Planning A Family? Here's How To Institute A Solid Financial Plan
To say that life changes after you have a baby is an understatement. Feelings of excitement and joy are married to an upsurge of expenses — not to mention the physical and emotional unrest that comes with financial stress. While people often make an effort to tend to their bodies and minds, the same attention doesn't always go toward individual financial preparations, let alone an adapted plan when considering a family. Case in point: statistics indicate that one-third of U.S. families can't even afford diapers, a basic necessity that comes with having a baby that can't be paid for with food stamps. Ideally, couples should start saving and investing the minute they start discussing having a child so that the financial transition isn't overwhelming. Here's a closer look at what should be on your to-do list.
Pay Off Debt
Let's be honest. Paying down your debts is a ticket item that will likely still exist once the baby arrives, but try to eliminate as much as possible (or at least have a solid action plan in place) before your bundle of joy comes into the world. Start by establishing a budget (and sticking to it) so you don't get yourself deeper in the hole. Student loans aside, pay off the most expensive debt first — a credit card with the highest interest rate, for example. Take advantage of balance transfers, if applicable. Always pay more than the minimum balance to make a substantial dent. Put work bonuses and tax returns toward your debt, and while it may be difficult (especially with a baby on the way), cease your credit card spending until your finances are under control.
Take a look at your current insurance plans to see if any changes need to be made.
Life: There are several different types of life insurance policies, so make sure you understand the impact each one has before making a purchase, including how the cash values and premiums vary. Note that if you’re ever in a financial bind, you can sell your policy in retirement to free up cash.
Disability: It's likely that you'll need disability insurance more than life insurance. If you become injured or disabled and are unable to work, you'll still be able to provide for your family. Just make sure you have the right amount of coverage to meet your expenses for several months.
Health: If your yearly insurance plan with your employer is about to expire, you may want to do a little research to determine whether or not you might be better off on your own. The truth of the matter is that not all policies offered by employers are good ones, and/or the family coverage is too expensive. Also, not all companies contribute to premiums. Take your time comparing plans, and don't necessarily make a decision based on price. Keep in mind that for most people, an employer plan is still the best option, because under the Affordable Care Act, employers can be reprimanded if their coverage is too expensive. Just don't forget to add your child on your plan within the first 30 days of birth.
Funding your retirement should not stop once the child arrives, so don't neglect your personal and long-term goals. You don't want to wind up having your kid supporting you in your golden years.
Save For Education
Contrary to what you may think, experts say the last thing you should be kicking money toward is your child's education. Paying off debt, funding your retirement, establishing an emergency fund, and affording the basics should come first.
Don't be afraid to seek out the advice of a financial planner. Some signs that you should hire one include, but are not limited to, a life-changing event, like having a baby; you're confused about the best way to save; you're making money, but have nothing to show for it; and you're not sure how to reach your goals. Hiring a pro is a small investment in comparison to the financial gain you could receive.
A little bio about me:
After losing her husband Greg, Sara Bailey created TheWidow.net to support her fellow widows and widowers. She is also the author of the upcoming book Hope and Help After Loss: A Guide For Newly Widowed Parents.