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Monthly Archives: September 2012

Creating a Baby Fund for Your New Arrival

Becoming parents for the first time last year has been the biggest change in our lives. As other parents will tell you, it’s a joy and a responsibility to raise a little one. One of the first decisions we made when confirming the big news was starting a baby fund for our little one and our family.

Why Start a Baby Fund?

Some may wonder if we had any savings before we became parents; we did. Up until that point we were comfortable with the few months of expenses being covered by our emergency fund. When we found out we were expecting, though, we felt the need to increase the safety net.

For one thing, I’m self-employed which means any time I take off for maternity leave would basically mean no income from my business. Though we expected some monthly expenses to decrease (less eating out for example), we also assumed that we would need a buffer to help us as we get adjusted to being parents.

How Much Do You Need In Your Baby Fund?

The next step to creating a baby fund is to figure out how much you want to save up. Of course, your needs depend on your specific family’s circumstances. However, here are some baby related expenses to consider when calculating the amount that is right for you:

Doctor Visits/Delivery Costs: Our visits to the obstetrician’s office was thankfully manageable. We talked to our family and friends who had babies recently to get a ballpark figure of what to expect for delivery costs.

We also checked with Human Resources with my husband’s company to know what would be covered and what wouldn’t be. The total costs (for the prenatal visits and delivery at the hospital) came out to about $2,500.

Diapers: Your preferences with diapers (disposable or cloth) can have a big impact on your expenses. Cloth diapers are more upfront, but it’s pretty much a one time cost. Baby Cheapskate and other sites like it can help you snag a great deal on cloth diaper sets, further lowering your costs.

Disposable diapers can be expensive in the long run. One tip I’d offer if you decide to go disposable is to use subscription services like Amazon Mom to have your diapers sent over to you and you can save around 30%. Our diaper costs have been around $20/month (not counting wipes – which can be found at stores like Costco for a great deal).

Food: Whether you breastfeed or formula feed, food is an expense likely to increase when you have a little one (though it doesn’t have to be by much). For many parents the money they save from not eating out as often evens out the higher food costs. If you buy formula, use sites like the ones I mentioned in the diaper section to get bulk deals. It can amount to significant savings.

Baby Gear: We had some money set aside for any items that we’d need that we didn’t get at the baby showers. Each little one is different so don’t be in a hurry to fill out all the gaps until your little one has arrived. You may be surprised at how little you’ll need. The money saved can be used for other baby expenses or you can put it into a college fund.

Childcare: For many families, this is the biggest expense if both parents work. Use the time before the baby arrives to compare which options are best for your family’s circumstances and goals. Daycare varies greatly throughout the country, so please get local estimates.

I’d also like to mention that if you’re doing a baby registry, please include gift cards on them. It can help you reduce the money you spend and help save up for certain baby expenses and give you some flexibility on how to spend it.

How to Save for the Baby

For the two of us, automated transfers and savings were the main strategy. Whenever we got a windfall such as a tax refund or bonus from work, having an automated deposit or transfer has helped us stay on course. We also looked at ways to cut back on expenses on our monthly budget and transferred the money into savings.

Thoughts on Building a Baby Fund

Whether or not you start a baby fund as something separate from your other savings is up to you. The thing to focus on is having a safety net to help you make the transition into parenthood. If you’re looking for more information about baby expenses, please visit Couple Money where we and other parents have been sharing their own stories, tips, and advice on what works, what doesn’t, and what’s not worth stressing over.

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Posted by on 11/09/2012 in Finance

 

Eight Tips for Taxpayers Who Receive an IRS Notice

Receiving a notice from the Internal Revenue Service is no cause for alarm. Every year the IRS sends millions of letters and notices to taxpayers. In the event one shows up in your mailbox, here are eight things you should know.

1. Don’t panic. Many of these letters can be dealt with very simply.

2. There are a number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.

3. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.

4. If you receive a notice about a correction to your tax return, you should review the correspondence and compare it with the information on your return.

5. If you agree with the correction to your account, usually no reply is necessary unless a payment is due.

6. If you do not agree with the correction the IRS made, it is important that you respond as requested. Respond to the IRS in writing to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the lower left corner of the notice. Allow at least 30 days for a response from the IRS.

7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right corner of the notice. When you call, have a copy of your tax return and the correspondence available.

8. Keep copies of any correspondence with your tax records.

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. For information about penalties and interest charges, see Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Publication 594 , The IRS Collection Process (PDF)

Understanding Your IRS Notice or Letter

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