If you’re expecting your first baby, you’re embarking on the adventure of a lifetime. The birth itself is a life-changing event. You are no longer just responsible for yourself, but now you have a bundle of joy to care for as well. Regarding finances, pregnancy, and childbirth can be fraught with anxiety. From unexpected medical expenses and insurance snafus to normalizing credit card debt… there are plenty of ways things can go awry in your financial life as a new parent. Luckily, we’ve put together some helpful tips to keep your finances in check before your baby arrives.
Create an Emergency Fund
You should have an emergency fund to cover unexpected expenses and avoid borrowing money from friends or family. You can use your savings to pay for things like a new tire, a trip to the doctor, or an emergency plane trip for a family member.
You should aim for having three months’ worth of salary saved up in case something unexpected happens. You can do this by setting aside a small amount every month, which will add up over time as long as it’s not spent on anything else first. If possible, put at least part of this money into a high-interest checking account so that any interest earned will offset any fees charged by the bank holding onto it. Otherwise, consider keeping everything in low-risk investments like low-volatility mutual funds or index funds instead.
Create a Budget
Some people act like budgeting is a dirty word but a budget is simply a plan for how you will spend your money. Before your baby arrives, it helps you plan ahead and save money to pay off debt and be financially prepared for when the baby arrives.
Start by making a list of all the things that have to get done before the baby comes. This can be anything from buying clothes and toys to setting up cribs in each room where the baby will sleep. This will help make sure that there’s not too much left over after these expenses have been taken care of!
Next, figure out what kind of monthly income from work or other sources this type of family needs each month. You might want to consider lowering your household bills. Also, make sure to add on any extra expenses like diapers and formula if applicable. Also if at all possible get your own washer and dryer. Babies make lots of messes if you need to go to a laundromat all the time, it will be expensive and time consuming.
Open a Credit Card, if You Can Afford It
Before your baby arrives, you might want to consider opening a credit card. However, you should do this only if you are not already in any bigger debt. To make sure of your decision, talk to your bank account consultant.
· Don’t run a balance. It’s important to only apply for a credit card if your financial situation allows you to pay off the balance in full each month. If not, then it’s best not to apply at all. But in rare circumstances you can use it as an auxiliary to your emergency fund.
· Don’t apply for more than one card at a time. While there are some exceptions (such as when applying for student loans), applying for multiple credit cards within a short period can be viewed negatively by lenders and could lower your score.
· Don’t use these cards for nonessential purchases. You can use the card for regular purchases such as clothes or food as long as you pay the balance off every month.
Get the Right Insurance
One of the most important things you want to invest in is insurance, especially before your baby arrives. Here are a few options you should consider:
Buy life insurance if necessary. Your baby will need help paying for things like diapers and formula long after they’re out of diapers and drinking milk from a cup. They’ll also need help paying for college tuition when they grow up! So, before your baby arrives, consider starting a life insurance plan. It can help ensure that there’s enough money around should anything happen to either parent.
Make sure medical bills are covered by health insurance before the baby arrives by reviewing what kind of health coverage is available through work or as part of Medicaid/CHIP programs in your state; if necessary, consider getting additional coverage through an individual policy purchased on Healthcare Marketplace exchanges set up under Obamacare provisions.
Get a Will and Estate Plan in Place
You should also get a will and estate plan in place. A will is a legal document that specifies how you want your assets to be distributed when you die. An estate plan covers all aspects of arranging for managing those assets during life. If you don’t have either, it’s time to talk with an attorney about getting them done today – before any babies arrive!
Before thinking about legal documents and real estate, you should consider the home your baby will be born in. So, if you plan to move to a new home, the time before the baby will be the best time! When it comes to finances, there are plenty of ways you can cut expenses on your relocation, especially when you’re moving long distance. Preparing a moving budget is the best way to save money during this time.
Pay Off Your Credit Card Debt
The best way to pay off your credit card debt is by paying the card with the highest interest rate first, then moving on to the next highest rate. Paying off your smallest balance first can lead to what’s called “debt stacking”. This could make you end up spending more time and money on interest payments than you would have if you’d paid off larger balances first.
Aim for saving at least three months’ worth of salary. Alt tag: a glass jar with coins inside
Update Your Beneficiaries on Life Insurance Policies and Other Accounts
Before your baby arrives, update your beneficiaries on life insurance policies, retirement accounts, and other plans that have money set aside in them. If you’re not sure who your beneficiary is, check with the company where you have the account or policy. You’ll need to designate a new one if the current one isn’t someone you trust or feel would use the funds wisely. It’s also important to update beneficiaries on things like Social Security benefits and annuities so they can be paid out when needed most (and not at all).
Conclusion
The best way to be prepared for the financial aspects of having a child is by starting early and being organized. The last thing you want is for something to happen that puts your family in a tough spot financially. So, make sure everything is set up financially before your baby arrives in your life!