If there’s one thing you will quickly discover as you start a family, it’s that parenting is a costly endeavor. In fact, it’s a sad reality that most people can’t afford to have kids these days, with the cost of raising a child to adulthood pegged at a whopping $233,000! It’s easy to see that a good measure of financial preparation is vital to ensure smooth sailing. Here are some of the most important ones you can take care of, starting now.
1. Have a Budget
If you’ve ever wondered how parents are able to bear the financial responsibilities of having children, it most likely has to do with good, old-fashioned budgeting. In the first year alone, you’re looking at around $21,000 in expenditures just to raise a baby, and how you’re able to make it work hinges greatly on your ability to build a budget.
Generally, the bulk of this budget will be taken up by child care costs, household bills, and other expenditures that you simply can’t do without. The second biggest chunk should be put toward savings and paying off debt, while the last and smallest piece of the pie can go toward financial “wants.” It’s a good idea to have a budgeting spreadsheet to help you stay on track.
2. Purchase Life Insurance
As a parent, you may find life insurance to be the ultimate godsend, especially when it comes to your peace of mind. Worrying about what happens to your family if something befalls you is a very legitimate concern. You’ll want your family to be financially secure in the event of your untimely demise, and as Family Finance Mom explains, it’s life insurance that can guarantee this.
Contrary to popular belief, you likely won’t even need to get a medical exam when you apply for life insurance. There are, in fact, some policies that forgo this requirement, including guaranteed issue, simplified issue, or medically underwritten life insurance. So it’s more than wise to do your research and compare the various kinds of life insurance coverage available today — not just to find policies that have no medical exam requirement but to also find the right policy for your specific needs and budget. Furthermore, it’s worth getting to know the process of applying for life insurance so you’ll know what to expect during your application.
3. Update Your Health Insurance
One thing you need to do almost from day one of becoming a parent is to add your child to your health insurance policy. This is because, per Childhood.com, medical costs are known to be among the biggest expenses that parents face in the first few years of a child’s life. By simply making sure that your child is covered as soon as possible, you can potentially mitigate much of your baby’s health care costs, which, in turn, translates to less out-of-pocket expenditures for you and (hopefully) more savings.
4. Protect You and Your Business
When you’re a parent running a business, taking steps to protect your finances is of the utmost importance. So, if you haven’t done so already, register your business with the state so that you can properly separate your personal and business finances. That way, if something happens to your business, it won’t affect your family’s finances. Additionally, you need to make sure that you take care of your quarterly taxes to avoid any late fees or penalties. For more information, check out these 7 lessons from the experts at ZenBusiness.
5. Save for Contingencies
Lastly, it’s very good practice to ensure that any leftover funds go straight into an emergency fund. This is very important because, despite your best efforts, you just can’t predict what might happen to you, your family, your job, and your household. Having an emergency fund will ensure that you aren’t left helpless, as well as have the resources to deal with whatever hardship life may throw your way so you and your family can come out of it unscathed.
Suffice it to say, financial planning is not something that’s optional for new parents; it’s a downright must-have. The sooner you take the reins on your finances and create a financial game plan, the more you and your family can enjoy the sheer bliss of financial security.
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