There’s a laundry list of things you need to do before you head out on for maternity leave, like reviewing your budget for new baby costs and reading the fine print on your health insurance. But once you’ve tackled those items, it’s time to make some financial decisions that go beyond maternity leave.
You’re adding a whole new person to your family and with that comes financial obligations to consider like life insurance needs and choosing a guardian for your child. These aren’t easy decisions to make, and certainly not things you want to think about when you’re basking in the glow of pregnancy.
However, taking some time now to get your financial house in order will ensure that you’re prepared for your baby’s arrival so you can focus on the blessing of a new baby.
Build your family’s financial goals
Creating solid financial goals as a couple is a smart money move you can make during or after maternity leave. Goals are what root your budget and give it purpose. Likely, post-baby, you will have new financial goals that will require some advanced planning, like:
Researching options and planning for daycare costs
Buying a home
Taking time off from work or starting a new career
Saving for college education Being able to afford college
Saving for family vacations
Saving for retirement
If you haven’t done this already, schedule a time each week to have a money date with your partner to discuss all things money and to refine your goals. It’s easy to get caught up in the day-to-day of raising a new baby, but you don’t want to lose track of the overall financial picture.
Each goal should be well defined and include when you want to achieve the goal and how much it will cost you to achieve. Some will be short-term goals, within the next six months to a year, and include paying off any maternity leave medical bills and starting to rebuild your savings account. Your long-term goals should be things like starting a college savings 529 plan and boosting the amount you’re contributing to your retirement savings.
For instance, if you want to start a 529 plan to save for future college expenses (which is a good idea), devise a plan to accomplish this goal. You'll need to figure out how much you can afford to save each month, research the best plans available and create a plan to sock those funds away ASAP because college is only going to get more expensive.
Whatever your goals are, spend some time developing a solid plan around those goals. Getting that plan in place before or even shortly after your baby arrives will help your chances of success.
Determine your life insurance needs
The earlier you get life insurance the better, but even if you’re already on maternity leave, it’s not too late to look into applying. Life insurance provides a tax-free death benefit to your beneficiary (most often your partner) which could be a much-needed source of funds in the event of an emergency.
With a new baby comes a lot of new financial obligations. Securing term life insurance will enable some peace of mind knowing that should anything happen to you or your partner, your family will benefit from the life insurance death benefit. Calculating how much life insurance you need depends on a few key factors.
How much debt you have?
Do you have a mortgage and how long will it take to pay it off?
Do you want to cover college expenses?
Do you have some coverage through work?
Contrary to popular belief, you can get approved for a life insurance policy when you’re pregnant. Applying for coverage in your first trimester is the best plan of attack so that you get the best health rating possible. However, if you’ve missed the first trimester window, the next best time to apply for life insurance coverage is six to eight weeks after you give birth once your body has healed and recovered.
The better your health rating, the lower your premium amount will be. You'll need a health examination when you apply for coverage and medical issues like high blood pressure, weight gain, and high cholesterol can have a significant impact on your premiums.
Term life insurance comes in all different shapes and sizes. You can apply for policies that last up to 30 years. Once you’re approved for your policy, your premium will remain the same for the entire length of the term period. You can select virtually any denomination for your death benefit, which is why you might want to spend 5 minutes and utilize our Insurance Checkup to dial in your needs.
Create your will
Creating an estate plan when you are expecting is often an overlooked part of a financial to-do list. Everyone has stuff, and that stuff has value - that is what is considered your estate. A will is a document that lays out all your wishes for what you would like done with your stuff should you pass away. It's your marching orders and your voice.
If you don't have a will in place before maternity leave, it's a good idea to tack this onto your goal list now. You and your partner will each need a separate will since you each have separate stuff, different wishes, and you most likely won't die at the same time. You can create a will online with services like Willing or hire an attorney to help you draft and file your will.
When you create your will, you’ll need to think about a few key questions.
Who is your beneficiary?
Where will all your money go?
Who will be the executor of your will (the person in charge)?
Who will be the guardian of your child?
Numbers 1-3 are relatively easy to define. You have some idea who should get your prized comic book collection and the secret family meatball recipe. However, choosing a guardian for your child could take you a while to determine.
Guardianship is no small task. In essence, you and your partner will be deciding on the person who will take care of and raise your child should something happen to you both. Your will lays out who this person is and any input and guidance you have for your child’s future.
Maybe you would prefer to have your child to receive a lump sum of money at a specific age, or you'd like to make sure that their college expenses are covered by the life insurance proceeds. It's a big deal, and these are big deal decisions. When you choose your guardian, make sure you let that person know your wishes once you create your will so there won't be any surprises.
Maternity leave is an exciting time in your life. It's a time of significant changes and exuberant joy. By taking steps to prepare your finances for your new life early on, you’ll be able to spend your time where it really matters – with your growing family.
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