The tired new parents' money checklist

By MP Dunleavey

Having your first child brings so much joy and sleep deprivation that the financial ramifications of this blessed event can whisk right by you.

Plus, a newborn is so cute and innocent -- how can you even look at that tiny face and think of money?

By reading this handy-dandy financial checklist, that's how.

Ideally, you would have mapped out a sane and sober financial plan the minute you learned you were expecting. Of course, nobody does, and I didn't either. So let's tap some of that fresh-start energy of the new year and get going.

Out with the old, in with the new

Most of the financial advice available to new parents includes the same old chestnuts:

• Set up a college savings plan.

• Write your will.

• Get life insurance.

• Get disability insurance.

• Start saving for a romantic weekend at a Motel 6 (you can't afford the Travelodge).

While you do need to cover those basics -- and we have some excellent articles you might want to read (see the links below) -- new parents also have to tackle a surprising number of other financial issues.

Factor in your cost-of-living increase

"Kids are expensive" sounds trite, even when it's backed by the oft-quoted government statistic that the average cost of raising a child from birth to age 18 is about $250,000.

What that means to your paycheck today is that, "It's going to feel like you're living on about 10% less," says Jonathan Pond, a financial expert and father of three who has written a number of books, including "You Can Do It!: The Boomer's Guide to a Great Retirement."

It's a strange equation: Your new addition inspires certain lifestyle adjustments that help you spend less (e.g. you're too tired to go out, and even impulse shopping requires advanced planning). But at the same time, you're paying for essentials like diapers, wipes, formula, clothes, unexpected baby items -- and possibly child care. And your health insurance premiums are skyrocketing.

I wish I'd asked other parents for specifics on how their own expenses increased before I drew up my own budget, which now has more holes than my husband's socks.

Rethink your lifestyle

An important but sometimes overlooked bit of financial planning is to weigh whether you and your mate want to make any changes in your work schedules -- and what those would cost, says Nihara Choudhri, a lawyer, mother of two and author of "Parent Savvy: Straight Answers to Your Family's Financial, Legal and Practical Questions."

"Not everyone wants to stay home," she says, "but you may want to change the amount you work or the way you work."

"You might be able to make certain lifestyle changes so you can afford to work part time," Choudhri adds, "or you might want to work more so you can afford a bigger home or a better way of life now that you have a child."

Either way, she says, "You really need to crunch the numbers."

By Pond's calculations, for example, maintaining a two-income household may not pay off in the long run, "particularly where the second paycheck is below $70,000 or so," he says.

After factoring in taxes, commuting and other work-related expenses, including child care, "the second income may not contribute all that much financially, especially given what you might be losing in terms of quality of life." (For more information, see "Second incomes: twice the work, half the return," and the Second Income Calculator).

Prepare to die

"Who likes to think about dying? Nobody," says Choudhri. Nonetheless, it's vital that new parents take out life insurance and write their wills as soon as possible.

While this is one of those standard Must Do's that you can read about in more detail elsewhere on this site, I was surprised to learn that each parent needs to set up his or her own will (because parents rarely die at the same time) -- as well as individual life insurance policies.

I was relieved to learn that neither of these steps is complicated, "although many people put off writing their will because they are afraid it will be expensive," says Choudhri.

Consulting with a lawyer is valuable if you can afford it, but you can also set up your own estate plan with Quicken WillMaker Plus or by using "Nolo's Simple Will Book."

You don't even need to overthink the life insurance issue: "A 20-year level-term policy is so cheap," says Pond. Not only does it make little difference where you buy it, "you won't be subjected to ever-increasing premiums."

You can do a quick assessment of your insurance needs here.

Continued: Assume once-a-month doctor visits

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