No matter how financially savvy you are, there’s something about the impending birth of a child that makes you feel woefully unprepared. Perhaps it’s the fact that you never really are.
“There’s one truism I’ve heard time-and-time again, it’s: if you’re waiting to have a baby until you can afford one, you’ll be waiting forever,” Amy Lins, Senior Director of Learning & Development at Money Management International told MadameNoire. “Luckily there are steps you can take to ensure you are as prepared as possible for an upcoming bundle of joy.”
We asked Lins to break those steps down for us so you can put your best financial foot forward as expectant parents. Here’s what she told us.
Connect with a financial advisor
When you want to be sure that you’re in great financial shape for the birth of a little one, one of the best things you can do is consult an expert.
“To build out your financial plan, it is best to partner with a financial advisor who you can relate to, and get you through each phase,” Certified Financial Planner (CFP) Patrice Cresci told Madame Noire. “The sooner you begin this process, the easier it will be. Once the little one arrives, you will have enough weighing on your mind, having a solid financial plan in place can help give you a sense of comfort and confidence.”
Create a budget
Additionally, you need to create a budget that gives you a clear picture of your financial situation.
“Once parents-to-be realize they will be having a child they should complete a cash flow/budgeting exercise,” explained Rosanna Guardavaccaro, a Registered Representative and Financial Advisor of Park Avenue Securities and Strategies for Wealth. “The cash flow exercise can be overwhelming, but necessary. It helps parents better understand what their spending habits are. The cash flow exercise will also help to figure out the bottom line of income minus expenses. The positive/surplus or negative/deficit can help determine what is left over and how to manage it. From there, you can concentrate on where that savings can be allocated.
When it comes to itemizing your budget, Guardavaccaro said, “There are several buckets that parents may want to prioritize such as care-giving, a child’s education, retirement, emergency savings, buying a home, or preparing for one parent to stay home longer. It’s all about financial balance and allocating the appropriate dollars into various buckets to give you the power to make different decisions and not feel like you are limited in your options.”
Reduce your debt
“Take control of your debt — now. If you have credit card debt, now’s the time to take care of it,” advised Lins. “You’d be shocked at the amount of money you’ll have to save once those monthly payments are out of the picture! If you’re looking for a quicker way to pay off your debt — not to mention the potential for lower interest rates — you may want to consider a debt management plan.
Get familiar with health coverage options
Further, many prospective parents tend to underestimate how childbirth and a new baby can result in the accrual of medical expenses, so it’s also wise to get reacquainted with your benefits package.
“Explore your health coverage options,” Lins went on. “Checkups alone for a baby can cost more than $100 per visit. You may also want to explore adding long-term disability and life insurance coverage to your existing healthcare plan. You should also look into the maternity/paternity leave policies at your workplace.”
Do a test run
Finally, it’s advisable to engage in a financial dress rehearsal of sorts. “Practice living on a ‘baby budget,’ Lins recommended. “If you are planning to live on one salary, start now. This will give you an opportunity to make the necessary lifestyle changes and cutbacks before your bundle of joy arrives, which will also make for a much easier financial transition.”