When expecting a baby, financial considerations should be given their due priority. In 2013, the United States Department of Agriculture estimated that the median cost of raising a child until the age of 18 would be nearly $250,000, but this figure could be significantly higher in regions such as Southern California. Babies born in 2018 will be joining their parents at a time when the American economy has completed a recovery cycle, and they will also have some advantages such as Obamacare. However, expecting parents should consider the following tips, brought to you by Jan Gleisner, a trusted San Diego financial advisor.
1. Plan for the Worst-Case Scenario
Not being able to provide for babies or partners is something that could happen at any time. The best time to inquire about life insurance and long-term disability coverage is before the baby arrives, and it would also be a good time to start looking into estate planning.
2. Consider Education Expenses
Couples should think beyond the early years of their babies and plan for their long-term futures with a 529 savings plan. It should be noted that this tax-deferred plan is not limited to saving up for college. It can also be used to cover K-12 expenses.
3. Budget Properly
A growing family means greater expenses, which in turns creates the need to formulate a new budget that addresses the new financial challenges. It is highly recommended to stick to the new budget before the baby arrives. Any funds that are not spent should be allocated to a cash reserve that covers three months of household expenses, including the financial requirements of the baby. Naturally, indiscriminate spending of disposable income should be avoided while executing the new budget.
4. Increase Savings Through Automatic Payments and Deductions
A smart method to build a family cash reserve is to set up bank accounts to make monthly automatic bill payments. Additionally, automatic deductions from payroll checks can be set up to be deposited into a savings or money market account.
5. Reduce Debt
The last thing new parents want is to be overwhelmed by mounting credit card debt after their baby is born. The pregnancy months should be judiciously spent paying off outstanding credit card balances. Doing so may provide peace of mind and create available credit that can be used in case of emergency.
6. Move to a More Affordable Location
Even within Southern California, some communities are more affordable than others. Couples who live in trendy neighborhoods known to be more expensive due to their location may want to think about relocating. If the situation allows, a home could be sold for profit and the proceeds from the sale could be used to finance the costs of moving. This may also be a good time to consider programs such as Housing Choice, offered through the U.S. Department of Housing and Urban Development.
If you need a reliable financial planner, Jan Gleisner has many years of experience in the industry. Reach out today with any questions you might have about planning your finances.