If you’re pregnant and reading this, congratulations! You’re embarking on a new adventure that will change your life forever. I know it may appear like there is so much to do before having a baby like decorating the nursery or buying some clothes. But there is something you should do first – Plan your finances!
“Money is something we don’t talk about,” says certified financial planner and founder of Friday Night Financials, Rachel Cruze. “We want to plan for our future and kids’ futures but we are scared.”
Babies cost more than you might think and can really put a dent in your finances if not planned for ahead of time.
Here are some tips on how to save money and prepare yourself financially before welcoming your bundle of joy into the world!
1. Prepare for the costs of baby-related items
Your baby will have a lot of requirements right from Day-1. You will be spending a lot on baby products apart from essentials like clothes, nursing products and cribs. You will need to be prepared to ensure your baby is provided the best care. Calculate the amount you will be spending on new ventures like baby products, healthcare, daycare / nanny, etcetera. Do the math on your paid and unpaid leave and how it will affect your finances. Save up accordingly even before your baby is born.
Try clearing existing debts and work on your loans beforehand. It can be a little overwhelming; however with proper planning and budgeting it will become easier.
2. Estimate your monthly finances after your baby's birth
Consider what you want your financial goals to be after having a child. Then, figure out how much you will need to save. Keep track of all of your family’s expenses (both big and small) to get a better picture of your monthly spending. Making a spreadsheet may seem old school. Trust me, it is the best method for budgeting. This tracking will help you identify areas that might make you crunch the numbers and need a cut back.
3. Make realistic budgeting:
If you think it is going to be hard to make expenditure liberally once you have a new member, start squirreling away already! Evaluate if it is worth it to purchase or rent a home with more space, especially if this means that you will have less money left over each month. Plan the care you can afford to give your baby. Don’t chase brands! Spend wisely on clothes and nursery. Your baby will out grow them sooner than you think. Practice living on your new family budget before the baby actually arrives.
4.Consider long term financial plans!
If you think your baby’s expenses are making your head spin, wait till they grow. Their education costs are the biggest expenses. The tuition fees for private schools and colleges are startling and will make you appreciate how important it is to save and invest. Prioritize retirement savings. It’s great to care for your kids, but not if it means potentially burdening them financially for your care later on.
5. Get medical insurance
Insurance coverage for fertility treatments and childcare will be life-saving in case of an emergency. Even with that, you will end up paying out-of-pocket while having a baby and after.
If you don’t already have a “rainy day fund,” now’s the time to anticipate some emergencies. Kids are accident prone, and with the cost of raising a child there’s no telling if you’ll have the disposable income to pay for any unexpected expenses. So, include your kids in health policy.
6. Review your estate plan:
When you become a parent, life takes on a new meaning. You’re no longer living just for yourself, but for the young family you’ve created.
Purchase life-insurance. You need to plan for your new family, which means facing questions like “What will happen to my child or partner if I die?” Life insurance is one way to provide for them financially when life unfortunately throws a curve ball at you. Keep in mind that you’ll need to make adjustments elsewhere to ensure when and how your child will have access to the money. A will and/or trust can accomplish this and it is a good start to estate planning.
I hope this post has given you a few new perspectives on how to tackle finances for the new addition to your family. Therefore, financial discipline is essential to providing good education, nutrition and a secure future for your child!
Now that you know what to expect, it’s time to take action. Start planning your finances before the baby arrives! What specific steps will you be taking?
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