Welcome to the world, little one! A look at the financial decisions with a new addition to the family
Becoming a parent brings with it so many new things to figure out. How to care for your new baby, teach them about life and raise them. While I don’t think any parent has all of that totally figured out, we all aim to do our best. The more concrete question of “How will we pay for this child?” is something we can help you plan for at Johnson Bixby.
As with all financial decisions, priorities will need to be identified. A few key topics that we will touch on include:
- All the “stuff!”
- Preparing for less income from one or both parents for a period of time
- Education planning
Now, what do you “need” for the baby? Costs can really add up fast. Start by reading up on common items purchased for a new baby. We were given a helpful book that broke down the categories of items and gave reviews on the best overall, the best budget friendly or best eco-friendly options. This helped give us solid information to decide what mattered to us or if nothing else, a place to start. Next, determine if you will be having a baby shower. Hopefully, family, friends and co-workers will want to celebrate your upcoming bundle by helping you get ready. Providing a registry of items you need will help those generous people to identify useful gifts. (Shout out to my amazing Johnson Bixby & Integrated Tax Services co-workers for the amazing boost they gave us with a loving shower!)
Lastly, see what you can find second hand. Family and friends with kids know what you are going through and tend to want to clean out their storage areas! This can help you check items off the list either for free or usually discounted. Social media sites like Facebook Marketplace and Nextdoor also have a large selection of used items available. In all cases, make sure items you acquire second hand are safe and clean.
Paperwork and your Monthly Income
If you haven’t already done so, look into what paperwork is needed to activate your leave time with your employer or the state. It can be a confusing maze of paperwork that you won’t want to deal with once your baby arrives.
You’ll also want to review your monthly budget. First, do you know how much it currently takes to cover your costs for a month? If you answered no to this question, start tracking! We have some tools for this if you need help. Then, consider additional expenses for the baby like diapers that will soon be added in. Next, will one or both of you be taking an extended amount of time off work? Do you have paid leave available for some or all the time you’ll be off? How much do you have in savings to cover any loss in income that you may experience? Do you need to re-think your plan for time off or cut back on the budget? As much as you can plan for reduced income the more successful you will be at spending within your limits and avoiding building up debt.
Education planning is one topic that I think most parents tend to put off. After all, you have plenty of time before your child will be going to college, right? However, education planning needs to fit into the larger financial priority list. For example, are you also able to save for your retirement? Things like what state you live in will also impact whether you can benefit from a tax deduction for funding an education account. It is best to discuss your overall financial picture with your financial planner to see where education funding fits in your personal plan. There are many vehicles that can be used for funding a child’s education.
Having a new baby will rock your world in so many ways. Let us help you take control where possible! For more perspective, check out the results of a USDA report on family spending from the infographic below.
Written By Patricia Spies, CFP®