Expecting a child can be very exciting, but overwhelming as well. All the financial responsibilities seem to be piling up before you even realize it, and suddenly, you're panicking and don't know what to do. This is why making a proper plan in advance, and seeing the clear picture is very important. These ten things are some of the essential factors you need to keep in mind when you are financially preparing for baby arrival. Use it as a guide, and you'll be able to go through this process with a little less tension.
Ramp up Your Savings
The first and most important thing to do when expecting a baby is to start saving money and spending it wisely. And the smartest thing to do is to start saving it as soon as possible. Having a professional head debt resolution attorney could also help you manage your costs and see how you can save more money than the amount you spend. Take a good look at our budget and see how much you can afford to spare each month. Take that amount of money and put it aside into a separate emergency account.
Also, try to focus on saving money for the necessities and covering up the upcoming costs. The easiest way to go about this is to create a list or even a spreadsheet of all the things you will need for the baby. Add up the expected costs and divide them by a certain number of months you think is going to take you to save the needed money. This way, you will be able to develop a monthly goal of how much you want to save over that exact period of time. There are also some useful apps that can help you determine how much you can afford to save, such as Digit. All you need to do is connect the app to your checking account, and its algorithm will do the rest.
Budget for Baby
Your budget is going to undeniably be a little overwhelmed in the upcoming time period. It is going to need a bit of an overhaul once the baby arrives. This is why tracking your overall spending can be quite useful. For instance, you could end up banking some savings by cutting back on entertainment and eating in restaurants. Some families choose to create a zero-based budget and account for every dollar that comes in. All you need to do is make enough room in the budget to pay down credit card debts so that you don’t have to worry about these payments once the baby is here. It will definitely give you a fresh start.
Also, with baby on the way you will have to plan for large expenses in advances such as birthing or adoption costs, a car seat and a crib plus many other monthly costs like diapers, formula and child care, and so many others. Having all of this in mind and making sure to have a proper plan before the baby is even born is very important.
Also, keep in mind that you or your partner will end up taking extended time off work or becoming a stay-at-home parent. In other words, you need to take into account the possibility of having a smaller income. Base your budget on what you expect, and your new income will be once the baby is born. Try to practice living off one income for a while and pocket the extra money so that you can save it for later.
Prepare for Parental Leave
You need to be aware of the fact that newborn babies require a lot of attention and care. Whether a woman decides to go for a C-section or vaginal birth, childbirth is nevertheless a significant medical event for a woman that requires several weeks of recovery. This is the time when a woman needs to take time off work to recover and spend time bonding with her child. Adjusting to these changes in the family is crucial. Also, consider meeting with your boss or your company's human resources department in order to make a concrete plan for parental leave.
Make a Decision about Child Care
One of the most expensive and overwhelming expenses you will have to face once the child is born is definitely child care. It has been proven by a survey from 2018 that 82% of parents with the children under the age of 6 pay up to $500 or even more each month on child care. And more than half of them said that it costs them at least $750 a month.
The smartest decision you can make is to start researching affordable child care options as soon as possible. Also, look into child care assistance is possible. Some parents choose to significantly reduce their hours or even put a pause on their careers to become stay-at-home parents and take care of their child. This can significantly cut down daycare costs. You have to be prepared to earn much less than before. You'll be earning less money, and huge costs will constantly be coming your way. It is going to be overwhelming, especially because of the lack of sleep you'll have in the first six months. No matter what plan you choose to go for when it comes to child care, just make sure to have your household income in mind and be aware of the budget changes that are inevitably going to affect your income.
Acknowledge Your Debt
It's most likely that you have some form of debt. You might have a car loan, student loans, or a mortgage. And it's totally okay. It is manageable to have children and debt. However, keeping up with these payments, even with a child in the picture is something that you should take care of. If you fail to keep up, high-interest rates and late fees will stack up and create a much bigger issue.
