With the average cost of having a baby in the U.S. at an eye-watering $18,865 across the country (1), it can be easy for new parents to slip into debt. Adding the medical bills to costs like new furniture, baby clothes, diapers and all the other supplies needed can strain any budget.
Imagine the case of Karl. He and his wife Millie brought home a new baby boy, and were able to budget for most of the expenses they expected while they were expecting. However, a few very unexpected surprises popped up: Their washer broke and had to be replaced, a hornet’s nest in their backyard needed professional help to be removed, and just this week, Karl got into a fender bender.
While just a single emergency may have been manageable for the couple, three in a row was hard. They make just $79,000 combined, and are having a difficult time trying to budget for these expenses, the medical bills and their living costs.
Karl has always been careful with money and has been able to stay out of debt until now, but he is wondering how the couple will be able to manage the family’s budget, and also manage his stress levels, during this trying episode.
Here’s what the couple can do to help avoid more debt, and get the family budget under control.
Karl and Millie’s basic living expenses are as follows:
Together, the couple brings home about $4,000 per month and has $10,000 in savings. (As Millie works for a day care, she is able to bring their son to work and the cost of his care is deducted from her salary.)
Their debts include:
$4,000 in hospital bills (they were able to qualify for financial aid).
$400 for a new washer (paid on a credit card).
$500 for the pest removal service.
$3,500 for the car accident, as the fault was on Karl’s side.
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As Karl and Millie have every penny of their existing budget dedicated to keeping up their lifestyle, it’s important for them to find ways to trim their existing expenses in order to pay off their debts as quickly as possible. They may want to consider dipping into their savings to pay off their largest debts — the medical bills and the car repairs — saving the remaining in case any other emergencies arise.
