How do we budget for a surprise pregnancy?
Finding out you’re unexpectedly expecting a baby means your life — and your budget — are about to change dramatically.
According to the Guttmacher Institute, 27 percent of U.S. pregnancies happen sooner than the mother had planned, so you’re not the only one suddenly trying to figure out how to feed and house a tiny human.
There’s still time to prepare financially before the baby arrives, even if you have only a few months to go. Follow this crash course in pre-baby money management so you’ll be (slightly more) ready for parenthood.
Reprioritize goals
Money is about to become an even more precious resource. If you got by with $500 or $1,000 in emergency savings before, now is the time to crank it up, aiming for three to six months’ worth of expenses. You’ll need a cash cushion if your baby requires unforeseen medical care or if one parent becomes unemployed.
In the short term, having available cash is more important than saving for your child’s college education, says Matt Becker, a certified financial planner and founder of Mom and Dad Money. You have time to save as your child gets older, and grants, scholarships and low-interest federal student loans can make up for a shortfall later on. Saving now will help prevent credit card debt later, and you can work toward other goals once your budget has stabilized.
Plan for hospital costs
If you have health insurance, confirm which hospitals, doctors and tests are covered, and how many days in the hospital your insurer will pay for.
Hospitals charged a median amount of $17,184 for childbirth stays in 2014, according to a NerdWallet analysis of U.S. Department of Health and Human Services data. If all doctors and hospitals are in your insurance network, you can expect a bill for 10 percent to 40 percent of that cost. Using the 2014 data as an example, that would come to $1,718 to $6,874, depending on your plan’s deductible.
Uninsured expectant mothers below certain income thresholds may qualify for Medicaid. You may be able to join your parents’ health insurance plan if you’re under 26.
Start living on less
Your income will likely decrease during the baby’s first few months. Estimate how much more money you’ll spend once the baby arrives and how much less you’ll earn. Start saving as close to the amount of those new expenses as possible. The time is now to ruthlessly triage your budget.
“They’re in a crucial needs versus wants situation,” says Roslyn Lash, a financial educator and coach at Youth Smart Financial Education Services in Winston-Salem, N.C.
Some new costs are nonnegotiable, such as life insurance. It will replace your income if you die, which is vital now that another person will rely on you completely. Even if you receive life insurance as an employee benefit, each parent should get an individual policy. You’ll be covered if your employer decides to end its program, Becker says.
Trim discretionary costs that aren’t high on your list of values, he says. Getting used to a tight budget isn’t easy, but at least money is something you can stockpile in advance. If only you could bank sleep the same way.
As upscale fitness boutiques are exploding in popularity, some of the nation’s largest big box gyms are opening small studios with high-end amenities, “it” trainers and specialized workouts that consumers can pay for on a class-by-class basis.
Big box gyms make their money off recurring monthly memberships with an average monthly fee of $54, but many say they saw an opening in the studio market where consumers are willing to pay between $25 and $35 for a single spinning, yoga or boot camp class.
Equinox, the leader in upscale gyms with a track record for starting trends through its innovative classes (Equinox acquired SoulCycle), says its new offering, called Project, in New York’s trendy NoLita neighborhood, has classes in everything from high-intensity interval training to yoga for $35 each.
The enterprise promotes rising fitness stars, encouraging them to create passion projects and work with other trainers to form unique mashups like a dance-pilates hybrid.
Equinox, which declined interview requests, is tapping popular trainers like Bec Donlan, who has more than 42,000 Instagram followers, to create their own workouts. Donlan is teaching a booty-band class at Project called Babes & Bands.
Membership in traditional fitness clubs grew by 5 percent, compared with over 70 percent in studios between 2012 and 2015. And the percentage of members who visited more than one facility in 2015 increased in all segments, ranging from 28 percent of traditional gyms to 86 percent of studio members, according to a study by the International Health, Racquet & Sportsclub Association.
“Today’s consumers, driven primarily by millennials, do not demonstrate a strong allegiance to one type of fitness program or provider. Therefore multiple memberships is becoming (or has become) the norm,” the report noted.
Experts call it the tribe mentality, led by millennials who aren’t afraid to spend more money to feel like they’re part of a shared experience and community. ClassPass, which contracts with fitness boutiques across the country and allows consumers to try different studios for a monthly fee, has capitalized on this phenomenon.
“Some people go to the gym and they know what they’re doing ... but there’s a segment that wants to have an experience and feel something going to those classes,” said Michelle Ryan, chief marketing officer of New York Sports Club. “They’re motivated by people feeling like, ‘Hey, why weren’t you here yesterday?’ ”
The brand, owned by Town Sports International Holdings Inc. (TSI), recently launched NYSC Lab in two locations in New York and one in Boston. The Lab features trendy open-space studios with upscale finishes and a rotating roster of six classes including strength, cardio and high-intensity interval training. Celeb trainer Kira Stokes is at the helm of the Chelsea studio.
“We were just listening to what the consumers wanted,” said Ryan, who noted the company is also exploring online streaming options, which are also popular at many fitness boutiques.
In 2015, approximately 31 percent of members said they participated in at least one small group class, from a low of 4 percent in sports-specific studios like yoga to a high of 36 percent in personal and small group training studios, paying an average of $35 per class, according to the study by International Health, Racquet & Sportsclub Association.
Still, experts say most gymgoers still want to put on headphones and work out on their own at a low-fee monthly membership gym.
“I wouldn’t expect disrupted wholesale business models over the next five years. We’re going to try to see the big players compete in these areas incrementally over time,” said Emile Courtney, an analyst for S&P Global Ratings.
Discretionary spending on fitness has remained steady with increased spending among higher-income consumers willing to pay for $25 to $40 per class offerings because “they have the income to do it, the time to do it and they are adventurous enough to do it,” he said.