Getting your Financial house in order for Pregnancy

[ddscook]

My husband and I are starting to plan for our 1st pregnancy in the upcoming year and I am the main income source.

My current employer does not offer STD.

I have a LTD own occ policy w Guardian-90 day elimination period; my insurance agents comment is "Guardian's individual disability product would cover complications of pregnancy provided that the elimination period and definition of disability are both satisfied (the inability to perform one's material and substantial job duties solely due to injury or sickness).  This would not include maternity leave from a normal pregnancy."

I have a 3 month emergency fund but I am wondering if I need to bother getting a personal STD policy in addition or if that's just overkill planning?

Also, are there any other aspects of financial planning I should consider for the upcoming year?

Thanks for your input!

[YSH]

I think more planning is always better than less, especially when it comes to planning for pregnancy/ new baby.  However, always be mindful that no matter the amount of planning, pregnancy and babyhood is a great unknown.  So its good to have a plan for certain fixed entities (like fixed expenses, ie mortgage, rent, work related expenses) but allow flexibility for the variables (might have pregnancy complications requiring bedrest, extended leave of absence from complications, baby with medical issues).

I don't know what your financial situation is (main source of income = only source of income vs. your income significantly higher than your partner's?), but I would say with pregnancy or a new baby, budget as if you will only have one income to live off off for the entire first 12-18 months of the baby's life.  If I am allowed to be totally risk adverse, I would say to budget as if living off only one income for their first 5 years of baby's life.

My reasons:

1. Childcare is expensive (esp when they are babies) and can be unreliable. Best not to depend solely on family (they can assist but don't count on them as the main childcare source).  You MAY save money by using family but, IMHO, the family member becomes another person that gets involve with your marriage.

2. Marriage takes a BIG plunge, so need more flexibility (both resource allocation and time reservation) to accommodate both partners during their adjustments in their new roles as parents AND partners.  More financial stress WILL NOT help.

3. Most jobs are not very accommodating to extended leave of absence, esp if they are paying your benefits or have overhead to deal with. So even if the contracts say you can have x amount of parental leave, be mindful that you won't be completely free.

Suggestions:

1. No big purchases within the first 1-2 years (maybe even 3 depending on the state of your net worth) of pregnancy and baby. Ie no new house, questionable car upgrades.

2. Personally, I think 3 months worth of E-fund is not adequate. Especially not adequate with new baby.

3. I don't think personal STD just for pregnancy is helpful.  If you can self insure your pregnancy/ new babyhood income loss, that would be best. I definitely won't cancel the LTD policy.

 

Interested in other's opinion as well.  Good luck!!!! Wishing you a most boring pregnancy!

[YSH]

Also make sure you have adequate life insurance.  Make it the priority to fund your retirement accounts and pay your student loans no matter what, after all fixed expenses are paid. The shiny stuff can come later; the baby won't notice.

[Miss Bonnie MD]

ddscook wrote:

My husband and I are starting to plan for our 1st pregnancy in the upcoming year and I am the main income source.

My current employer does not offer STD.

I have a LTD own occ policy w Guardian-90 day elimination period; my insurance agents comment is “Guardian’s individual disability product would cover complications of pregnancy provided that the elimination period and definition of disability are both satisfied (the inability to perform one’s material and substantial job duties solely due to injury or sickness).  This would not include maternity leave from a normal pregnancy.”

I have a 3 month emergency fund but I am wondering if I need to bother getting a personal STD policy in addition or if that’s just overkill planning?

Also, are there any other aspects of financial planning I should consider for the upcoming year?

Thanks for your input!

Click to expand...

I just wrote a 2 part series that you might find helpful: Ultimate Financial Planning Guide for the Physician Mom To Be

[StarTrekDoc]

State disability can give a token amount, so check that out.

[ddscook]

Thanks, YSH! Your suggestions are really sobering and I'm glad I'm starting to think about this early.

To answer your q: husband is in last year of training so by next year Nov he'll be at attending salary, so I'm primary income only for another 14 months. I like to plan for worst case scenario, so if I get pregnant immediately and can't work for a long time while pregnant and he's still in training, I need to save/be prepared financially. Like you said, More financial stress will not help!

 

[LizOB]

If you get a personal STD policy, you will REALLY have to read the fine print about what it will cover for normal pregnancy/delivery. They may exclude pregnancy if you conceive within a certain timeframe of getting the policy. The LTD policy won't help you much, unless you have some crazy complication where you have to be out of work >3 months (I'm OB, this is pretty darn rare).

When I started my job after residency I could get STD through my employer at a unisex rate without an exam, and since we were planning pregnancy within a year I did elect to purchase it. Since it was pre-tax, the benefits were taxed. It capped at I think $1500/wk pre-tax. Also, it didn't start for 2 weeks and only lasted through 6 weeks, so only 4 weeks total = $6000 minus taxes. Pretty easy to self-insure for that small of a benefit. My policy works out to about $900/yr so mathematically it does make sense to keep it if more kid(s) are on the horizon over the next few years. When I'm done having kids I will almost certainly cancel. Keep in mind I am probably paying less than what you will be able to find as an individual policy for a woman of child-bearing age.

