A new baby is a joyous addition to any family. But children also bring added financial responsibilities for new parents. The New Jersey Society of Certified Public Accountants (NJSCPA) offers the following advice on making the right financial choices:
Create a Budget
This is excellent advice for anyone, but it’s a particularly valuable step for new parents, particularly because you will be making many purchases as you prepare for your baby’s arrival. More importantly, take the time to consider how the new addition will affect your family’s monthly finances. Child care, for example, can be a very costly addition to your monthly expenses. If one spouse is going to quit a job or work fewer hours in order to care for the baby, that loss of income will also have an effect. As soon as you learn you’re expecting a baby, begin putting together a regular monthly budget so that you’re prepared for changes in your financial situation.
Make a Will
If you don’t already have one, now is the time to write a will that indicates who will receive your money and other assets when you die. In a will you can also name the guardian who will care for your child if you die before he or she is 18, so it’s a particularly important document once a child is born. This is also a good time to analyze your disability and life insurance. The benefit amounts you chose before may not be enough to support a young family, so you may want to make some adjustments.
Plan for the Future
Preparing for the long term means saving both for your retirement and your child’s college education. When you create your budget, include regular deposits into retirement accounts and college funds. If you have to make a choice between the two, CPAs advise that you put your retirement savings first. That may be surprising to a doting parent, but it makes good sense. If you don’t have the money to cover tuition when your child reaches college age, there are plenty of scholarships and relatively inexpensive loan programs available to help. However, there are few options for parents who hit retirement age with insufficient funds to finance their current standard of living.
Get Out of Debt
This should rank high on your list of financial priorities. If you are already carrying heavy credit card balances or other debt, analyze your budget to see if you can raise your monthly payments. You’re not just paying for past purchases, you’re also paying interest on your outstanding debt each month. Getting rid of those balances will free up more money for your family and help you avoid wasting money on interest.
Don’t Go Broke
There are many necessary expenses associated with a new baby, but don’t fall into the trap of spending more than you can afford. Many people mistakenly believe that a happy childhood requires elaborate toys, birthday gifts and parties or room decorations. In fact, the best choice you can make for your child is to spend wisely and keep your family on sound financial footing.
Consult Your CPA
If all of these issues sound more complicated than you expected, your local CPA can help. Turn to him or her for practical advice on all the financial issues facing your family.
If you don’t have a CPA, you can easily locate one online using the NJSCPA’s free, online Find-A-CPA service. Just go to www.findacpa.org, and in a few clicks you can locate a highly qualified professional who can assist you.
For more information on various personal financial matters, visit the NJSCPA’s public service website at www.MoneyMattersNJ.com. While visiting, you can subscribe to Your Money Matters, the NJSCPA’s free, monthly email newsletter to receive valuable personal financial planning advice throughout the year.