How to reduce the financial strain during your baby's first year.

If you feel overwhelmed with your first baby coming, you are not alone. Many seasoned parents are anxious to offer advice on what you “need” to buy based on what worked for them. While that is helpful, you will quickly realize that baby supplies are not cheap. Here are some tips to keep the first year baby costs from ruining your budget.

Register for gifts before the baby.

I was hesitant to create a gift registry for our first child. I felt like a registry was impersonal and it was as if I was saying “buy this for me." The reality is that people prefer to buy you something you actually want and need. Without a registry to reference, most people will buy clothes and stuffed animals. That is fine, but many parents will tell you that they have an abundance of these things and end up giving a lot of them away or donating them.

Go to a thrift store first before buying anything new for the baby.

Some items for the baby are recommended to be purchased new, such as a car seat. Most items, however, can be gently used. For the items you want but did not receive from your baby shower, look for a baby-specific thrift store. We had one near us in San Diego that had baby clothes, toys and maternity clothes. We found it the day we took our daughter home from the hospital. She was born a week early and didn’t fit into the 0-3 month clothes we had ready for her. My husband purchased five "newborn" outfits for a total of $10 at the thrift store. You can check out Craigslist or swap with friends as well, but the thrift store may give you more options in a pinch.

Enroll in the Dependent Care FSA if it is available at your work.

Having a new child is considered a "qualifying event". That means that you have the ability to modify your benefits (if you are lucky to have them) at work. If you and your partner are both working full-time or attending school full-time, and you will be paying for childcare for the baby, you will save money by using a Dependent Care Flex Savings Account (FSA). The Dependent Care FSA allows you to use pre-tax money for a certain amount of tuition per year. There are specific rules, so check with your financial planner or tax preparer if you have any questions.

Create a plan for funding college.

This is a great time to begin the conversation with your partner about how much you plan to fund the baby's college education. Do you want to pay for the entire cost of a private 4-year university? What about graduate school? The vast majority of our families with young children are planning to fund half of a 4-year public school university for each child. Whatever your goal, the earlier you start saving, the smaller the monthly savings amount has to be.

Notify family members of the new college savings account.

If you decide to create a 529 plan for college, notify friends and family in the baby announcement email. People that are interested will save the info for the future and can contribute to the account for a holiday or the child's birthday. Our family gives money for college and then a small gift for the child to open on their birthday.

Meet with a financial planner.

Many people benefit from meeting with a professional during life transitions, such as having a baby. From life insurance to naming a guardian, there are a lot of new things to consider once you have an addition to your family. Having someone document your family's goal and financial plan in writing can help you stay focused during this incredible, but busy year. We can help.

A version of this article was published on February 24, 2013, and an updated version on February 7, 2020.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.

What is the Solar Tax Credit?

If you are considering transitioning to solar energy for your residence, you may qualify for a federal tax credit. 

VIDEO: WHAT IS THE SOLAR TAX CREDIT?

The amount of the credit depends on the year that the qualified solar system is placed into service.

• 2020, the credit is 26% 

• 2021, it is 22% 

• 2022, the credit is 0%

The credit is scheduled to expire on 12/31/2021 unless it is extended.

You do not receive the credit if you lease the solar panels - you need to own them. The IRS explicitly excludes panels used to heat a pool or hot tub.

How to take the solar tax credit.

The solar credit is in fact a credit, not a deduction to your income. That means you will calculate your tax due and reduce that number by the credit amount.

Notify your tax preparer if you end up installing solar panels to make sure you receive your tax credit. 

This will require them to complete IRS Form 5695 for you and to file it with your 1040.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.