This article was written by our featured contributor, Sara Bailey of Thewidow.net. As a widow and mother of two, she knows from experience how important it is for parents to have a strong financial plan.
Excerpt from Thewidow.net: “Like many people who have lost the love of their life, I never in a million years thought I’d be here. On my 40th birthday — which I spent with my husband and our two kids bowling, devouring cupcakes, and laughing more than I ever thought was possible — I never dreamed that by my 41st, I’d be a grieving single mom raising a son and daughter on her own. But here I am, and with each passing day, I get a little stronger, and life gets a little easier.” If you or you know someone who may be facing similar challenges, please visit Sara’s website for support.
Parenting is a roller coaster. There are so many ups and downs that thinking about your finances can feel like the last thing you want to do. However, it is incredibly necessary. Being responsible for another life means you cannot make things up as you go along. That’s why the best parents are financially savvy parents.
The Budget Is King
A smart budget is the centerpiece of any financial plan. CNN found that the average cost to raise a child until 17 is about $233,000, which is almost $14,000 annually. It’s also a good idea to come up with a budget before your baby is born.
If you don’t already, keep track of your expenses for about a month. Take a look at what you are spending money on and use this as a guide on where to cut back or redirect money to your new budget. Remember not to neglect your savings account. You will want some padding in case you or your partner becomes sick, injured, or loses their job.
While you’re creating your new budget, decide if it makes sense for you or your partner to stay home. Keep in mind that the average cost of childcare in the United States is about $200 a week. Use your new numbers to see which option is better for your family.
Properly Plan Out Your Estate
Smart financial planners are looking beyond month-to-month expenses. No matter how unpleasant it is to think about, you need to consider what would happen in a worst-case-scenario situation. You and your partner need to sit down and have a serious conversation about estate planning. You’ll find comfort in knowing that if something were to happen to you and your partner, your child will be taken care of.
When crafting your will, take into account all your assets and how you want to distribute them, which includes your home, cars, collectibles, and any art. Where possible, try to calculate their worth. You can estimate the value of your home by looking at how much similar homes have recently sold for in your area. For art and collectibles, look at what similar pieces sell for online. If you’re still uncertain, bring in an appraiser to estimate their worth. You want to ensure your child will be getting as much as possible out of your investments.
Update or Write Your Will
The best time to write or update your will is during major life events such as weddings, deaths, and births. Use this opportunity to assign a guardian to your child in the event of the absolute worst-case scenario. Having a clear designation of who gets what in terms of estate and guardianship will save your family a lot of stress and heartbreak. Not to mention, you will feel better that your wishes will be carried out as you want.
The New York Times encourages parents to use these moments to take a look at their beneficiaries as well, especially if you have not updated them since you entered the workforce. In most states, whoever is the assigned beneficiary on the account will get the money even if someone else is listed on the will.
Invest in Their Education
Planning for the future also means planning for the best-case scenario. As soon as possible, open a college savings account in their name. Pick a plan that guarantees that the money you set aside will go directly toward their education so they do not miss out on any financial aid or end up owing thousands in taxes.
Expect the best, Plan for the Worst
Though it can seem overwhelming, planning ahead is necessary. Life can be unpredictable and even more so with kids. Getting a handle on your finances early on and looking ahead to the future is the best way to prepare for whatever may happen.
If you would like to create or update your financial plan, please call or email us. We would love to help anyway we can to support your unique financial circumstances. (562) 999-4578 or JST@Fiduciary4.me.
JST Investment Consulting does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable. The information in these materials may change at any time and without notice.
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