Financial planning is a life-long, all-encompassing journey. Not only are you considering your income, savings, and budget, financial planning includes preparing for all significant life events, both expected and unexpected.
One of the most significant of these life events for many individuals and couples is having a baby. In fact, about 60% of adult Americans plan to have children. Having a new baby will require adjustments across every aspect of your life. While changes to your finances are expected, many new parents aren’t prepared for just how much money it takes to have and raise a child. However, proper planning can alleviate anxiety and stress and allow you to enjoy the journey of being a parent.
Here are a few financial tips for expecting parents.
Have Consistent Conversations About Life and Money
Communication is fundamental when raising a child, especially regarding finances. Money is a leading cause of stress in America and an uncomfortable topic of conversation for many individuals and couples. Having conversations about finances and aspects related to finances are important to address with yourself and/or your partner before having a baby and throughout parenthood.
Discussing your jobs and careers, goals in relation to them, and how they can impact your family is important. Plan ahead and agree on how to maneuver having a baby while balancing work. How will the changes that take place affect the family’s cash flow? How will it affect your career progressions and future earning potential?
Furthermore, it’s important to plan for childcare and the costs that come along with it early on. The average annual cost is about $12,000 per child for middle-class American parents, and budgeting needs to align with what type of education you are planning for your child. It’s never too early to discuss college savings, and starting early will allow for budgeting to be less stressful throughout the years.
Include Your Child in Your Employer’s Benefits
Does your employer offer a benefits package? When your baby is born, you should be able to update the status of your benefits enrollment to include your child in any plans, like medical, dental, and vision insurance. Planning for this change and being certain about how your health insurance policy works can make you aware of different deductibles and out-of-pocket maximums that can occur if you change from an individual plan to a family plan.
Keep Stock of Your Standings and Reassess
Because having a baby is a major life change that affects every aspect of your life, it’s important to keep an updated stock of your standings and have clarity around your finances to have a strong starting point for parenthood. This includes keeping track of all your records in one safe and accessible place, like financial records, your child’s birth certificate, social security cards, medical records, and more.
Updating your budget to include the transition to parenthood is a prerequisite to keeping you on track with your long-term financial goals. Reassessing your cash flow and planning for how time away from work will affect your income, along with increased expenses and savings, will reduce long-term stress and keep you on track during this transitional time. This includes reevaluating your emergency fund and looking at whether the addition of your new family member means you’ll need to increase it. Also, consider reviewing and updating estate planning documents. It’s critical to have a will, a financial power of attorney, and advanced medical directives, especially as a parent. This includes beneficiary designations. Having a new baby means you’ll need to update these documents to account for your new family.
Make Parenting Easier With Financial Planning
Working with a trusted fee-only financial advisor will help you to find a passive income-generating plan that is the best fit for you and launches you further towards your long-term goals. At IMAFS, our goal is to ensure you achieve yours and guide you through major life changes. We offer fee-only holistic financial and retirement plans for doctors that will work with your circumstance to find the most optimal way to accomplish financial security.