My wife and I are expecting our first child in August, and as we continue this journey, I thought I’d provide you some advice on what do to when you’re expecting.
Prepare your emergency fund
Are you familiar with Murphy’s Law? Murphy’s Law is an adage that is typically stated as, “Anything that can go wrong will go wrong.” Prepare for the unexpected by setting aside 3-6 months of expenses in a high-yielding savings account or an account that you will not be tempted to spend. An emergency fund is just that, for emergencies, ONLY. When the furnace goes out in the middle of December or the baby swallows a penny and you must go to the ER, you have the money set aside and can avoid going into debt.
Create post-baby budget with spouse
Some people hear the word “budget,” and a cold shiver runs down their spine. Others hear the word “budget” and think this six-letter word is only secondary to another six-letter word, heaven—having a Type-A personality, I fall in the latter category. Whether you make minimum wage, or you make six figures, a budget is the key to building wealth. Budgeting allows you to tell your money where it should go instead of wondering where your money went at the end of the month. There are many ways to keep a budget. You can be as low-tech as a piece of pencil and paper (I would never recommend using a pen as I’ve yet to have a month where I didn’t have to shift money around within my budget) or as high-tech as budgeting software that can link with your debit/credit card and automatically import and categorize every transaction making the budgeting process simple and painless.
Becoming a parent can be stressful. There is a lot out there that is promoted to new parents as “must-haves.” Instead of listening to the marketers, start talking with your friends and colleagues who have already taken the leap into parenthood. They will be able to steer you straight as to what you do and do not need. Buy second-hand through garage sales or thrift stores. Most baby clothes are only worn a few times before they are outgrown, so you can often find clothes in good condition at great prices. Your friends may also be an excellent source for clothes and baby items. Most people hold on to their baby stuff until they are done having kids. If you have close friends, some of them will even let you share their stuff!
Start 529 College Savings Plan
Maybe it is the nerd in me coming out but one of the first things I did when I found out we were expecting was open a 529 college savings plan. We live in Indiana, and the state offers an annual 20% tax credit up to $5,000 for saving in this type of plan ($5,000 x 20% = $1,000 tax credit). My wife and I do not plan to pay for our child’s entire college education, but we do want to have some money set aside to help pay for their further education. By starting out early, it can make a huge difference through the power of compound interest. In 18 years, using a 7% growth rate, this $5,000 could be worth $16,900! To learn more about 529s, check out this article https://www.fidelity.com/learning-center/personal-finance/college-planning/college-529-spending
Financial Advisor and Dad-to-be