Are you worried about your finances as a new parent? Becoming a parent triggers a huge adjustment period, and you worry about your little one’s health and well-being, so it’s crucial that you make smart choices and create the right financial plan for your family.
Create a Realistic Budget
Have you been keeping a monthly budget? If you’re not sure how much you’re spending, you’re more likely to struggle with financial stress. Start by tracking your income and expenses for a month. You might be shocked to see where you’ve been spending your money, and realize that your coffee budget is far too high, for instance.
When creating a realistic budget, start by listing all your fixed expenses, such as your rent, vehicle and credit card payments, health insurance, and utility bills. Allocate funds for groceries, entertainment, and basic needs, then create a column for saving and try to save at least 15 – 20 percent of every paycheck.
Look for Extra Savings
Once you have a budget in place, turn your attention to saving. You’ll need to save for your child’s education, your own retirement, and possibly a down payment on a home. Try adjusting your spending by shopping mindfully, reducing your entertainment spending, and avoiding dining at expensive restaurants.
Save for a Down Payment
As a new parent, you’d probably like to have a great home where you can raise your family. Once you’ve created a budget, you can start saving for the down payment of your first home. Not only is real estate often a good investment, you’ll love having a home of your own where your children can enjoy more space. Saving for a down payment takes a lot of time and careful budgeting, so be patient and celebrate reaching savings milestones. Check your credit score and be sure you always pay your credit card bills on time. When it comes time to buy, look to put 20 percent down if possible, so you can avoid having to pay for private mortgage insurance.
Consider Purchasing Insurance
Many parents don’t want to think about these things, but you’ll need to find a way to provide for your family if you pass unexpectedly. Consider purchasing disability or life insurance that could help cover things such as mortgage or education costs. Life insurance can protect your family and give them the financial resources they’ll need in the event that you’re no longer able to provide for them. Disability insurance can be a lifesaver if you’re unable to work due to an illness or injury. The insurance can help you pay your mortgage, pay off debt, and cover household expenses while you get back on your feet.
Save for Long-Term Goals
As your children grow, so will your expenses. You’ll also face costs of child care, extracurriculars, and family holidays. Your household budget will go up, and you’ll need to adjust your food budget to match growing teens. The most important savings goals you need to work toward are college tuition fees and your own retirement. Explore 529 savings plans and use these tax-advantages accounts to save for future tuition fees. As well as saving for college, you need to plan for your own retirement. Your child can take out student loans to cover tuition fees, but if you’re not prepared for your own retirement, you’ll place a huge emotional and financial strain on your child, so start saving for your retirement as soon as possible.
Financial planning can be stressful, but by creating an achievable budget and a solid savings plan, you can take the headache out of your finances, and sleep soundly knowing that you’re making smart financial decisions for you and your family.
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