This guest post was contributed by Ashley Feinstein of Knowing Your Worth, where she teaches people how to redefine personal finance on their own terms, break free form the status quo, and fearlessly ask for what they want.
Congrats, you’re having a baby! As you probably know, this adorable addition to your family will bring about a lot of change in every area of your life. What should you be thinking about financially to set you and your family up for success? Here are 4 things you should do to make sure you are financially ready for your new baby.
4 money tips for new parents
Revisit your budget.
Life with a baby will definitely call for some changes in your current spending. You now have a new mouth to feed, clothe and house. While you might have to adjust real-time as you are living your new life, you’ll set yourself up for less money stress if you do some research in advance. How much more do you anticipate spending each month and in which areas will your spending decrease? Will these additional expenses mean saving less, spending less, earning more or some combination of all three? Take some time to go through and adjust your current spending plan for your new parent lifestyle. Don’t forget to think about expenses that don’t happen on a regular basis such as birthday parties, medical expenses and early schooling or day care.
Plan for the future.
You’ll also have some new milestones and savings goals to look forward to. Consider opening up a 529 savings plan for tax-advantaged savings for your new baby’s college education. While it might sound a long ways off, the sooner you start, the less you have to contribute each month to hit your target.
You’ll also want to think through other potential education expenses from Kindergarten through high school. What types of schools do you plan to send your child to? Once you figure out your new savings goals, set saving up to be automatic. Have money transfer automatically out of your checking account each paycheck. You will have enough on your plate – make it easy on yourself and automate your life wherever possible.
Beef up your emergency fund.
With a new set of expenses, you’ll want to revisit your emergency fund and most likely beef it up. Your current 3-24 months of living expenses might amount to a lot less with your revised budget. Check-in with your current rainy day fund and contribute more money if need be. Again, save yourself the extra work and make it automatic so that you can set it up and forget it until you hit your target amount.
Consider life insurance needs.
New parents will also want to consider or reconsider life insurance as they now have someone depending on them for their livelihood. Check to see what you have available to you through your current employer because you may have some life insurance built into your benefits package. You may also want to supplement what you already have with another policy. How do you know what’s enough? Check out the Policy Genius Life Insurance 101 Guide. It will tell you everything you need to know to help you choose a policy that makes the most sense for you.
Before your new bundle of joy comes along, take some time to make these key financial decisions. Not only will this protect you and your new family financially but it will also take away the money stress and worry that comes along with this big wonderful change.