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Financial Planning Part II: Evaluating Your Budget
In the first article on financial planning, I reviewed some common expenses of pregnancy and infancy. In this article, I suggest a way to record your current expenses in order to evaluate your budget. Most experts recommend that you take stock of your current spending patterns and create a hypothetical budget that includes the expenses of caring for your baby.

You should think about the expenses that are fixed, flexible and occasional.

Fixed expenses are stable from month to month. These include items like your mortgage or rent, your utilities, monthly insurance premiums (life, disability, health care), childcare and transportation.

Flexible expenses occur each month but may vary considerably. These include items like food (groceries, restaurant), transportation (gas, bus, taxi), clothing (purchases, laundry, dry cleaning), personal care, entertainment/leisure, pets and medical care (doctor visits, prescriptions, dental care).

Occasional expenses occur periodically throughout the year. These expenses may include holiday and birthday purchases, home maintenance, educational needs (school supplies, tuition and fees, class pictures), dues/subscriptions, club memberships and infrequent automobile expenses (license, inspection, maintenance).

Once you have outlined your expenses, you'll need to compare your income to your spending. If your income exceeds your spending, you can begin saving for maternity leave and for future parenting needs. Long-term disability insurance and life insurance are recommended for most parents. Some couples tuck away an emergency fund, optimally three to six months of salary, to provide a financial cushion in case of unanticipated difficulties.

On the other hand, if your spending exceeds your income, you'll need to find ways to balance your budget. With a baby on the way, you may not have the option of increasing your income. Reducing your expenses could be the most effective strategy to quickly balance your budget. You may need to cut back on items that are somewhat optional such as restaurant, entertainment and vacation expenses. You might consider ways to pay off credit cards and reduce debt. However, be aware that some loan consolidation programs can cost you more in the long run. Some couples meet with a financial planner to come up with short and long-term strategies.

Reviewing your finances will help you decide how much maternity leave you can afford. Some employers and several states provide short-term disability coverage that provides a portion of your salary while you are on maternity leave. You will need to check with your employer or your state disability office to learn about what's available.

Laura E. Stachel M.D. Obstetrician & Gynecologist