Introduction

There is no doubt that starting a family is one of the most radical changes that can happen in a lifetime. Children affect not only your social life, and the flow of your weekly schedule, but they also affect your finances. If you are expecting or desire children, read along to discover some key actions you can take to prepare for a bundle of joy.

Consider Insurance

This may be a good time to investigate purchasing insurance if you have not already. If you have insurance already, review your current plans to decide if you need to adjust for greater coverage. Life insurance is important for protecting your family’s financial situation if you were to pass. Health insurance is also important to consider, because children often have many doctors visits especially in their early years. Disability insurance is another measure of protection if you were to get sick or injured.

Create a Will

This is a good time to review your estate and ensure everything is set up correctly to transfer to your chosen people. This includes wills, potential trusts, powers of attorney for healthcare and property, and a living will. Having a will written is a measure of protection for your partner and children to receive your assets if you were to unexpectedly pass.

Start Saving

Saving and investing your money as early as possible will benefit you so much in the future when you want to pay for your child’s education or travel with your family. Compound interest is your greatest tool when saving for these future costs. Consider investing in a 529 Plan if you desire to fund your children’s education.

Save Your Out-of-Pocket Maximum

Having a baby is an expensive feat when considering medical costs. You should expect that you will hit your insurance deductible and reach your out-of-pocket maximum. To prepare for this, it is a good idea to know your maximum and save that amount. Make sure you know your maximum as listed on your health insurance plan, and research what expenses could come up in labor & delivery.

Research Your Maternity Leave

For my working parents, it is a good idea to research maternity/paternity leave and what that entails. Know how long it is, if you are paid or not, and any other details included by your employer. You and your spouse may need to consider adjusting how much you are spending and saving depending on your leave.

Talk To Your Partner

This is an important time to talk with your spouse about how your life is going to change.

Discuss:

• How will your financial situation change?
• Will either of your work situations change?
• Will one of you stay at home?
• How long will you be single or partial income?
• How will you make this work in your budget as a single or partial income family?
• What expectations do each of you have? Are you on the same page?

Think Simple

Regarding what you should purchase for your baby, there are many opinions. I believe simplifying and having a “less is more” mindset is less overwhelming for new parents. There are so many creative ways to affordably purchase what your baby needs as well as the special things you may want. Consider buying from secondhand stores, shopping sales, creating a registry that friends and family can purchase from, and making a list of just the basics. It is also important to remember that you can buy what you need as you go into the newborn stage.

Conclusion

There are so many factors to consider in preparing financially for a child. It is wise to consider how your life is going to change and taking the steps to financially prepare. I am no parent yet, but I’ve heard the love and joy is unexplainable. I hope that financially preparing can free up the mental load to allow those first moments with your new baby all the more memorable.

Matt’s Corner

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The post Financially Planning When You’re Expecting appeared first on New Century Investments.

1. Assess Your Monthly Expenses:
Start by evaluating your monthly expenses. Consider essential costs such as rent or mortgage payments, utilities, groceries, transportation, and insurance premiums. Additionally, factor in discretionary expenses like dining out or entertainment. Summing up these expenses will give you a baseline for your emergency fund.

2. Consider Your Income Stability:
The stability of your income plays a significant role in determining the size of your emergency fund. If you have a stable job with a reliable income source, saving three to six months’ worth of expenses might be sufficient. However, if your income is irregular or uncertain, it is advisable to aim for a larger emergency fund, covering six to twelve months’ worth of expenses.

3. Evaluate Your Risk Factors:
Assessing your personal risk factors is crucial when determining the size of your emergency fund. Consider factors such as your health, dependents, and the stability of your industry or job market. If you have dependents or work in an industry with higher job insecurity, it is wise to save a larger emergency fund to mitigate potential risks.

4. Account for Unforeseen Circumstances:
Emergencies can come in various forms, such as medical emergencies, unexpected home repairs, or sudden unemployment. It is essential to account for these unforeseen circumstances when calculating your emergency fund. Research the average costs associated with common emergencies to ensure you have an adequate buffer.

5. Set Realistic Goals:
While it is important to have a substantial emergency fund, it is equally important to set realistic goals. Saving a large sum of money overnight might not be feasible for everyone. Instead, set achievable milestones and gradually work towards building your emergency fund over time. Automating regular contributions to your emergency fund can help you stay on track.

6. Reassess and Adjust:
Life circumstances change, and so should your emergency fund. Regularly reassess your financial situation and adjust the size of your emergency fund accordingly. Major life events such as marriage, having children, or purchasing a home may require you to increase your emergency fund to accommodate these new responsibilities.

Determining the ideal size of your emergency fund is a personal decision that depends on various factors. By assessing your monthly expenses, income stability, risk factors, and accounting for unforeseen circumstances, you can calculate a realistic target for your emergency fund. Remember, building an emergency fund is a long-term process, so be patient and consistent in your savings efforts.

About Matt

Matt Ward is a financial advisor and the president of New Century Investments, an independent investment advisory firm serving business owners, pre-retirees, and retirees in the Dallas-Fort Worth area and beyond. Matt is passionate about integrating investing, planning, and tax management into a holistic approach. Matt’s breadth of knowledge and experience in both taxes and investment management sets him apart, giving him the ability to design, advise on, and manage business strategies, tax efficiency, and retirement planning. He is known for his care and attention to detail and works hard to develop personal relationships with each of his clients so they can benefit from his customized service and guidance. He loves walking with his clients through their financial journey, supporting them and celebrating with them as they reach their goals.

Matt’s Corner

The post A Guide to Determining the Ideal Emergency Fund Size appeared first on New Century Investments.