Whether you get the STD or not, calculate what your expenses will be for your time out on leave and make sure you have that plus a little cushion in an emergency fund.

Other aspects: childcare costs a LOT. I pay $1240/month for full time daycare for one child. Make sure your budget can handle that. Not to mention diapers, clothes, furniture, etc etc. Get the Baby Bargains book to help figure out what you can skimp on vs what you may want to splurge on. Do NOT buy expensive baby clothing. Find a friend or relative with a kid older than yours and get all the hand-me-downs.

Start 529s as soon as you get the baby's SSN so you don't put it off. If you happen to have relatives who want to contribute financially to your child's future put it straight into the 529.

I did not follow the above advice about no big purchases. We bought a house when the baby was 9 months old and it has worked out fine. To be fair, that was right around when I finished off my student loans, and our current mortgage payment is less than the old mortgage payment + student loan payment (I was overpaying) so our monthly expenses actually went down.

Oh, and for leave- before you talk to anyone at your job regarding pregnancy, make sure you know whether you are covered by FMLA or alternatively, what your contract or company policy says about maternity leave. I found that many people in the medium-sized healthcare system where I work were totally clueless and acted like they had never dealt with a physician having a baby before. You will have to be your own advocate.

[Craigy]

Does your husband bring any revenue to the table?  What are your expenses?  Does his income cover any of this?

My wife just had a big salary gap, about 2mos.  Leading up, thought money might be tight, but in reality it was no big deal, hardly noticed it from a bank balance perspective.  Even bought her a nice graduation gift and we had other normal spending, plus some home repairs.

How long are you taking off?  If you have money in the bank, and a second income, should be no problem unless you're taking some lavish sabbatical or retiring.

 

Edit - Just saw your husband is a resident.  Assuming he's making decent PGY3, PGY4 money, and you're living below your means, and you don't take a huge amount of time off, you should be fine.  Now if you're on bedrest for 20 weeks before the child is born, might have to make some adjustments. Do you have family to lean on, etc?

Also, if you're just now "thinking" about a child, by the time that child is out in the open, your husband should be starting as an attending, or a matter of weeks away, and the financial situation should be moot.

[Miss Bonnie MD]

LizOB wrote:

 

Other aspects: childcare costs a LOT. I pay $1240/month for full time daycare for one child. Make sure your budget can handle that. Not to mention diapers, clothes, furniture, etc etc. Get the Baby Bargains book to help figure out what you can skimp on vs what you may want to splurge on. Do NOT buy expensive baby clothing. Find a friend or relative with a kid older than yours and get all the hand-me-downs.

 

Click to expand...

that is nothing! in NYC daycare is 2700+...nannies are more.

[ddscook]

LizOB wrote:

If you get a personal STD policy, you will REALLY have to read the fine print about what it will cover for normal pregnancy/delivery. They may exclude pregnancy if you conceive within a certain timeframe of getting the policy. The LTD policy won’t help you much, unless you have some crazy complication where you have to be out of work >3 months (I’m OB, this is pretty darn rare).

When I started my job after residency I could get STD through my employer at a unisex rate without an exam, and since we were planning pregnancy within a year I did elect to purchase it. Since it was pre-tax, the benefits were taxed. It capped at I think $1500/wk pre-tax. Also, it didn’t start for 2 weeks and only lasted through 6 weeks, so only 4 weeks total = $6000 minus taxes. Pretty easy to self-insure for that small of a benefit. My policy works out to about $900/yr so mathematically it does make sense to keep it if more kid(s) are on the horizon over the next few years. When I’m done having kids I will almost certainly cancel. Keep in mind I am probably paying less than what you will be able to find as an individual policy for a woman of child-bearing age.

Whether you get the STD or not, calculate what your expenses will be for your time out on leave and make sure you have that plus a little cushion in an emergency fund.

Other aspects: childcare costs a LOT. I pay $1240/month for full time daycare for one child. Make sure your budget can handle that. Not to mention diapers, clothes, furniture, etc etc. Get the Baby Bargains book to help figure out what you can skimp on vs what you may want to splurge on. Do NOT buy expensive baby clothing. Find a friend or relative with a kid older than yours and get all the hand-me-downs.

Start 529s as soon as you get the baby’s SSN so you don’t put it off. If you happen to have relatives who want to contribute financially to your child’s future put it straight into the 529.

I did not follow the above advice about no big purchases. We bought a house when the baby was 9 months old and it has worked out fine. To be fair, that was right around when I finished off my student loans, and our current mortgage payment is less than the old mortgage payment + student loan payment (I was overpaying) so our monthly expenses actually went down.

Oh, and for leave- before you talk to anyone at your job regarding pregnancy, make sure you know whether you are covered by FMLA or alternatively, what your contract or company policy says about maternity leave. I found that many people in the medium-sized healthcare system where I work were totally clueless and acted like they had never dealt with a physician having a baby before. You will have to be your own advocate.

Click to expand...

Thanks, LizOB! It is great to know about your experience with STD, makes more sense to just start increasing my savings to prepare for it.

