Financial planning is an ever moving target. What seemed perfect for you last year might not actually pan out this year. This is because change is ever present. There is nothing you can do to stop that. The best thing is to be proactive with the potential changes and be flexible enough to adapt to it.
There are times when situations would catch you off-guard and that is where you reserve funds would be of most help. However, there are life-changing developments where you have a few months to prepare for. One of them is having a baby in the family. According to CDC.gov, there were almost 4 million babies born in 2015.
After you attend to your marital finances, the next step for you as a married couple is to have a bigger family. Once you determine that you are having a baby, expect to go through a roller coaster of emotions especially if this is going to be your first baby. You would feel happy at the prospect of being a parent. Then you might start to feel a little scared that you are not really prepared for such a big responsibility.
One way to try and address whatever anxieties you might have is to get down and look at your financial planning outline for the baby. Having one can greatly decrease your worries knowing that you are doing something and securing your baby’s future. Here are a few things you can do to achieve just that.
Forecast your household budget
There is no doubt that one of the areas that would have to change is your household budget. You might already have a good working budget for the two of you that covers all your expenses and payments. However, once the baby comes out, you would need to make changes to that budget.
There is no doubt that your expenses would spike up because you now have another person at home. Everything from food to clothes and even utilities would, sooner or later, see a significant increase. As your expenses would go up, the next logical thing to do is to increase your income as well.
It is also a good idea to redo the numbers on your reserve funds when you have a new household budget. You might overlook the fact that since your expenses would go up, your emergency money needs to be able to cover that new amount as well. The last thing you need is having a new baby and taking on debt when the unexpected happens because you forgot to increase your reserve funds.
Want to see how the new budget pans out and how effective your financial planning approach is? You can choose to test-run your new budget months leading to your baby’s arrival. This can give you enough time to work out the details and adjust to the new numbers.
Pay down as much debt as you can
Debt can be a great tool when you look at investing for your future. Student loans get you a college degree and a mortgage loan allows you to buy a house. However, all these, when added up, puts a fair amount of stress in your budget. You need to make payments on these loans regardless why you took it out.
One financial planning tip when you are expecting a baby is to try and pay down as much debt as you can. This can free up precious funds in your budget that you can then put into expenses for your baby. It can help you put together a new budget without the added stress of trying to drastically up your income.
Creating a baby fund can be part of financial planning
As you try and redo your numbers for your reserve funds, you might want to set aside a few extra dollars a month and create a baby fund. This is best done prior to having the baby at home so you get to save up in advance. The way to do it is to look at what you will be needing at home when the baby arrives.
How much will you need to turn that extra room into a nursery? Have you looked at the prices of baby cribs and other furniture? How about installing safety gates for the baby? Maternity clothes and even breast pumps, as well as milk bags, can also run up your cost of preparing for the baby. You can prepare for all these big expenses with a baby fund.
Check how the new baby could affect your work
There is no doubt that for the most part, financial planning would oftentimes boil down to two things – income and expense. As with your budget and most of your financial decisions in life, these two items will always play a huge part in how to make money decisions. Once your baby is at home, you might start to explore your income options. You might start to look into telecommuting to spend more time with your family. You might even plan to kickstart that business you have been putting off. At the end of the day, your decision needs to strike a balance between your financial needs and spending time with your growing family.
Prepare all the legal documents that you need
Having a baby is a life-changing event and as such, you need to make life-changing decisions as well. For one, you need either create a will if you have none yet or update the one you have. This is to make sure that you look after the future of your child. In line with that, explore the possibility of getting a life insurance as well.
If you have health insurance, you need to add your child into that plan to make sure you get to address any medical needs he or she might have. All these are big decisions and you are forced to face facts of life such as sickness and death. With these types of decisions, it is better to do it early rather than putting it off for another day.
Never too early to prepare for college
Collegeboard.org shares that for 2017, the average cost of attendance for a 4-year private non-profit school is at about $45,370. As a parent, you can help your child prepare for that impending cost by setting up a college fund. You can look at a 529 plan or look at other investment options for your child.
Do not put your retirement plans on hold
As you look at financial planning, you should not forget about your own needs. There are a lot of parents out there trying to figure out if they need to hold off planning for retirement in lieu of a college fund for their children. You need to understand that you have to take care of your own needs as well. Besides, the more you have in the future, the lesser you have to rely on other people especially your kids for your financial needs.
Financial planning might get quite complicated when you are expecting a baby at home. However, this can be also an exciting stage in your life as you redo your finances to welcome the newest addition to your family.