Well, it's official. We saw the sonogram last week, and we are having another baby! We had a hard time getting pregnant the first time, but this time it only took about 2 months, so we must be getting better at it! Obviously, this is a huge change for our lives in general, but it has specific effects on several areas of our finances:

Taxes
With an additional exemption and child tax credit, my estimate is that our federal tax bill will go down by $1900, and our state taxes by $250.

In 2008, we were just on the cusp of the 15% federal tax bracket, which is a good place to be. With the additional $3650 exemption, we can now reduce pre-tax 403b savings by $3650 and still be on the cusp of the 15% bracket. We will increase our Roth savings by $3650 to keep the same savings percentage. So some of the tax savings will be reduced by cutting back on the 403b contributions. The rest of the tax savings will go towards our increased expenses.

Day care
My wife works part time, so our daycare needs are reduced already. My mother will be watching the kids once a week. We have a nanny for the other 2 days. We will probably give her a significant raise due to the increased workload. This will increase our daycare costs from around $800 a month to about $1000.

Maternity leave
We were not expecting to get pregnant so quickly, so we will come up a bit short on leave. My wife earns 6.5 hrs every two weeks of general leave (sick, vacation & personal). Right now she has saved up about 84 hrs. If #2 is on time, she will have about 171 hrs by the time she has to take her leave. Her short term disability will cover 6 weeks at 60% pay. The rest comes out of paid leave, and then unpaid leave when she runs out. We are calculating that we will only need to take 2 weeks of unpaid leave, so this is a fairly minor hit to our budget.

Expenses
We will definitely see some increases in our weekly expenses (diapers, clothing, food). My wife plans to breastfeed again so we won't need formula. Except for the diapers, we are expecting these expenses to increase pretty gradually so we will adjust to them when we notice a big difference in our budget. Probably we will see some cost savings in other places since I think it will be harder to go out.

Overall, the effect on our budget will not be nearly as drastic as when we had our first child. However, I know my sleeping budget is going to see some serious cuts!