Guest Post By: Rick Pendykoski
Every first-time parent is bogged down by a lot of overwhelming responsibilities – stocking up on diapers, bottles, toys, baby clothes, furnishing a nursery, buying kid-friendly furniture, a cot, a stroller, a car seat, and the list can go on. Not to mention the sleep deprivation and exhaustion! Amidst all this excitement and chaos, thoughtful financial planning takes a back seat.
Whether you want help with managing your debt, need advice on choosing the best retirement plans or need an expert’s guidance for choosing a college savings plan for your child, a financial advisor can do a quick check of your finances and help you get on track with your goals.
To make sure that you start your parenting journey on the right foot and avoid the mistakes that most first-time parents make, follow these 6 tips:
Rework Your Budget
Between infant formula and pediatrician visits, expenses will just blow up before you even know it. So prepare in advance with a budget plan and stick to it. For this, you would want to redo your budget, cut back on your expenses, and adjust your shopping habits so that your financial future stays on track.
You can’t pour out of an empty cup and so, it is very important to take care of yourself first.
But, most new parents make the mistake of prioritizing savings for kids and put off their retirement savings. It is never too early to start saving for retirement, so consider enrolling in your company’s retirement savings plan and make the most of your employer’s matching contribution or open an IRA and start building your retirement reserve before you set up a kids savings account.
Invest in a Registered Education Savings Plan
The best way to make sure that you have the money to fund your child’s education when he/she grows up you must set up a Registered Education Savings Plan. The best part about an RESP is that the government matches your contribution by 20% or you get $500 every year from the Canadian Education Savings Grant – which is free money!
Don’t Go Overboard with the Baby Gear
Most new parents are tempted to budget a little extra for their newborn even after receiving useful gifts from friends and family. But, with a growing family, you need to save money and for this, you can consider shopping at consignment stores or you can shop online for gently used, refurbished products that you will only use for a few months. Everything you buy for your baby does not need to be brand new. The money you save can be used for other important expenses or you can put it into in your kid’s savings account.
Create a Safety Net for Unexpected Medical Costs
After you have a child, the doctor may recommend postpartum care which may or may not be covered under your insurance policy. Also, support services like a night nurse or a lactation consultant can invite unexpected expenses that add up to a big amount. If you don’t have a cushion for your family and haven’t planned for unexpected medical expenses for the mother and baby, you could be left in a soup. So, it is very important to save for an unexpected medical condition. You can start as small as $25 a week and create an emergency fund over time.
Prepare Your Will
One of the most important things that a new parent can do is writing the will. It will not only help your family avoid disputes over assets, but also allow you to designate a guardian if something happens to you or your family. You can write your own will using a software solution or you can consult an estate planning attorney to assist you through the will-writing process.
Account for Future Costs
While it is impossible to predict the future, it is equally important to plan for a financially secure future. If either parent plans to stay at home for the first few years, then it is very important to start planning the budget on the basis of a single income. If you are already running things on a tight budget, consider returning to work as early as possible or take up a part-time job to avoid running into cash flow issues.
If you are ready to start your own family, consult a financial advisor for personalized advice on planning your finances. A financial advisor will help you with a money management plan that is customized to your unique situation and financial needs.
Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning. Over the last 10 years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement. You can also find his writing on Business.com, SAP, MoneyForLunch, Biggerpocket, SocialMediaToday, and NuWireInvestor. If you need help and guidance with traditional or alternative investments, email him at [email protected]