As all my clients know, that there are 3 types of money. One of them being Transferred Money. A large focus of our planning is to identify areas of inefficiency where money can be transferred away. This post is by Sara Bailey who points out many areas of possible inefficiency for Young Parents. As is often the case in life, if we pay attention to the small things, many of the big things become a lot easier.
Sara was widowed at the age of 40 and you can read about her story at thewidow.net
By Sara Bailey
Life changes in a lot of ways when you have kids. It can get busier, noisier, and definitely more expensive. If you have a new baby or young children, it’s time to take a look at your spending habits and budget and begin planning for a secure financial future.
Not sure how you’re going to afford your children’s college tuition? The trained college specialists at College Planning America can design a plan that works for your family. Contact us today!
Appoint a guardian
When your children are very young, you should appoint a guardian who will care for them if something tragic were to happen to both parents. It’s not a pleasant thing to think about, but it could be important for your children’s future. You should also write a will as well as consider purchasing life insurance while you’re young and healthy (and the premiums are inexpensive).
Start an emergency fund
One of the costliest “Holes in the bucket” is to not have an emergency fund and many Americans don’t have funds for emergency expenses. Because you have kids, you are at greater risk for unexpected expenses to pop up. Therefore, you need to start putting money into an emergency fund. You might think you don’t have any extra money in your budget, but even $50 out of every paycheck will add up. Figure out a dollar amount you want to put away each month, and have it automatically transferred into a savings account.
Reassess your budget on Lifestyle Money
The USDA says the average cost of raising a child from the time they are born until age 17 is $233,610 for a married two-parent, middle-income family with two kids. That’s a lot of money! Therefore, it’s time to take a line-by-line look at your budget and figure out how you can cut back or where you save. You don’t have to live off beans and rice, but you can stop eating out so often, as well as reduce your entertainment expenses.
Another way to save money is to cancel subscriptions and services you don’t use. Also, bundle your internet, cable TV, and phone service for a bargain rate. Additionally, check your car insurance to see where you can save. Even if you have full coverage (which includes collision, comprehensive, and liability coverage), you may qualify for a discount if you bundle your car insurance with your homeowners and/or life insurance.
Allocate money for the long term
After you have built up an emergency fund that covers six months’ salary (or whatever number makes you comfortable), you may want to start saving to purchase a home. Before looking at homes, you should calculate what others say you can afford, and then take a step back and ask yourself, “Just because someone says that I can afford the payments, “Should I be spending that much?”
The best advice I could give here is to first see a financial advisor and answer the 4 vital questions every financial advisor should be able to answer. When shopping for mortgages, consider a conventional loan. Many home buyers choose conventional loans because they can be used for many kinds of properties, and you don’t have to purchase mortgage insurance if you make a down payment of 20 percent. I would strongly suggest that you consider these suggestions before deciding how you will pay your mortgage.
You should also allocate money for retirement and your child’s college expenses. Though these things are many years away, it’s never too early to start saving. If your employer offers a retirement account as part of your benefits package, you could receive matching funds – essentially free money from them. Do online research about retirement accounts (such as a 401K or IRA), as well as 529 plans and other college savings accounts. Also, familiarize yourself with the tax consequences of these accounts. Look into the details about the child tax credit, earned income tax credit (EITC), child and dependent care credit, and other deductions which can all be beneficial for parents at tax time. Review all your options and learn about solutions by working with the trained specialists at College Planning America.
As parents, you want to make sure that you are on solid footing financially so you can help your children on their own path to financial success down the line. By practicing smart money habits, sticking to a budget, and saving for the future, you can establish a strong financial foundation for your family.
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About Dave
Dave Coen is a Retirement Income Certified Professional (RICP®) and Financial Advisor with SageView Advisory, and CEO of College Planning America. Along with his retirement financial industry experience, he is a College Planning Specialist. He works closely with individuals and families to provide comprehensive financial planning that addresses all elements of their financial picture. Learn more by connecting with Dave on LinkedIn. Please feel free to contact me if you would like to discuss how we can help you with your family’s plan either in person, over the phone, or on Zoom
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