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Financial Tips and Practical Advice for Parents
When you have a child, suddenly your priorities shift. Your perspective on the future changes, viewing everything through a lens held by a small person’s hand. You want to ensure the best possibilities for your youngster, but how do you make that happen? Here is some advice for making your finances a practical part of that picture.
Chances are you already put your child on your health insurance policy, but if you haven’t, that should be your first priority. Next, you should consider life insurance policies. Life insurance provides a safety net in the event of an untimely death, helping to pay for everything from a roof over your child’s head to a future education. As USA Today explains, establishing a life insurance policy while you are young is cost-effective as well, since it becomes more expensive as you age. Along those same lines, another suggestion is to draw up a will and name your child’s guardian. If something should happen to you and your partner, it legally establishes your wishes and protects your child.
Establish a Budget
Another item you may have overlooked before becoming a parent is establishing a budget. Now that someone else is relying on you, it’s imperative to know where your money is going every month, and living paycheck to paycheck isn’t reasonable. You need to ensure you make ends meet and are saving for the future. All of that depends on a budget. Groomandstyle.com gives some great tips on transitioning from college to career: A guide for New Grads.
To get started, some experts recommend calculating your total monthly income. Then, list all your monthly expenses and tally them. Your totals should equal each other. If your income is higher than your expenses, put those funds into savings. If your expenses come out higher than your income, you need to cut costs. The first places to cut are fluid expenses such as groceries, eating out, and entertainment. If you shave that down and still have trouble making ends meet, look for ways to cut your debts or other expenses. This can mean things like getting a less expensive car or lowering interest rates on credit debts. When you free up some cash, make sure you use that to pay down any existing debts.
With a child in your life, you should make it a point to increase your emergency savings fund. Some professionals suggest setting aside a minimum of three months of income. Many people also elect to get a jumpstart on educational costs, so consider establishing a college fund. The sooner you get started, the more progress you can make in the long run.
Know Your Worth
Your net worth is a snapshot of your financial health. The Simple Dollar sums it up as what would be left if you sold all your assets to pay all your debts. In order to get a handle on this, you should list all of your assets, which are items you own outright and don’t owe any money on. Next, list all your liabilities, which are things like car loans and mortgages. There are some handy online tools for figuring these totals, such as a home value estimator and a net worth calculator. You can take steps to increase your net worth, such as reducing debts, paying off your mortgage, and making investments in tax-deferred retirement plans, stocks, or bonds.
Saving for your retirement isn’t selfish; the more secure your future financial picture is, the better off your child will be. You should explore retirement savings accounts to decide what’s right for your situation. For example, one of the simplest options is to see what your employer offers. Not only can you make deposits directly from your pay, there is often a matching program. Another frequently overlooked option is a health savings account. Those funds can often be used to boost retirement savings.
You can provide more security for your child by improving your financial outlook. Evaluate your situation carefully to decide if you’re well-prepared. Ensuring your financial picture is stable is a key to your family’s future.
Article graciously provided by Sara Bailey