Each stage in our lives comes with a new set of financial challenges. This is especially true for new parents. Your budget, insurance needs, estate plan, and income taxes will all be dramatically affected. What can you do now to financially plan for these changes?
Budget
Having a baby is the perfect time to set up a new budget, or review the one that you currently have in place. You will need to keep in mind that you will have increased expenses for your child and you will need to increase your savings for future needs such as college.
Here are a few categories of your budget that will most likely increase after you have a baby:
- Grocery Bill: You will need to add on purchasing diapers, wipes, formula, and other baby foods (just to name a few).
- Housing: If you live in an apartment or small home you may need to relocate to a larger location that will support your now growing family.
- Transportation: If you have a small car you may have to get another car that can fit a car seat and other things that you will need for your child
- Health Care: You will most likely find you have an increased premium to provide health insurance coverage for your child. You will also find that you have to make more visits to the pediatrician and you will most likely have to pay some sort of copayment or coinsurance for those visits
- Child Care: If both you and your spouse are planning on working you will need to factor in the cost of child care.
As you can see, it is important to have a budget already in place, once you have a child you will need to update your budget to prepare for your new addition. Good preparation is a key component for your financial success.
Estate Planning
Many think that estate planning is for older people, but that is not the case. It is crucial for new parents to have a complete estate plan in place. This is so vital because you want to ensure that your child will be cared for according to your wishes. Mortality is not something people want to think about, but you will need to in order to protect your child’s future.
As a new or expecting parent, you will want to set up a trust that will provide for the care and upbringing of your child. A trust will allow you to nominate someone as trustee to care for the financial needs of your child from money that you leave behind. You will also want to nominate a guardian to care for you child if you and your spouse are not able to.
If you are not sure where to start with your estate plan and you do not want to spend a lot of money to get one set up, meet with an Arizona Certified Legal Document Preparer who can help you get organized and put into place the estate planning documents that you need.
Insurance
Just as everything else in your life is going to have to change for your new little one. You will need to make changes to your insurance coverage as well.
- Life Insurance: Now that you have a baby on the way your Life Insurance Needs are going to change. You are going to want to increase the amount of coverage that you have on both yourself and your spouse to cover the additional expense of caring for your child if something were to happen to either one of you.
- Health Insurance: Since you have an additional member of your family, your premiums are going to go up. You may also want to switch to a plan with more coverage. As a couple, you may have been able to get away with minimum coverage, but with a child, you may want more coverage to control the out of pocket expenses for all of the doctor’s visits they will need.
- Disability Insurance: If you have not already purchased disability insurance privately and you do not receive any coverage through your employer, it may now be something you want to look into. Now that your expenses are going up, you will want to make sure that you have an alternative source of income if you are injured and no longer able to work. Similarly, although no one likes to think too much about being unable to work due to injury, it is important to make sure that you know how to claim WorkCover benefits if needed. Not sure where to begin? Take a look at the website for this team of Brisbane Workcover lawyers to learn more about your legal rights if you are unable to work as the result of a workplace accident or injury.
Taxes
Though everything else in your life may seem to be getting more expensive, having a child will actually give you a big break on your taxes. With an additional dependent, you will also have an additional exemption. You may also be eligible for several different tax credits such as the child and dependent care tax credit, the child tax credit, and the earned-income tax credit. If you are curious to see how a new child will affect your taxes, meet with a Qualified Tax Professional who can generate a tax report to show you what to expect this tax year
Overview
There are so many different financial factors that come into play for new parents, from your everyday budget to your estate plan. Do not leave yourself exposed to a financial disaster, begin preparing for the added expenses of parenthood as soon as possible. One factor that will be instrumental in your success is a financial plan. When you meet with a Financial Advisor they can create a plan for you that will outline your savings needs to reach all of your future goals. Start planning today!