By: Sara Bailey
Although having a child can contribute to money stress, it can actually be the push you need to finally get your financials in order and help you better plan for the future. Whether you’re preparing to welcome a new child into the world or you’re finding it difficult to meet the financial demands of your baby, planning will help you accomplish your goals of financial stability. Follow these tips to help you get started.
Set Financial Goals
Setting financial goals helps you remember what you’re working toward. Instead of simply putting money in a savings account without a future purpose for it, you’re building up funds for your child’s college education, your own retirement, or for a down payment on a home. Have regular discussions with your partner to talk about your goals and evaluate your progress. Many parents make the mistake of spreading themselves too thin by trying to accomplish too many goals at once. Instead, The Balance recommends prioritizing your savings, whether that means starting by building an emergency fund or paying off credit card debt.
Make a Budget and Stick to It
Making a budget will help you evaluate your progress toward your goals and track your spending habits. This will allow you to make cuts if you’re spending more than you’re making. On the more positive side, a budget allows you to do more of the things you want to do if you discover a surplus. In essence, budgeting ensures you will always have enough money for the things that are important to you. If possible, try to set up a budget for your next six months to a year. This will let you plan for large expenses and ensures you will meet your savings goals.
Get Life and Auto Insurance
Consider getting life and disability insurance now that you’re a parent. According to Money Expert, your life insurance should cover the expenses of your family if you’re no longer around to provide for them. This should protect them from the costs of things like childcare, but also your mortgage and your child’s education. Similarly, disability insurance will protect your family in the event that you are no longer able to work and bring in an income.
While you’re shopping for life insurance, it’s also important to ensure to take a look at your car insurance. Should you have an accident, you want to know that you’re covered, especially if you suffer a severe injury. And while all states require you to have basic auto insurance, it’s important to consider upgrading to collision or comprehensive coverage if you don’t already have it. Full coverage could be your best and most cost-effective option but remember that insurance rates vary, as such, it’s important to shop around for the best policy. Note that your premiums will depend on a variety of factors: your driving record, the make and model of the car you drive, and your age and gender.
Track Your Net Worth
Keeping track of your net worth will allow you to monitor your progress toward financial goals, but also help you make better financial decisions. For example, it can help you decide if it would be more beneficial for you to pay off your credit card debt or begin saving for your retirement. Your net worth is essentially a report of your financial health, taking into account everything that you owe as well as the value of everything that you own. This includes things like savings accounts, investments, and your house. You can calculate this on your own, but you’ll need to figure out the value of your home while adding up your assets. You can do this by using online home value estimators or talking to a local real estate agent. You should also figure out the monthly costs of owning your current home and whether you can afford to live there with a child on the way.
Prepare for New Baby Costs
The initial costs of providing for a new baby can cause parents to go into debt. Make sure you plan for these costs when making up your budget so you can cut back spending in other areas. You’ll have to purchase nursery furniture, a car seat, a stroller, diapers, food, clothing, and many other accessories. You’ll be able to reduce spending if you look for second-hand items. However, don’t skimp on a good car seat, since this is vital to the safety of your child. Take a look at your household income and see if you can live off of just one salary before deciding to have one parent stay at home. Remember, this will cut out the cost of childcare, which can often be very expensive.
Becoming a new parent is scary when you think about your important role in raising a happy and healthy baby. However, add in financial worries, and parenthood can feel like an anxiety-ridden nightmare. Ease the burden and stop sleepless nights by doing some solid financial planning. That way, you’ll know that the future of your family is safe and sound.
When Sara lost her husband, she quickly learned there is no handbook for those who have lost a partner and suddenly find themselves raising children on their own. She created TheWidow.net to support her fellow widows and widowers.