Financial Planning for New Moms
Jordan Sowhangar, CFP, Wealth Advisor, Girard, a Univest Wealth Management Division
Since becoming a mom last year, my financial goals and long-term plans certainly have shifted. While expecting and new moms should continue focusing on their own financial security and retirement goals, a new baby means a whole new set of monetary considerations. Here are some tips that can help get your family on solid footing for the future.
Tips leading up to baby
Diaper duty. In the six months leading up to our son’s birth, my husband and I strategically purchased diapers. Knowing diapers are one of the more expensive, and frequent purchases for baby, we spaced out buying diapers over a few months creating a readily available surplus. This spread out the expense, which felt better on our wallets than having to shell out lots each week after the baby was home and other expenses had also increased. This also gave us time to get used to having this added expense in our budget.
Analyze and adjust your budget. Before the baby comes, try to get an idea of current expenses as well as the new expenses you expect to incur (diapers is just one example). It is inevitable that your day-to-day expenses will change when the baby arrives so it is important to start preparing during your pregnancy. Start by tracking everything you spend for a couple months – it can be as simple as a list in Excel. Don’t just account for the obvious monthly charges like the mortgage and cable bill, be sure to track how much you are spending on going out to eat, trips to Target, coffee (decaf now) on the way to work. These smaller expenses can add up and may need to be adjusted to make way for baby-related expenses such as daycare, clothes and those previously mentioned diapers!
Plan for the expected. As you get closer to your due date (say, 3 months out), try to incorporate the expected new baby-related expenses to see how you will need to adjust your budget. One expense in particular to consider is daycare. If you will need to pay for childcare, this is likely going to be one of the most expensive elements of having a baby. It is wise to begin saving well in advance by allocating a percentage of money early in your pregnancy that will go toward this expense. For us, to prepare for the baby, we wanted to get a larger, more “family-friendly” car. With the daycare price tag on our mind, we opted to not get a brand new car, but rather a pre-owned car instead. This allowed us to pay cash for the “new” vehicle and avoid having a monthly car payment. Sure, a new car would have been nice, but we decided it was wise to choose a less expensive car so our budget could more easily handle the daycare expenses. Considering where you can cut expenses can make the transition to the post-baby budget easier.
Plans once baby is here
Once your baby is here (by the way, congratulations!), consider these tips to help start your child on a path to financial security.
Consider a 529 plan. If you would like to help pay for your child’s college education, it is important to start saving as early as possible and be deliberate with your approach. Too often, we see parents open a 529 Plan put an initial lump sum into the account and then never make consistent deposits after that. Upon opening the account, determine how much you will contribute each week or month to your child’s college savings plan. Or, consider having automatic contributions deducted from your paycheck – you are less likely to miss the money if it comes out automatically before you ever see it. A 529 plan can be an important tool to build assets to help pay for college which will hopefully alleviate the need for you to dip into your retirement accounts to pay for your child’s education.
Start a savings account. After we had our son, my husband and I started a savings account for him. Any time he has a birthday party, or event where there is a check payable to him, we deposit the money into his account. We decided that we would also match the amount gifted to our son with our own funds. This will help his savings grow. Of course, he wont have free-reign over this money. It will be a great way to teach him budgeting skills of his own. We will work together to determine how much he can spend, how much he should keep in savings and how much he should share with others for a good cause.
Focus on your retirement plan. While it is easy to have the baby on the brain constantly, I cannot stress enough how important it is to remember to focus on your own financial security. It can be easy to put yourself last, as we know moms do, but saving for retirement cannot be left behind. While baby items can be expensive, getting that new gadget should not mean putting your savings at risk or dipping into your 401(k). Remember to stay the course for your retirement plan and cutback expenses where you can – baby stuff is so cute, but is not always a necessity.
For expecting or new moms, this is certainly an exciting time for you and your family. By being one step ahead with your financial plan, it can help keep you on track with day-to-day expenses while also allowing you to prepare for the future as well. If you’re looking for guidance or assistance to meet your financial goals, the advisors at Girard are here to help. Contact us to have a conversation about the plan for your financial future.
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