Formula was already expensive, and that expense has further increased this past year due to inflation, supply and demand dynamics, and in some cases, the added cost of shipping charges for formula ordered online that used to be available in the local grocery store. For households that are struggling to make room in their budgets for the increased cost of formula, I would recommend tackling the issue from the following three angles:
#1 Earning more
Is there any way to bring in more income to the household? Is it time for a raise at work? Workers have more leverage right now than they have had in decades, and employers are desperate to hold on to good employees. One conversation that leads to a raise can have a significant compound effect on your financial situation not just today, but for years to come.
If only one member of the household is working, is it possible for another household member to bring in a little extra money, perhaps by taking a part-time job or working freelance in some way? Can selling items that are no longer need or uses bring in a little extra cash? Services like Facebook marketplace make this easier than ever.
#2 Cutting costs and optimizing spending
Feeding a baby is not an optional expense. If the numbers aren’t adding up, it’s time to look closely at expenses and trim back discretionary spending appropriately.
Apps like mint.com and You Need a Budget (YNAB) can help illuminate where the money is going each month, if it’s not clear.Optimize spending by using a service like Truebill to identify all active subscription services and cut any that aren’t being used, and negotiate expenses that cannot be cancelled entirely. Oftentimes, landlords, utilities, and credit card companies will work with good customers to reduce payments temporarily in order to ease a financial burden. The key is to ask.
#3 Looking for a lifeline
For those households that are already making as much as they can, have cut out as much as possible from their budget and are still struggling to make ends meet, look at all possible resources to help access money and support:
Roth IRA contributions – There are exceptions to the 10% early withdrawal penalty for Roth IRA assets. For example, withdrawals are allowed for qualified expenses related to a birth or adoption. Additionally, any contributions to a Roth IRA can be withdrawn penalty free at any time. Just note that earnings on those contributions would be subject to the 10% penalty on early withdrawals, so avoid withdrawing earnings, if possible.
401k loan – A 401k loan can be a valid source of funds to help bridge a short-term financial shortfall quickly. The loan must be repaid, typically over a 5 year timeline, but it can be a way to help bridge the financial gap during the newborn/formula period. Note that a 401k loan must be repaid immediately upon leaving the company, so this is only an option for those who feel that they will remain employed for long enough to repay the loan. Otherwise, the loan is seen as a taxable withdrawal and subject to the 10% penalty as well.
Enhanced Child Tax Credit – Families who do file taxes due to low income may still be eligible for the enhanced child tax credit, and can receive up to $3,600 per child under the age of 6. To check eligibility and submit information to receive the credit, families can visit www.childtaxcredit.gov.
The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) was designed to help women and young children in need, specifically to help cover nutrition needs, including formula. More information about the program can be found here, including a prescreening tool to check for eligibility.