When baby makes three but you’re living on an income built for two, you’ll have to do some financial finagling to ensure everyone’s needs are covered today and in the future. Keep reading for a few tips on how to plan ahead while staying comfortable.
Evaluate Your Situation
As a new or expecting parent, it’s important to know how you stand where your finances are concerned. Take an honest look at your spending habits and make changes when necessary. Evaluate your assets, including real estate and personal property, and factor them into your budget.
Draft a Budget
One thing you should know is that babies are expensive. For such tiny humans, infants have a way of making a big dent in your wallet. Investopedia notes that ongoing expenses can add up fast. A single infant will require more than $1,000 worth of clothing and diapers in their first year. That’s just for basic disposables and budget-minded clothing. That number can easily triple if you plan to use name-brand diapers and outfit your child with trendy toddler wear. If you plan to formula feed, you can tack on another $900 to $3,000 to your yearly baby budget.
As a parent, one of your first instincts will likely be to start saving for your child’s college expenses. This is a smart move considering that higher education can cost tens of thousands of dollars or more for a single semester. Most experts recommend funneling money into a 529 college savings plan and note that it’s never too soon to start putting money away for the future. Fidelity recommends saving your child’s age times $2,000 to be confident that you can cover at least half the cost of a four-year university. By the time your child is 10 years old, you should have around $20,000 set aside for college.
Put Yourself First
Before you even think about putting money away for college, you’ll need to ensure you are on the right track for retirement. While it may seem selfish, you don’t want to burden your adult children with your financial care, which can cost significantly more than repaying college loans.
Get Life Insurance
If you don’t have a life insurance plan, you really need one, as it’s one of the most important aspects of estate planning. In the event of your passing, your family could be left with outstanding debt, such as medical bills and funeral costs. Since your children will likely have enough expenses to worry about in their adulthood (healthcare costs, college expenses, etc.), getting life insurance will help offset these costs during payout. If you want to save on insurance, don’t just settle on a plan without doing some homework first. You can determine the right coverage for you by using an online calculator, which factors in your current health, annual income, number of household members, and other basic information.
Investigate Additional Income Opportunities
If you have identified deficiencies in your income and have taken steps to modify your spending but still fall short, it may be in your best interest to look for additional income opportunities to supplement your savings strategy. Although it may seem counterproductive, planning for one parent to remain home with the child while working side jobs may be a lucrative option if that parent makes less than $30,000 per year. In addition to saving on childcare costs, the stay-at-home parent can pursue self-employment to add to the family bank account. Flexjobs notes that remote, contract employment opportunities, such as events marketing and tutoring, offer both flexibility and potential long-term career opportunities.
Avoid Future Debt
In addition to saving money, part of your financial plan should include strategies for staying out of debt. This might mean sacrificing personal endeavors or reducing your discretionary spending. A good rule of thumb is that if it’s not an emergency and you can’t afford it, you don’t need it. Track your credit card spending, compare prices before major purchases, and pay with cash when possible. Debt.org offers more information on how to avoid landing in debt.
Understanding your current cash situation and staying on top of your personal economics does more than strengthen your financial health. Keeping tabs on your financial strengths and weaknesses will have a positive effect on your mental, emotional, and physical wellness. Talk to your financial advisor about other ways to plan for your child’s future without sacrificing comfort.
Image via Pixabay
About the author:
After losing her husband Greg, Sara Bailey created The Widow in the hopes of sharing her journey of grief and provide insight and hope to those who experience loss. She then created her site, the widow.net
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