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From the very moment your baby is born, your financial picture changes. Suddenly, it's more important than ever to create, maintain and stick to a budget.

After all, you now have someone depending on you to keep the family financial matters in order. A well-thought-out budget will be your most valuable tool in managing the family money.

If you already have a budget, you'll need to revise it to fit your new, expanded circumstances. (If you don't have a budget, create one right now. Click here to create a budget.) But don't throw away your old budget. You can use it as a starting point for a new one. Go through each of your expenses to see if they will change with your new baby. For example, your rent or mortgage will probably stay the same. But electric bills might increase if one person is planning to stay at home every day.

Add all the extra costs of raising a child into your budget. Another parent can help you identify what extra expenses might come up on a regular basis and how much you can expect to spend on them.

Make sure your income is accurately reflected in your budget. If you're going to have only one income and you are used to two incomes, this will significantly affect your budget. If you've been receiving financial assistance, check to see if this will increase with the birth of your child.

It will be important to add even more savings into your budget. Many experts suggest that you try to maintain three months of expenses in savings in case of emergency. If you're planning to save for a university fund, make space in your budget right away. It won't get any easier. Saving for your Child's Future has more information about starting a fund for your future scholar's education.

One Income vs Two

One of the hardest decisions for new parents is whether to have one parent stay at home full time.

As wonderful as it would be if this were not the case, this decision is often based on financial considerations rather than emotional and developmental considerations. Here are some questions that might help guide your decision:

  • Are both jobs paying off? A job is more than just income. It also includes expenses. There are various expenses related to transportation. You may eat out much more when working. And — most significantly — you will need to pay for childcare while you are at work. Add up all of these work-related expenses to figure out how much you would really lose by staying home. It may not be as big a loss as you thought.

  • Can you afford not to work? Subtract your income and work-related expenses from your budget. If that produces a deficit, see if you can cut any expenses but keep your savings as high as possible.

    If you need to start scrimping, it's best to start slowly. Reduce expenses while you continue to work and move the extra to your savings. Eventually, you may trim expenses —  and bulk up your savings — enough to justify quitting your job. Even if you can't, you will have learned to live more simply and have saved up some money in the process.

  • What are the emotional costs? Some parents can't wait to get back to work after maternity or parental leave. As beautiful and enjoyable as the parent-child relationship is, it can become a bit overwhelming. Parents often yearn for the company and conversation of another adult, the satisfaction of working and the structure of a regular day at the office. If you decide to be a stay-at-home parent, make sure you receive the stimulation you need by getting out of the house once in a while, spending time with friends or arranging for a trusted babysitter to come in periodically for relief.

    On the other hand, many parents feel guilty leaving their child at daycare and have a hard time going back to work. They fear that the decision to put career over family means that they aren't good parents. But happy parents make the best parents. So if working and coming home to spend quality time with your child feels better to you than scrimping to spend 24 stressed hours a day at home, then the answer to your dilemma is clear.