Have you recently had a baby? Or are you planning on becoming a parent in the near future? Either way, it is in your – and your unborn progeny’s – best interest to make changes to your finances now to ensure a stable and more comfortable future. Keep reading for things you can do starting today to protect your loved ones from a financial crisis.
LEARN TO BUDGET
Before you do anything, you need to have a heart-to-heart with yourself to evaluate your money situation. Next, create a family budget. To do this, determine how much money you have and how much you make. Bank of America suggests to then figure out your recurring monthly debt. This should include housing, vehicle expenses, food, clothing, and all other necessities. Now, you can take a look at your actual spending. If you are spending more than you make, it’s time to trim the proverbial fat. You might, for example, forgo your daily trip to Starbucks or cancel subscriptions and memberships you don’t use.
HANDLE THE UNCOMTABLE ISSUES
It’s time now to face uncomfortable issues head-on. The biggie here is buying life insurance. Although it is not pleasant to think about your death, the big picture here is how your family would be taken care of if you passed without warning. To figure out how much life insurance you need, think about your family’s needs by year and multiply that by how many years you would like for them to be taken care of if you died. You can use an online calculator to give you a rough idea of your actual life insurance needs.
It’s also a smart idea to invest in burial insurance. Unlike life insurance, burial insurance is used for a specific purpose, which is paying for a funeral. Having this important safeguard in place ensures that your life insurance goes toward supporting the lives of those you love. Spend some time figuring out average funeral costs before you purchase a burial policy.
You will also want to set up a last will and testament. Rocket Lawyer explains that this controls what happens to your estate – money, real property, personal property – after you die. Other important information, such as who you wish to care for your children if both you and their co-parent dies, are listed in this document.
EVALUATE YOUR HEALTH INSURANCE
Do not make the mistake of thinking that your health insurance company will automatically update your policy when your family situation changes. It won’t, and that is a task that is up to you. Having a child is a qualifying life event, meaning that you can make changes to either your private or Healthcare Marketplace plan within 30 days of the birth.
KNOW YOUR TAX ENTITLEMENTS
They say that two things in life are certain: death and taxes. Life insurance will cover the death part of this equation, but there are always taxes. As a new parent, you are entitled to many tax breaks and credits that childless taxpayers are not. As long as your child is born before the end of the year, you qualify for many of these. Consult with your tax preparer for more information.
INVEST IN YOURSELF
Although you’re probably wondering if it’s time to start a college fund, that’s not your priority here. Instead, despite becoming a parent, you still have to look out for your own future. Even if you’ve already reached your late 30s (or have seen your 40th birthday), you can still invest in your company’s 401(k) program or open a self-employment IRA. Ideally, you’ll put back 10 percent to 20 percent of your income. Once you have a retirement fund established, then you can start saving for college. Remember, your child can always take out loans or self-pay for school as a healthy adult in 18 years. In that same amount of time, you will no longer be in a position to establish long-term savings.
Having a baby comes with a host of new expenses. But it also comes with an obligation to look out for the future – both theirs and yours. The advice above can help you do that so that everyone is taken care of no matter what the future holds.
Credit: Daniel Sherwin (DadSolo.com)