WRITTEN BY: ALEX HALL
It used to be so simple. You just added up your income, subtracted expenses, and the rest went into savings. With a new baby arriving, finances are about to get even more complicated. Here are a few things to bear in mind so you won’t worry too much about tomorrow, and you can enjoy today with your new child.
First of all, you need to know how much you’ve got, and that includes all of your assets. Unless you’re holding a lot of cash, the roof over your head makes up the majority of that figure. You can get a quick estimate online, but for more accuracy, you’ll have to do some research into sale prices of comparable homes in your area. If in doubt, real estate agents offer broker price opinions or competitive market analyses. After adding up your other assets, such as stocks, you’ll know your net worth. This will help you protect your value and budget for unexpected expenses while planning for your future as well as that of your child.
Part of totaling up your assets includes calculating your debt. Once you know what you owe, you can start exploring options on how to pay back what you owe as quickly as possible so you can put your hard-earned funds to better use for you and your child. If you owe multiple creditors and have multiple accounts in debt, such as owing on student loans, credits cards and your vehicle, it might be worth your while to consolidate your debt. Consumers Advocate explains that by taking this step, you can pay toward all of your debt via a single, monthly payment, and you may even be able to pay less in interest overall. Before taking this step, do some research online and speak with your financial representative so you can make an informed decision about whether this is the right choice for you.
Their Health Insurance
First up in parental budgeting: insurance. It’s possible that your employment benefits include a healthcare plan under which your child is covered as well, or your co-parent’s employer could offer such a plan. In all cases, read the fine print, says lifestyle website Lifehack. You don’t want to be bombarded with medical bills after finding out an appointment you thought would be covered by insurance isn’t.
Your Life Insurance
This is a tough thing to think about. It implies that you may not be there for your child as they grow up, but it’s an important part of financial planning as a parent. After all, you wouldn’t want to leave your child in financial turmoil in the event of your passing. An expert speaking to USA Today recommends getting insured with a term life policy. The nonprofit Life Happens allows you to figure out your insurance needs online before talking to an agent.
There are all kinds of emergencies that can come out of nowhere. The going could get tough after a layoff, an extended illness, legal trouble … and the list goes on. That’s why parents should come up with an emergency fund. According to Forbes, that secret stash should be equal to three months’ worth of expenses for families with two incomes and six months’ worth for families with one income. That should give you enough time to figure out a solution should life throw you a curveball.
The average price tag for a private college was $50,900 for the 2017-2018 academic year, according to the College Board, and there’s no reason to believe that’s going to decrease as your child nears high school graduation. It’s time to start saving now. To give you an idea of what that means in terms of your budget, putting away $50 per month from the day your child is born will result in savings of $20,000 by the time they turn 17, assuming a 7-percent return on investment, according to Finaid.org. There are programs to help you in this endeavor, such as 529 college savings plans, which allow you to put aside money for education without tax penalties.
As a new parent, you’ll have to put away money for your child’s health insurance, your life insurance, your emergency fund and their college tuition. That’s in addition to food, clothing and your own expenses. It may sound difficult, but with an effective plan in place, it’ll all come together.
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