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Don't Let Having a Baby Sink Your Financial Ship
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Those of you with children know what a crazy and exhilarating time it was before your baby arrived. You also know that it is even crazier during the weeks and months that follow. Along with the excitement of seeing your new baby might come fear and anxiety over the changes that are about to occur in your life. There are a few steps you may want to consider to solidify your finances in preparation for your larger family.
Approximately three to four months before the due date is a good time to start your planning. You will receive numerous documents that should be retained in a safe place. A fireproof safe or a safe deposit box is ideal for storing this paperwork. The next step would be to contact your attorney and ask what changes you should consider making in your will. Before meeting with your attorney ask yourself who will raise your child if something happens to you and how their upbringing will be financed.
It can take four to eight weeks (sometimes longer) to issue life insurance, so if the new baby dictates your need for more insurance it might make sense to start the application process right away. Females should apply before becoming pregnant because the changes in their body due to pregnancy can affect insurability.
If you or your spouse are employed, consider how having a child and taking time off from work will affect your health insurance. Health coverage may cost hundreds to thousands of dollars per month. If you have to start paying out of pocket for this coverage, ask your employer for a list of available plans. There might be other plans obtainable with lower premiums.
If both parents are planning on going back to work, finding a babysitter early in the pregnancy is important. Ask your employer if they have a flexible spending account that might allow you to pay your babysitter with pre-tax dollars. Babies are expensive so consider joining a shopping club like BJ's or Sam's. The savings on diapers and formula alone should be more than enough to pay for your membership fee. While we are on the subject of money, depending on your situation, it might make sense to cut back on your retirement contributions to build up your emergency fund.
Before your baby is born request change of beneficiary forms for your life insurance policies and mail as soon as they have been completed. Do not forget about policies your employer might provide. Speaking of your employer, you will want to see how much time off they provide upon the birth of your baby. If this is not enough time, start saving your vacation and sick days.
During the first few months after birth you may notice a significant change in your finances. Now is a good time to start a budget if you do not already have one. If it fits into your budget, it is never too early to start saving for college. There are many ways to do this, including 529 college savings accounts, U.S. savings bonds, custodial accounts and more. Research the options or speak with a financial advisor before beginning a savings program. If you receive savings bonds as a gift, your new fireproof safe or your safe deposit box is a great place to store them.
Guarantees in the investment markets are hard to come by but I can guarantee that a new baby will drastically change your life. Taking some of the steps outlined above should help ease your transition into parenthood. If you are contemplating starting a family the only advice I have is to start your planning early so that cost associated with your new baby do not sink your financial ship.
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