A first child comes with many new responsibilities. Some are more daunting than others, but there is no reason you can’t start tackling them now. One of the most important things to get under control as soon as possible is your finances. Coming up with a financial plan before the baby arrives is the best time to do it.
Between setting up the nursery, buying baby supplies, and attending various doctor’s visits, it’s easy to let financial planning fall by the wayside. However, once the baby arrives, it will be even farther from your mind. According to Parents Magazine, most couples who don’t plan ahead run into financial issues around six months after the baby is born.
This can lead to significant amounts of stress and cause serious relationship issues. Financial stress has been known to take a toll on mental health. It can also lead to depression and anxiety that affects your physical health. That’s why the best time to come up with a plan is before the child arrives. Proper money management and solid financial health can relieve stress and anxiety and promote happiness. Plus, you can head into parenthood knowing you’ve got your ducks in a row.
Find a New Budget
The cornerstone of any financial plan is creating a budget. Children are expensive. On top of the larger one-time purchases such as cribs and strollers, you have to account for diapers, clothing, daycare and maybe even formula. Then as they grow, their needs will change and so will your expenses. Time magazine found that the average cost of raising a child to age 17 is $14,000 yearly. Start keeping track of your spending. This helps you to see where you can make cuts to allow for these new costs.
There are many hidden costs in owning a home, so you should also think about where your home fits into your budget. If your home is too expensive, you may need to downsize. Consider using a home cost calculator to work the numbers.
Beef Up Your Savings
Most money experts will encourage you to have three to six months worth of savings in your emergency fund. This money exists should anything unexpected happen such as job loss or a hefty medical bill. Even if you are the type of person who is on top of their savings, remember that a child will add new monthly expenses. To account for this, the best time to add money to your savings is before they are born.
Get Your Estate in Order
However unpleasant it is to think about, you need to plan for the worst. In the unlikely event that something happens to you or your spouse, you can take comfort in knowing your child is taken care of. Before the baby comes is the perfect time to look at your assets and decide how you would like to distribute them. It is also the time to decide who would take guardianship of your child in the worst-case scenario. This will save your family a lot of heartache from fighting over your estate and you can have a peace of mind knowing your child will be okay.
The New York Times also encourages parents to take a look at their assigned beneficiaries. In many states, certain accounts will distribute to the beneficiary even if it’s noted otherwise in your will. Now is the perfect time to update your accounts.
Plan for Their Future
Truly savvy financial planners look farther ahead than the next month and even the next year. They’re planning for the long-term. It’s never too early to start saving for your child's college. Consider opening up a college savings plan in their name as soon as possible. These are designed to ensure money goes directly toward your child’s future education. It will help them avoid missing out on financial aid and owing thousands of dollars in student loans.
Do Not Forget Your Future
It’s easy to get wrapped up in spending all your money on your child. Resist this urge. There is no reason to spend everything on them now if they are going to end up supporting you in your retirement. Keep putting money toward your retirement plan. This will save everyone a lot of stress and future arguments if you are able to support yourself into your golden years.
Getting Your Finances in Order
As excited as you may be when you are expecting your first child, there will inevitably be a slow creep of stress as the weight of your new responsibilities hits you. Getting your finances under control ahead of time will significantly relieve this. It’s never too early or too late to start planning. The sooner you start, the less stressed you will be.
Photo courtesy of Pexels.
Guest Blog Contribution dadsolo.com