a few months have passed. You’ve gotten used to the social and financial changes in your life. Maybe you’re now choosing to save for expensive home purchases, like that new TV, instead of purchasing it as soon as the idea appears. Maybe you need to schedule friend hangouts a few weeks in advance, and you can’t stay out as late as you used to. That’s just the way it is, and you’re getting comfortable with these long-term compromises.

But then: A surprise pregnancy, an unexpected baby. Once again, you’ll need to reorient your priorities to make space – both physical and financial – for this new person. This blog post will detail some smart ideas for how to save money, make space, and feel comfortable adjusting to the new baby.

Consider Your Home

Your home should be the first stop on your tour of “places to find money.” If you own your house, consider whether a refinance makes sense. Refinancing a mortgage can have various effects, from reducing the monthly payment in exchange for a longer term to tapping into home equity and taking on a larger loan. Check mortgage refinance rates to see if you can secure lower interest on a new loan. Depending on your financial standing, you’ll be able to choose between cashing out your equity, refinancing back into a 30-year loan term, and consolidating debt. If you already have a low rate and don’t want a refinance, a HELOC might be a good option. Talk to your mortgage provider to see if they have any helpful insight.

Make Budget Cuts to Your Daily Habits

Cutting expenses at home is an easy way to free up funds over a longer period. You won’t notice the savings immediately, but getting used to spending less can provide some additional flexibility in a budget. Evaluate your subscriptions, reduce your electricity use, and see if you can reduce insurance premiums. Eat at home more often, avoid professional cleaning and landscaping services, and switch to store-brand products. You’ll be surprised by how quickly a few dollars a week turns into thousands over the coming months.

Ensure Employment is Secure

Whether you’re the birthing parent or the supportive parent, you’ll likely experience an income reduction during the baby’s first few months. Only around 12% of U.S. employees work at companies that offer paid family leave. If you’re not sure whether your company does this, ask as soon as you can. If they don’t, be sure to figure out how you’re going to take time off. If possible, see if you can have your company guarantee employment for the duration of the pregnancy and first few months. If your contract is up for review, now is a great time to get tough at the negotiating table.

Tap Into Your 401(k)

If you’ve already tried the above money-generating/saving techniques, tapping into your retirement savings may be a good option. However, if you withdraw money before you’re 59.5 years old, the IRS will assess a 10% penalty when you file your tax return. Keep this in mind when determining how much to withdraw and whether that steep penalty is worth the financial security.