Financial planning can be complicated and hard to understand. But when you’re a parent, it can easily become more difficult due to the added pressure of including your children in your plan. After all, now you need to save up for college, pay particular attention to your retirement fund, and rewrite your will. If you’ve only recently become a parent, then you have the added stress of possibly living off of one income and having to completely redo your budget. Luckily, there are a few steps you can take to make financial planning easy and help you stay on top of your money.
Redo Your Budget
Whether you’re expecting your first child or are about to become an empty-nester, you should take another look at your budget. When you have children, your expenses can ebb and flow quite dramatically. One month, you might be spending a hundred dollars on diapers, while your toddler might be potty trained the next. Or, you could be paying for soccer for one month and T-ball the next. If your child regularly goes through growth spurts, the amount of money you spend on new clothes can change drastically from month to month. Because of this, it is important to regularly redo your budget to ensure that it really is meeting your family’s needs. The last thing you need is for an expense you didn’t budget for to pop up, like piano lessons. And don’t just think about your kid-related expenses. For example, look for ways to reduce what you pay in auto insurance premiums. While your state may have high insurance rates, you can still save by bundling different insurance policies, not getting in accidents, and driving a safe car (as deemed by insurers). According to Nicole Lapin, you should look at your spending after each week to ensure that your funds really are going where they need to be going. Of course, if you’re having a new baby, you will need to change your budget substantially. Luckily, babies aren’t actually that expensive, according to Dave Ramsey.
Get a Will in Place
Few of us want to think about our own morality, but if you have children, it is important that you ensure that they are cared for in any situation. While a will does specify what happens to your property when you die, it also explains who will take care of your minor children. In the case that you don’t have a will, the state will determine who will take care of your children and where your money will go. Even if you don’t have much property to designate in a will, you should at least draft one so you can choose your children’s guardian. You will need to calculate how much your assets are worth, which means that you will have to figure out the value of your home.
Life Insurance & Burial Insurance
Just like with a will, life insurance is crucial to ensure that your children are well taken care of even in the case that you aren’t there. In the case of your death, life insurance will pay a set amount of money to your beneficiary, which can help pay for the funeral arrangements and keep your family afloat while they rebalance their budget and expenses. No matter whether you work or stay at home, you should get an insurance policy to help cover the expenses of your untimely death in the case of an accident or illness. After all, even if you’re a stay-at-home parent, there will be added family expenses of childcare and a funeral if you passed away. During this time, you may also want to look into burial insurance. Unlike life insurance, which is very broad, burial insurance is specifically designed to take care of funeral costs that arise at the time of your passing. Additionally, burial insurance policies cap out at $50,000. Parents are not only responsible for their financial future but also the financial future of their minor children. Finances might not be one of the fun parts of being a parent, but it is still extremely important. Start by taking the three steps outlined in this article. They will give you a good financial foothold and represent the “must-do” financial planning list for parents.