And A Baby Makes... Life Expensive

So a baby is on the way (or perhaps ANOTHER baby is on the way)!  It's so exciting to walk about the house deciding how to decorate the nursery or jump in your 2-door car for a quick run out to the closest baby store.  Until you realize "where are we gonna put this thing?"  (And by thing I lovingly mean the bundle of joy growing ever so quickly in your belly). Now by no means do I advocate getting a larger house or car just because your family is expanding.  What I do advocate is spending a bit of time organizing your finances to clearly see what you can reasonably afford if you do find that you would like to find a larger house or car. 

If you are looking to expand your residence, there are a couple general rules to follow so you don't find yourself "house poor" with an additional mouth to feed.  Whether looking to buy or rent, your total monthly payment for housing should be no more than 28% of your gross monthly income (that is, your income before taxes).  When purchasing a home, this would include your mortgage principle plus any interest, taxes or insurance included in your monthly payment.  Depending on your tax rate and loan interest rate, these costs can figure anywhere from 10-20% of your monthly payment.  Once you have a ballpark figure, a mortgage loan officer at your bank or a real estate agent can help you solidify a price range you feel comfortable searching in.


Here is a simple formula to see how much car you can get for your available bucks.  This should give you an ideal price range in that will fit your budget and your needs: 

1. Figure out what you can afford to pay monthly and multiply it by the number of months you would like to pay (typically 35, 48 or 60 months).  
2. Add to that amount any down payment or trade-in value you may have.  
3. Now subtract out any taxes (around 7-8%) and loan interest (2-7%).

By spending some time organizing your finances and figuring out what you can afford, you can alleviate some of stress related to your upcoming family addition.  If you need further information, please consult a financial planner.  Now if I could only come up with a formula for alleviating the stress of labor pains.