Prince William Living’s recent article, “Baby on the Way? Here’s How You Can Prepare Financially,” says that as you plan to welcome your child, consider these seven tips that can help you decide how to provide your family with the lifestyle you desire.
Examine your career. A new baby may cause you to think differently about your career goals—you may seek a promotion, a job with a higher salary or better benefits, or more education. Perhaps you or your spouse want to decrease your hours or become a stay-at-home parent. If you are thinking about changing your job status, examine the effect it may have on your take-home pay, retirement nest egg and benefits.
Lifestyle changes. Look at how your baby will affect your day-to-day activities. If your perfect lifestyle involves a new car or home, talk to a financial professional about whether to make the move now or in the future.
Childcare expenses. Nearly one-third of parents spend 20% or more of their income on childcare. In some states, the cost for a year of care can be more than one year of college!
Tuition. Private elementary or secondary school often costs money, and the price of a college education continues to rise at a pace faster than inflation. The 2017 tax reform expanded the use of 529 plans, so you can now withdraw up to $10,000 federal income tax-free per beneficiary, per year to pay for kindergarten through 12th grade tuition at a public, private or religious school.
Review your financial position. Unanticipated events can impact your finances at any time. Resolve to build or maintain an emergency fund that could cover three to six months of expenses. You should also prioritize your retirement savings. After your baby arrives, update your estate plan and insurance coverage as needed.
Consider family values. Consider how you want to teach your child about financial responsibility. Being intentional early, can help create clear expectations and ensure that you and your spouse are on the same page.
The family bucket list. Look at what activities matter to you and add them into your financial plan. Taking an annual vacation or having a vacation home are common goals for many families.
Adding a new member to your family has a way of putting your priorities into perspective. Use these reminders to plan accordingly. Don’t forget that you’ll need an estate plan now that your family is growing. Your will should name a guardian in case something happens to you and your spouse. If there is no will, or no guardian named, the state will decide who will raise your child. Talk with an estate planning attorney to make sure that your planning for the future is complete. Call Rowley Law today to schedule an appointment, 847-490-5330.
Reference: Prince William Living (December 2018) “Baby on the Way? Here’s How You Can Prepare Financially”