[StarTrekDoc]

Or get hired by University/large corporation that offers noexam/AFLAC style STD  ---maybe worth it for near term and long term career planning since he's getting attending income in near future --- with larger corp allows for higher schedule flexibility and options.

[ddscook]

Craigy wrote:

Does your husband bring any revenue to the table?  What are your expenses?  Does his income cover any of this?

My wife just had a big salary gap, about 2mos.  Leading up, thought money might be tight, but in reality it was no big deal, hardly noticed it from a bank balance perspective.  Even bought her a nice graduation gift and we had other normal spending, plus some home repairs.

How long are you taking off?  If you have money in the bank, and a second income, should be no problem unless you’re taking some lavish sabbatical or retiring.

 

Edit – Just saw your husband is a resident.  Assuming he’s making decent PGY3, PGY4 money, and you’re living below your means, and you don’t take a huge amount of time off, you should be fine.  Now if you’re on bedrest for 20 weeks before the child is born, might have to make some adjustments. Do you have family to lean on, etc?

Also, if you’re just now “thinking” about a child, by the time that child is out in the open, your husband should be starting as an attending, or a matter of weeks away, and the financial situation should be moot.

Click to expand...

Yes, the hope is to have the baby once he's an attending - but apparently babies don't like to be told exactly what date to be conceived on or born on haha.

[ddscook]

Miss Bonnie MD wrote:

ddscook wrote:

My husband and I are starting to plan for our 1st pregnancy in the upcoming year and I am the main income source.

My current employer does not offer STD.

I have a LTD own occ policy w Guardian-90 day elimination period; my insurance agents comment is “Guardian’s individual disability product would cover complications of pregnancy provided that the elimination period and definition of disability are both satisfied (the inability to perform one’s material and substantial job duties solely due to injury or sickness).  This would not include maternity leave from a normal pregnancy.”

I have a 3 month emergency fund but I am wondering if I need to bother getting a personal STD policy in addition or if that’s just overkill planning?

Also, are there any other aspects of financial planning I should consider for the upcoming year?

Thanks for your input!

Click to expand…

I just wrote a 2 part series that you might find helpful: Ultimate Financial Planning Guide for the Physician Mom To Be

Click to expand...

This is an excellent Blog post! Super informative! Thank you for sharing!

[YSH]

Miss Bonnie MD wrote:

LizOB wrote:

 

Other aspects: childcare costs a LOT. I pay $1240/month for full time daycare for one child. Make sure your budget can handle that. Not to mention diapers, clothes, furniture, etc etc. Get the Baby Bargains book to help figure out what you can skimp on vs what you may want to splurge on. Do NOT buy expensive baby clothing. Find a friend or relative with a kid older than yours and get all the hand-me-downs.

 

Click to expand…

that is nothing! in NYC daycare is 2700+…nannies are more.

Click to expand...

Yes, childcare cost is expensive to all.  While I would also love to join in to commiserate about who has it the worst with daycare cost (hands down Miss Bonnie, NYC SUCKS big time in that area), all I can say is that after being a parent for almost a decade, the actual numerical value of daycare/ nannycare childcare expenses is really just the tip of the iceberg. There are many other cost that will continue to be there as they grow older- moving to a "better" school district cost, enrichment "keeping up with the Joneses' little one" classes cost, another person traveling cost (esp if that's important to you as a family), career (female> male) opportunity cost,  PTO contribution/ silent auction donation/ private school tuition cost, time and due diligence required to research school/nanny/summer care cost, etc.  Its a long term commitment to raise a child and a lot of data confirms that the female primary caretaker bears most of this burden (cost).  I don't have the exact figure in front of me, but I wouldn't confine the $2700+/ month on one child as just early years phenomenon.

And yes, LizOB, I agree that my suggestions don't apply to all.  In your case, your net worth allowed you to be able to take that opportunity of buying that house with a smaller mortgage and you went with it.

Craigy wrote:

Edit – Just saw your husband is a resident.  Assuming he’s making decent PGY3, PGY4 money, and you’re living below your means, and you don’t take a huge amount of time off, you should be fine.  Now if you’re on bedrest for 20 weeks before the child is born, might have to make some adjustments. Do you have family to lean on, etc?

Click to expand...

@Craigy- What do you consider is a "huge amount of time off" for a child?  What do you consider is the appropriate amount? What information do you use to make that decision? Financial? Child development research? Maternal/ paternal post baby mental health data? Both parents' adjustment to caring for child? Curious.

@ddscooks - you have got tons of great advice here. Think you will be okay with your hubs getting an attending salary in the next 1-2 years. Kids are expensive but they are worth it.  Just don't underestimate how much of an impact they will have on your and your partner's (individual) life and together as a couple.

[Hank]

Craigslist, goodwill, and friends & family for baby clothes, not Babies 'R Us or Carter's. Small children outgrow their clothes, they don't wear them out. (Shoes are an exception once they start walking.)

Target and Costco have good diapers on the cheap. No need to pay extra for Huggies or Pampers. Breastfeeding is best, but if you need formula, Costco's prices are hard to beat.

Take the money you've saved and put it into a 529. 18 years is a long time for compound interest.