New Family… New Financial Plan

The truth is, for a savings system to be truly effective, it needs to be reevaluated with every major change you go through. Here are some ideas on jump starting your financial safety net throughout life’s biggest events:

Getting Married
Any happily wed couple will tell you that the secret to marital success lies in open communication, and your finances should be no exception. Begin your married life by discussing your dreams for the future together… and then mapping out the best way to get there.

Prepare a monthly budget that includes both of your incomes and expenses, and use that as a tool to set a “savings goal” for each month. Find ways to cut down on individual spending in order to build a retirement fund. For example, if you are each paying a health insurance premium, now might be a good time to do a cost/benefit analysis of your individual plans versus a family one.

You should also keep in mind that joint credit means that you are both 100% responsible for the entire debt amount. Instead, it might be a better idea to simply add your spouse as an authorized user on your credit cards, which won’t affect anyone’s credit rating. Now is also the ideal time to take full advantage of any employer sponsored retirements or IRAs.

Starting a Family
The first step in expanding your family is making sure that your finances are in order. Creating a plan before your new bundle of joy arrives can often make the new influx of expenses seem more manageable.

Child care is a huge expense. Sit down with your partner early on and decide if it makes more sense for one of you to stay home with your new family or if you will need to arrange for daycare. Do your research carefully, and don’t forget to factor in details like part time versus full time child care, and the cost of commuting to work. Calculating what you’d lose in annual income if one of you quit working in comparison to the cost of a good day care might just surprise you.

Keep in mind that diapers and formula alone can add over $100 to your monthly grocery bills. Also, Clothing, toys, and baby essentials will be a big expense, especially during the first year, so you might want to start setting aside a portion of your monthly budget long before your little one is due to arrive.

You may be tempted to divert all of your retirement savings into a newly formed college fund, but be careful. After all, there are loan, scholarship, and grant options for education, but no one is going to help you pay for old age.

Divorce
Divorce is a lengthy process which can, unfortunately, be as hard on your finances as it is on your emotions. Careful planning can help make the transition easier on both of you.

Begin by getting your immediate finances in order. If you and your spouse agree on most issues, consider avoiding costly legal fees by filing an uncontested divorce. If you do need to hire an attorney, make sure that all of your paperwork is in order beforehand in order to keep the cost down. Avoid any large purchases until after the divorce is settled, and make sure that all of your taxes are up to date before heading to court.

Also, make sure that your emotions don’t cloud your judgment—don’t move out of your home without consulting your attorney, and never sign any financial documents without having a lawyer review them. If you’re worried about being able to support yourself or your children on your own, consider alimony or child support.

Of course, there are dozens of major events that will come up throughout your life. From embarking on a new career and handling an inheritance to dealing with a death in your family or a sudden change in your stocks or the price of buying gold, consider each one of them as an opportunity to reevaluate your goals and the way you’re preparing for the future.

By Jeff Roberts