By Jamie Bosse
Congratulations! You will be welcoming a little bundle of joy into your household! A million things are running through your mind, what will the new baby look like? What will we name him or her? How will our lives be different? I can’t answer any of these questions for you, but here are a few financial planning topics we suggest you keep on your radar:
Insurance:
Now that someone depends on you for their full financial and emotional support, you need to make sure they are protected in case you are no longer around. The idea behind life insurance at this stage is to replace your income and allow your family members to maintain their standard of living. While not exhaustive, you’ll need to consider the cost of final expenses like burial and funeral costs, paying off your mortgage and other debts, and pre-funding goals like paying for education expenses. Also, if you don’t have disability insurance, now’s the time to explore your options. If you are sick or injured and cannot work, how will you replace your income? Many employers offer disability policies to their employees for a small contribution per paycheck. You could also obtain coverage through an independent agent.
Estate Planning:
This part is pretty straight forward. If you don’t have a Will, you need one. If you are incapacitated or no longer around, who would you want to take care of your little one? Naming a guardian is one of the most important aspects of your estate plan when you have minor dependents. That is one thing that you do not want to leave up to the court system to decide should the unfortunate situation arise.
Budget items:
Your purchases are likely to change dramatically. Eating at nice restaurants, nights out with the guys or girls, and elaborate vacations may be replaced with diapers, daycare, and college fund contributions. The money you used to spend on nice purses, shoes, and outfits will now go to diaper bags, car seat accessories, and clothing for someone whose size changes on a monthly basis. There are a lot of big expenses to plan for on the front end. You’ll need to equip your house with new furniture like a crib, changing table, rocking chair, and maybe a dresser for the baby’s clothing. You will also need a car seat (which likely comes with multiple attachments), and potentially other items like a stroller, bouncer seat, swing, and highchair. Make a list of all of the more expensive baby items that you need and want. Is there anything that you can borrow from someone else? Check the selection at local consignment shops. For items that you will need to purchase, split them up amongst the months you have remaining in your pregnancy, so that you don’t incur a large blow to your cash flow all at once. You may receive a lot of great gifts from friends and family members, but in my experience, these gifts tend to be blankets, cute outfits, and toys, not the expensive items on your registry. For items that you will be purchasing on a regular basis (diapers, wipes, formula, baby food), look into “subscribe and save” option on sites like Amazon Prime. They will deliver right to your doorstep, saving you a trip to the store and they usually give a discount for recurring orders.
Education Planning:
Have you ever heard the phrase, “A dollar today is worth more than a dollar tomorrow”? If you want to foot the bill for your child’s college education, the sooner you start planning, the better. When your child is an infant, you have the time value of money on your side. The older they get, the less time these funds have to grow. Get in the habit now of putting away a certain amount every month to help pay for this goal. Encourage grandparents, friends, etc. to contribute to this fund for holidays and birthday gifts instead of adding to the piles of toys that you are already accumulating.
Welcome to parenthood!
To get started financial planning for your new family, schedule a meeting by clicking below, contact Jamie Bosse –jbosse@makinglifecount.com, or call (913) 345-1881.