Having your first child can be a financial wake up call. Growing families need solid money management strategies to survive and thrive. That means getting serious about putting money aside for the future, completing educational goals to enhance career potential, making realistic budgets, and more. Here are six ways new parents can get a handle on their money situation.
Sign up for a payroll savings plan at work. If your employer doesn’t offer one, set up a specified bank account to which a fixed percentage of every direct deposit paycheck goes. Don’t worry about the amount or percentage. The aim is to save regularly. Many people of all income levels find that about five percent of income is a good starting point. Bake this amount into your monthly budget and label it ‘automatic savings’.
Even if you already have a monthly budget, re-do it when you learn that your family will be expanding. Being a parent means all sorts of fresh responsibilities, and one of those is being more careful and precise about how you spend your money. Fine-tune the budget as much as possible, taking into account the added expenses for your new family member.
Borrow Wisely for School
If you’re thinking about adding a college or graduate degree to your resume, borrow wisely. That means finding a private lender who can offer you the full cost, or close to it, of all educational expenses. Next, use one of the free online student loan calculators to estimate monthly payments. The benefit of working with a calculator is that you can plug in different interest rates, repayment terms, and loan amounts. It’s the best way to get a quick feel for finding an arrangement that fits with your new parenting budget.
Aim for Homeownership
Don’t put off the idea of owning a home. Too many new parents take the attitude of waiting until their first child is in grade-school before setting aside funds for a down payment. The time to begin is now. Set up a separate account labeled ‘down payment’, and place a fixed percentage of your monthly income into it. This is not the same as your regular savings account, so keep the percentage small at first, perhaps just two percent of your income. But, don’t neglect to set up the account and fund it every time you receive a paycheck.
Plan Vacations Well in Advance
Life doesn’t stop when you become a parent. If anything, your need for an annual vacation will be much greater. That doesn’t mean you need to spend a ton of money on extravagant two-week getaways each year. On the contrary, consider vacationing nearby for just a few days at a time, two or three times annually. Plan at least a year ahead so you can put money aside for these needed stress-reducing vacations.
Talk with a Financial Planner
Check your local listings for a financial planner who specializes in helping new parents. Many do, and their per-hour fees are reasonable. The best part is that if you arrive prepared for the meeting, you can come away in less than an hour with a roadmap to financial freedom and security.