The first step towards managing your debts is to take a good big-picture view of all of your currently unpaid debts. If you feel overwhelmed and are not sure how to go about it and make a plan, use a free credit-monitoring service Credit Sesame. This way, you will be able to get a clear picture of what debt you have. Most of the time, you won't be able to pay all of it immediately, and that's okay. Just make sure to draw these into your budget. This will prevent you from falling behind. Also, as new parents, make sure your overall finances are protected. The app will offer you free identity theft protection as well.
Address the Insurance Question(s)
Having a baby means having someone who now entirely relies on you. That can be quite terrifying. Many parents start thinking about life insurance within the first month of their child's birth. In case something happens to one of the parents, the other one would be responsible for raising the kid and providing all the necessary care for the child. This kind of weight of responsibility is what you feel once you have a child.
Now, like any other responsibility, researching life insurance can be overwhelming. It will take a lot of time and energy to figure it out and make the right decision based on your own situation and needs. There are companies that will offer you an easier way to compare and buy life insurance. This newer online platform makes applying process much easier and offers instant quotes from top carriers in order to help you make a quicker decision.
But there are other types of insurance that you need to think about. Some of them are health, auto, homeowners, and disability insurances. Each situation is different and comes with different costs, so be careful when considering your needs.
Write Your Will
I know it sounds daunting, and many parents easily find an excuse for not taking this step, but writing your will is something that can help a lot. It is an essential thing to do once you've got your children in the picture as well.
A will is a legal document that determines who will get to receive your assets and who will be your legal child guardian if you pass away. It might not be the most pleasant thought, but it is very important to prepare for the worst-case scenario. Get informed about the process of writing a will and get it done just in case. It's important to know the difference between a will and a trust, its cost, and even how to write one if your funds are low.
Don’t Forget About Your Retirement Plan
However, having a kid does not mean you have to forget about your own future. One of the things you also want to take care of is your retirement fund. You need to make sure it is on the right track. Before you have kids, it is very important for you to already have a good start on your retirement fund. Make a plan to continue to make these contributions as well. And if you have trouble getting your money into the retirement account, there is another way to do it. You can build it into your budget. Consider this part essential, like any other we discussed so far.
Make sure to pay it at the beginning of each month. This way, you won't be able to spend it on something else. In case you made a retirement plan through your employer, try to set up a direct deposit. That way, a portion of your paycheck will go directly into your savings account. Try to keep tabs on your account and make sure it has your best interest in mind.
Plan for Your Kid’s Future
Even though your child's education seems like ages away, it's important to have it in mind and develop a plan. However, if you have bigger issues in other areas, you can put this one-off.
One thing you should never do is sacrifice your retirement or emergency fund to pay for college. In case this is something you can't start saving for immediately, try making a plan that you'll start incorporating college funds along the way. You can always start college savings account for your kids. Look into a 529 plan, which is similar to a 401(k). In other words, it is an investment account that has tax benefits. It will help you save money for your children's college. However, if you end up in a situation where you need money in a shorter period of time, or you lack a certain amount of money to cover a portion of tuition, consider taking reliable low rate personal loans that you will be able to pay off along the way.
Order a Birth Certificate and Social Security
Lastly, another thing you should do right away, as soon as the baby arrives, is to order the birth certificate and social security number for your child. In most cases, staff in the hospital will already have the paperwork for this, so you don’t have to worry about it. However, in case they don’t have the paperwork ready, contact the Social Security office and the office vital records in the state you live in. This information is highly important because you need it to open savings accounts for your child. You have a full right to ask for it.
All things considered, there are many things you need to plan ahead when you are expecting a new member of the family. Remember that everything you do, you do it for the secured future of your own child. Make sure you and your partner have everything clearly laid in front of you, all the responsibilities, upcoming costs, and past debts and come to a decision together about what you are going to tackle first. This list will help you keep in mind all the necessities so that you can make sure your family has a bright and promising future.