For those that have been here before welcome back. We are your hosts, BJ 'n Cindy. We own and operate this site as well as the sister sites. Financial Steps to Prepare for Baby
With a baby on the way, it’s time to get serious about future planning. Not only do you have to think about college, possibly new housing, and your assets, but you’ll also notice a sharp rise in your daily expenses for things like diapers and childcare. All this can feel a bit overwhelming so this guide from MilitaryWives.com can help you prepare.
Estimate Baby Expenses
There’s no way to know exactly what you’ll spend raising your child. However, some expenses are guaranteed. Calculate what you’ll spend on diapers, furniture, healthcare, and other necessities in your baby’s first year, then estimate annual costs going forward. The cost of raising a child depends highly on what childcare costs in your area, so unless one parent intends to stay home, look up what daycare costs where you live. You’ll also need to factor in pyour current lifestyle. For example, if you travel often, you want to look ahead at these extra costs.
Get Your Insurance in Order
New parents have 30 days after birth to add their child to a health plan. However, if you sign your little one up in that 30-day window, benefits are retroactive to the day your child was born.
Adding a baby to your existing health plan is easy. If you have an employer-sponsored plan, talk to HR. If you have a policy through the healthcare marketplace, update your plan online. Depending on your company’s policies, you may also be eligible to make changes to your policy as a whole. If you’re a freelancer, you can join the Freelancers Union or enroll in COBRA through your previous job. Spend some time evaluating your current coverage. You may find that with the addition of a new family member, you are more comfortable paying a higher premium for better coverage.
Health insurance isn’t the only type of policy you need. Now that you’re a parent, it’s time to sign up for life insurance, too. Most parents opt for term life insurance, which guarantees a payout if you die during the term (typically 10-30 years). Most term policies also have guaranteed level premiums, so you don’t have to worry about a price hike on your 20-year policy after only a few years. That makes it an attractive choice for parents on a budget. If you want to know what you can expect to pay for a term policy, start by getting a quote.
However, before you start officially shopping for a policy, get an estimate online by using an online calculator, which often requires just some basic information.
Beef Up Your Emergency Fund
No matter how financially secure you are, unexpected expenses will pop up. When they do, make sure you’re prepared for them by padding your emergency fund before the baby arrives.
Don’t have an emergency fund? This savings account is a must for everyone, but especially parents. Without an emergency fund, an unexpected car repair or hospital bill could threaten your ability to pay rent or buy groceries. If you’re laid off or experience another major setback, you could end up in serious financial trouble. Most experts recommend putting six months of expenses in a high-yield savings account and only touching it in true emergencies like job loss, medical bills, and unexpected home and car repairs.
Save for a New Home
If you decide that you need more space as your family expands, it may be time to look at a new home. Even if you have home equity, it never hurts to put some extra money aside for down payment and moving expenses. To figure out exactly how much you can spare each month, take into account your annual income, monthly expenses, geographic location. You’ll also need to know how much you’ll need for a down payment. A down payment of 25% is optimal to get the best interest rate. This means that on a $600,000 house, you’ll need to have liquid cash assets of $150,000.
Get Your Affairs In Order
Even if you have your insurance taken care of, there are other issues that you do not want to neglect. The two that come to mind are having a will and, if you are a business owner, making sure you have someone to take care of company matters during your maternity or paternity leave. Business owners are also wise to come up with a succession plan in the event they can no longer run their company.
Each of these can be difficult when your children are infants, but you will be glad that you had the foundation in place to help secure your family’s interest in your organization and assets in case of your untimely death.
Becoming a parent changes everything — especially your finances. However, the earlier you start preparing, the more financially sound you’ll be when your baby arrives. By putting savings and safeguards into place, you put your young family in a better position to remain financially independent from birth until well beyond the college years.
Written By Carleen Moore