Found myself unexpectedly pregnant. Need to get my s**t together

Submitted by coldbloodedcreatures t3_10pnh4v in personalfinance

Hello! My fiancé and I are expecting our first baby in June. As exciting as it is I feel a soul crushing anxiety to pay off my credit card debts and save up as much as I can ASAP.

I have made some more decisions with credit cards in the past and am working to get them paid down.

The breakdown is this:

Salary: $64k Rent: $1220 Savings: $500 monthly 401k: 8% plus 3% employer matching Credit card debt total: $6085.31 over three cards (with high interest) Dependent and health FSAs: $100 monthly

All of the other bills I split with my fiancé. I am doing my best to pay about $600 a month on my credit cards but it’s been hard recently as we have just moved and it’s proven to be a huge expense. I am planning to use my upcoming tax return to pay down my cards as I get a pretty large return because I’m a graduate student. This will take care of a good chunk but I am wondering how else I can pay this down faster. Should I borrow from my 401k? Should I stop saving and focus on paying my cards? I don’t want to but I feel a crushing need to pay off my debt before my baby gets here because I know we will have medical bills. Any advice is greatly appreciated

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Vegetable_Alarm1552 t1_j6lgpza wrote

Would be helpful to know how much you have saved. With that said, don’t borrow against the 401k. You’re only $6k in debt.

Don’t listen to the “baby industrial complex”. You don’t need anything other than a bassinet for your child. They sleep 16 hours a day and eat/drink food you produce. They live in the bassinet or your arms for at least 3 months. Then maybe they need a mat to lump around on and do tummy time. That covers 6 months. You’ll need diapers; maybe formula. You’ll need a car seat. Graco 4 in 1 is good until the kid goes to college. Get a stroller. Going on walks is free, good exercise and good for bonding as a family.

They’ll make you think you need way more than you do. Live simply!

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FWF_scripta t1_j6m67ay wrote

>Graco 4 in 1 is good until the kid goes to college

🤣

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DoubleHexDrive t1_j6n8hsv wrote

I swear I raised three toddlers in a battery powered swing. Slept great in that thing. MVP of the baby years.

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coldbloodedcreatures OP t1_j6lgz9s wrote

I have saved $1005 thus far. Ok yes you’re right about borrowing from the 401k. And yes most of the stuff for the baby will be purchased by our family too and you’re absolutely right they really don’t need much. I can’t believe how much overpriced BS there is out there!!!

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GreenEggPage t1_j6lhc9g wrote

  1. Do not borrow from your 401k - that money will grow better in the 401k and, if you don't repay it, you get a nice tax hit. Just don't do it unless you're going to die if you don't.

If you don't have to pay state income tax, you should be bringing home a little over $4,300 per month. I see about $2,300 in bills, leaving you with about $2,000 free. Don't spend anything extra and you can pay it off in 3 months. It's not gonna be fun, but you'll be done.

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eckliptic t1_j6lhx3z wrote

How does your employer matching work? Is it required you put in 8% for that 3% match?

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coldbloodedcreatures OP t1_j6li0ve wrote

No it’s not I just read that it was the standard. I guess I could pull back on that a little for now

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eckliptic t1_j6liaiy wrote

Read the side bar, specifically the prime directive

The step after meeting the bare minimum for your employer march is to then pay down high interest debt

There’s no point putting in money for 8-10% returns when you have CC debt charging you 20% interest

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CeruleanSaga t1_j6lph7h wrote

I'd rather you borrow from your 401k than reduce contributions.

You can only put so much in per year, you don't get that window back.

Borrowed funds can be paid back. And market rates of return are unlikely to beat savings in credit card interest.

That said, I agree with others, $6k is low enough that either of the above can likely be avoided - but it may take some major self discipline.

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racf599 t1_j6lihw5 wrote

I recommend pinning down exactly what your medical expenses are likely to be. It's been a minute since I had a baby, but I remember being blindsided by the fact that I had to pay 2 copays for the hospital admission. Find out now exactly what counts toward any deductible, your individual and family out of pocket maximums etc.

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Creepy-Floor-1745 t1_j6ljehe wrote

I would normally recommend getting out of debt asap, putting savings (besides 401k) on hold but now you’re expecting a significant risky life change. Pregnancy and childbirth are very common but are also very dangerous when compared to not being pregnant and delivering a baby. So, save save save.

Someone else mentioned this but do NOT buy ALL the baby things. Cannot stress that enough. Plain onesies, diapers, receiving blankets. They don’t even need a crib or changing table if you don’t get one as a gift or hand me down from a trusted source.

You could quite possibly end up on bed rest with longer unpaid maternity (you don’t have paid leave, so you?) leave than you expected - or other circumstances much more significant financial impact, we don’t need to get into details. Stack up your cash. Everything will quite likely go very smoothly, boringly smooth is what we hope for, and worse case scenario you have a bunch of cash to throw at the debt.

Good luck and congrats!

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coldbloodedcreatures OP t1_j6lkow4 wrote

I do have paid maternity leave and quite a bit of sick and vacation time that needs to be used prior to the end of the year, so my cash flow is no issue at all. Thanks!

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Creepy-Floor-1745 t1_j6mmy5m wrote

Oh that’s great - what a relief!

It’s not just for the maternity leave that you need the cash for. Sometimes things happen like an extended stay in nicu ir other special circumstances. It’s worth stashing up the cash. You just don’t know. Not just bed rest, sometimes we have kids who need more than the typical baby and require things like medically necessary formula. Sometimes we have kids born that need much more than just special formula. I hope everything goes really well for you and the baby. It won’t hurt to save more cash in case there are complications that you didn’t expect.

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famguy31 t1_j6mte9y wrote

Like others have said, see if you can decrease your 401k contribution but just enough to get the employee match. This won’t be a lot but it is something. Can your fiancé help? I think joint accounts is best if you feel this will be a long term gig (Kind of like combining powers).

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CrocsBBQ t1_j6o3c5r wrote

Could you do a balance transfer to a new cc? I know it sounds counter intuitive to open a new card but many times you get an introductory rate for a period of time which may we well below your current rates.

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Thomasanderson23 t1_j6lhtyp wrote

This might be terrible advice but stop paying your credit cards if you can’t afford to live

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