Congratulations! You will be welcoming a little bundle of joy into your household! A million things are running through your mind. What will they look like? What will we name them? How will our lives be different? I can’t answer any of these questions for you, but here are a few financial planning topics to keep on your radar:
Now that someone depends on you for their full financial and emotional support, you need to make sure they’re protected in case you are no longer around. The idea behind life insurance at this stage is to replace your income and allow your family members to maintain their standard of living. You will need to consider the cost of final expenses like burial and funeral costs, paying off your mortgage and other debts, and pre-funding goals like paying for education expenses.
Also, if you don’t have disability insurance, now’s the time to explore your options. If you are sick or injured and cannot work, how will you replace your income? Many employers offer disability policies for their employees for a small contribution per paycheck. You could also obtain coverage through an independent agent.
This part is pretty straight forward. If you don’t have a Will, you need one when you have a child. If you are incapacitated or no longer around, who would you want to take care of your little one? Naming a guardian is one of the most important aspects of your estate plan when you have minor dependents. That’s one thing you don’t want to leave up to the court system to decide.
The things you spend money on are likely to change dramatically. Eating at nice restaurants, nights out with the guys or girls and elaborate vacations may be replaced with diapers, daycare and college fund contributions. The money you used to spend on nice purses, shoes, and outfits will now go to diaper bags, car seat accessories and outfits for someone whose size changes on a monthly basis.
There are a lot of big expenses to plan for on the front end. You’ll need to equip your house with new furniture like a crib, changing table, rocking chair and maybe a dresser for the baby’s clothing. You will also need a car seat (which is likely to come with multiple attachments) and potentially other items like a stroller, bouncer seat, swing, and highchair. Make a list of all of the more expensive baby items that you need and want. Is there anything that you can borrow from someone else? Check the selection at local consignment shops and sales.
For items that you will need to purchase, split them up among the months you have remaining in your pregnancy so that you’re not taking a large blow to your cash flow all at once. You will receive a lot of great gifts from friends and family members but in my experience, these gifts tend to be blankets, cute outfits and toys, not the expensive items on your registry.
For the items that you will be purchasing on a regular basis (diapers, wipes, formula, baby food), look into “subscribe and save” options on sites like AmazonPrime. These items will be delivered straight to your doorstep--saving you a trip to the store--and they usually give a discount for recurring orders.
Have you ever heard the phrase, “A dollar today is worth more than a dollar tomorrow”? If you want to foot the bill for your child’s college education, the sooner you start planning, the better. When your child is an infant, you have the time value of money on your side. The older they get, the less time these funds have to grow.
Get in the habit now of putting away a certain amount every month to help pay for this goal. Encourage grandparents, friends, etc. to contribute to this fund for holidays and birthday gifts instead of adding to the piles of toys that you are already accumulating.
Welcome to parenthood!
Jamie Bosse, CFP®, RFC is a Financial Planner at KHC Wealth Management. She strives to help clients live the life they want by helping them identify their goals, create a plan and take action. Jamie loves to write, travel, BBQ, watch the Kansas State Wildcats win football games and spend time with her husband, sons and pet corgi. She is an active member of the Financial Planning Association of Greater Kansas City.
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