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New additions to your family can create stress on your finances for years to come. Preparation ahead of time and knowledge of what to expect in the future can greatly ease the financial burden. One of the first things that should be taken care of when you welcome a new member into the family is to make a decision as to who would be the best appointed guardian for that child and note this decision in a current will in the case of the unfortunate death of both parents.
This may sound like a harsh first step but this little child is not yet prepared to take care of him or herself and life is not predictable. Along these same lines, obtain life insurance to ensure the child is taken care of if the need arises. Rate should be relatively low the younger you are. Educate yourself on the tax savings this may entitle you to including exemptions for dependent children, possible child tax credits and child-care credits for those who need to pay for child care services while employed. Look into college savings plans early. The price of colleges is continually on the rise. The average public college tuition and fees is approximately $8,300 and $29,000 for private colleges annually.
However, if it is a choice between saving for your child’s college tuition and saving for retirement at this point, opt to save for retirement. Financial aid and loans are available for college costs, but not for retirement. Resist the urge to jump into buying a larger home because of the increase in number of household occupants. A new baby does not take up too much extra room in the beginning and you do not want to short yourself on funds at this time. Wait until it is financially possible to make that large of a purchase and find creative ways to make do with your current living arrangements.
The best time to plan the after baby financial budget is well before the baby is born. Once you start trying to have a child or discover one is on the way, start right away to see the effect the baby will have on your finances so you can start making changes to your budget ahead of time preparing you for baby’s arrival. Make financial observations by going to baby stores and talking with friends and family who already have children. Make room in your budget for new expenses associate with a child and look at the impact they have on your current financial situation.
Start looking into bargain priced baby items that will be less impactful to your wallet. The baby will not notice the difference between designer brand name items and the more economical counterparts if the quality is the same. Take advantage of offers of hand-me-downs and garage sales for certain items. Also consignment shops and eBay are a great place to look for gently used baby clothes. One of the greatest gifts others can give to you during this time is an offer to baby-sit the new baby. Be sure to gratefully take them up on their offer and get some much needed adult time or possible just some quiet, peaceful alone time.
If both parents are currently employed, you may want to experiment with the idea of a one-income family situation. Try living off of just one of your current incomes and see how feasible this plan is and if it is a possibility that could be put into action upon the baby’s birth to avoid the need for childcare. If childcare proves to be a necessity, see if your employer offers a flex-spending account. These can be used to pay up to $5000 in childcare related expenses and be tax exempt on your income taxes.
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