Having a Baby? It's Time to get your Finances in Order!Insights Young Professional
As an eventful year comes to a close, I’d like to offer a heartfelt “thank you” for being part of the Boulevard Wealth Management journey.
I am deeply grateful for your trust and presence in my life and I'm sending you my warmest wishes for an amazing end to 2022 and a great start to 2023.
As a board-CERTIFIED FINANCIAL PLANNERTM and father to two perfect babies, I wanted to merge those two passions together into a single post to talk about my experience. If you haven’t heard the amazing story of the birth of my first child, Marley, you can read about it on our website HERE.
Planning to have a child in the coming year? If you haven’t already, get your finances in order first!
1. Create (and try to follow) a Budget
Your financial success will ultimately hinge upon the control you have over your cash flow. Knowing how much money you spend on an “average” month is important, especially when you’re preparing to have another mouth to feed. Budgeting is a dynamic process, so don’t worry about trying to map out all your expenses perfectly on the first try.
In my experience, the best way to build a budget is simply to use your ACTUAL expenses over the past 3-6 months, and tweak as necessary from there. The best way to go about doing this is to use software that tracks actual spending patterns-- this way, it’s impossible to “cheat” yourself. There are several effective free budgeting tools out there (I use Boulevard’s financial planning software, MoneyWorksTM, for myself).
2. Maintain an emergency fund
The generic financial planning advice is to have 3-6 months of living expenses in a checking/savings account, but the actual dollar amount is largely dependent on personal preferences. In the case of preparing for a new child, it may make sense to have more than 6 months of cash (there are A LOT of first-time expenses that come with having a new baby). If you’re curious, go on Target’s website and start checking prices for a bassinet, crib, car seat, stroller, highchair, etc.
The budget will help you find this number. Aside from drastic emergencies, this “cushion” fund should prevent the need to use credit cards in the event of a large, unplanned expense.
3. Automate your Savings
Forcing yourself to save is a very effective way to budget without over-obsessing about each budget category. In many cases, I work with my clients to save what’s possible ASAP into a cash reserves account—typically anywhere between $250 - $1,500/month.
This way, if you get into a financial crunch, you not only know that you have an extra $1,500/month of “margin” in your budget, but you’ve also built up a reserve account that you can lean on without going into debt.
4. Build your Estate Plan
This isn’t usually the most exciting process to go through, but it’s one of the most imperative things you can do after having a child. One thing I’ve learned in this business, is that you likely won’t be happy with how the State of Minnesota decides to dole out your finances if you pass. More importantly than what happens to your finances, is naming a guardian for minor children.
BUT MOST IMPORTANTLY, DON’T OVERTHINK IT!
After everything I talked about in items 1-4, this one might be the most important. A lot of clients I talk with are very concerned about whether they’ll be able to “afford” a baby. Babies can be very expensive, but they don’t HAVE to be. Your budget will morph with your new life. After Marley arrived, my “going to the bar” budget simply became my “diapers, wipes, and formula” budget. My “entertainment & events” budget of going to concerts and sporting events turned into strollers, toys, and car seats.