Paying off debt or planning for a baby? How can you deal with pregnancy in debt?
January 5, 2020
Today we have a guest a post from Sophia Hayden who is a fantastic writer that focuses on travel, small business, entrepreneurship, pets, and lifestyle. You can check out her excellent work at CreditCardConsolidation.com.
We all have those financial insights like “You should live within your means”, “You need to save as much as possible”, and “Debt is forbidden: so pay off first”, etc. But in reality, there are so many expenses that we can’t ignore – groceries, utilities, loan payments, gas, shopping, etc.
In addition to this, unwanted stuff happens every day – your car battery dies, your roof needs a quick fix, and you realize that you have no savings and a pile of existing debts you have to take care of.
Thus, sometimes we feel overwhelmed when it comes to planning a baby or starting a family.
For most the people planning for a baby becomes a scary thing considering all the related costs with a baby. Often they don’t know what should come first paying off the debt first or planning a baby?”
Yeah, making personal financial choices can be overwhelming, because, there is no universal answer that fits all. Preparing for a baby is also important and super exciting. You should never want to compromise when it comes to planning and raising a child. But, planning for a baby can be financially strenuous especially when you have debts.
So, what should you do? Read the article to break the dilemma.
When is it wise to pay off debt before planning for a baby?
You should pick the right one as per your financial situation and circumstances. If you want to plan for a baby while dealing with debt, then also you need to know the ways to manage everything. Having higher interest consumer debt can be dangerous; it is wise to pay them off first.
If you are paying more on debt than you are earning, then you’re actually losing money.
By paying the higher interest debt, you can solve the ongoing money issues in your life as well. Moreover, you can get a guaranteed return by cutting down interest payments.
Some financial experts say that by cutting down interest payments, a debtor can earn more than what he/she could earn in the stock market and in the savings account.
Thus, paying down the debt before planning for parenthood makes sense. Once you pay off your debts, you can concentrate on the other financial goals like – planning for a baby, saving for retirement, or buying a car.
How to pay off debts fast to move forward to the next financial goal like planning for a baby
Target your higher interest rate debts
If you have multiple debts, then you have to target the most expensive debt to pay it off first. If you only make the minimum payments, then you are racking up the huge interest day by day. By doing so, you are actually making the debt more expensive. Therefore, it is important to pay more than the minimum to get rid of the painful credit card debts.
Most of the Americans are dealing with a pile of high-interest credit card balances. Thus, they should work on them first. Then comes the private student loan debt, which is again an expensive debt most of the students are dealing with. Lastly, you should continue making the monthly payments toward your govt. student loan and mortgage.
Get rid of your credit card debts
It is easy to rack up huge credit card debts but tough to pay them off. To become debt-free, you need to identify your expendable income first. Based on that income, you need to formulate a budget where you have to include the debt payments as one of the significant parts of the expenses.
You can also try to convince your creditors saying that you are trying your best to repay the outstanding balance. The creditors may agree to lower the interest rates or erase a part of the credit balance.
These days, some DIY debt repayment plans like debt snowball method and debt avalanche method are becoming popular among debtors.
However, if you want to save on the interest, you have to choose the debt avalanche method since this method targets the highest interest rate debt first.
However, professional debt relief options like debt consolidation, debt settlement or, debt management, can effectively help you to get rid of debts. After paying off the painful debts, make sure you manage your bills efficiently to avoid debt in the future.
How can you plan for a baby while dealing with debts?
Create an emergency fund
While paying off your debts, you should save money. This will help you to manage costs related to pregnancy and after pregnancy costs.
So, create an emergency fund dedicated to your pregnancy and upcoming baby-related cost.
Once you stash a good amount of money in the emergency fund, you can earn a decent interest from the savings as well.
Set aside money for a baby’s arrival to other costs
After building an emergency fund, you should work on saving more so that you can manage baby-related costs. Remember, you should be prepared for the costs like decorating a room in preparation for the upcoming baby to food, clothes, and other necessities. Because, without having enough money, it is not possible for you to maintain parenthood.
Formulate a budget
Saving money while repaying debt can be tough. Thus, you should formulate a budget to manage everything properly. Make sure you make room for debt payment and money-saving for the baby’s arrival while creating the budget.
Try to increase your income
If you struggle to manage all the costs with your current income, then you may have to increase your net worth. Otherwise, you may not be able to manage the cost related to motherhood while dealing with debts. You can increase your income by considering a side hustle. You can make yourself prepared for the work home jobs to manage post-delivery costs. Online jobs can be the great side hustles that you can manage while dealing with pregnancy.
Get a health insurance
A newbie parent may have to spend more on health-related issues after having a baby. So, you must review your health insurance policy or buy suitable insurance policies beforehand. Don’t forget to check about deductibles and policy limits.
Lastly, financial priorities are a matter of individual circumstances and choices.
If you are young and have started earning a good amount, then it is wise to pay off the entire burden of debt. After that, you can buy a house or plan for a baby.
Remember, the most important thing is that you have to manage your finances well.
If you use your credit cards randomly and don’t repay them back, you will never be able to get out of your current debts and fulfill other life goals like planning for a baby, starting a family, saving for retirement, making investments, etc. So, adopt financial discipline, cut unnecessary expenses, repay debts to move forward to fulfill other dreams.
Bio: Sophia Hayden has started blogging after completing her graduation. A deep passion for writing has inspired her to get connected to other bloggers through blogging. She loves to give her opinion on finance, pets, and lifestyle topics.