If you have a baby on the way, you probably know more about medical jargon and equipment than you ever thought possible. You may not be quite as familiar with financial or budgeting terms. While it’s understandable that your attention is elsewhere, you should start planning for your family’s financial future now so you’re not stressing about money and handling a newborn at the same time.
According to CNN Money, the cost of raising a child from birth to age 18 is now over $200,000, and that’s not just college tuition. You’ll have expenses out of the gate for food, clothing and other life necessities. Try the following tips to get your financial ducks in a row before your baby’s birth, so you can spend your time enjoying your child instead of worrying about money.
Cut Your Debt Down And Budget
Your first move should be reducing and eliminating debt. The interest you’re paying on debts, especially credit cards and high-interest loans, can be put toward your child instead. Eliminate all unnecessary spending and put that cash toward your current debt load. Do whatever you can to lower interest rates. Transfer credit card debt with high interest to a lower interest card. Call creditors with whom you have a longstanding relationship to see if you can get a point or two knocked off your rate.
You’ll also need a new budget so you know where your money is going and what you can do to save more. Keep track of your spending for at least two months by saving all of your statements, receipts and bills. Use that information to plan a realistic budget and identify what you can cut from it. Try financial budgeting software to make this process easier, faster and more accurate. Go as lean as possible, even if it means eating out and shopping less. You want to save at least 10 percent of your income to create a cushion that can weather a storm.
Update, Update, Update!
Now is a good time to update your retirement and insurance information. Check all your beneficiary statements, such as the designation for your 401(k) and life insurance plans, and update as needed. If something happens to you, you’ll want your child and his or her caregiver taken care of as much as possible.
Get a will and life insurance. If you already have a will, you’ll need an updated one to reflect the addition to your family. For existing life insurance, the policy benefit amounts need to be reviewed. Speak to both your insurance agent and an estate planner so you have all your bases covered.
While you’re taking care of beneficiary statements with HR, get the skinny on what work offers you and your partner in the way of maternity and paternity leave. Ask all your questions now, and get clear directions for paperwork submission and other employer requirements for paid and unpaid leaves.
Check Your Credit
Your credit report may have errors on it even if you pay your bills on time like clockwork every month. Get a copy of your report from each major credit bureau, Equifax, Experian and Transunion. Each bureau has its own process for disputing incorrect report items, so check out their official websites for more information if you find mistakes on your report.
Make Some Tough Choices
Are you going back to work or staying at home? What about daycare? Try to make plans for your return-to or exit-from work strategy now. Review your financials to determine if staying home is feasible if that’s what you want to do. Check out daycare facilities and the associated costs so you know what you can truly afford to do.