Financial Planning for Parents: How to Get Started

      Whether you’re just embarking on the journey of parenthood or raising kids who’ll be off to college in a few years, it’s never too soon — or too late — to start financial planning. The key is to start, so here are some tips to help you on your way.

Start By Talking

     You and your partner should discuss and write down your financial goals. Think about your short-term and long-term priorities. Are you saving for a house? Another child? A bigger car? Do you want to pay off credit cards or stash more money for retirement?

     Make the time to have this conversation several times a year — it’s good to talk about finances between two and four times every year. You can review your budget, reevaluate goals, analyze savings, and assess new changes in your life. Many people fear talking about money, but this doesn’t need to be a stressful, dreaded conversation. Open up a bottle of wine or splurge on take-out and turn it into a date night.

Create a Budget to Track Spending

     Eliminate worry and stress by tracking what comes in and your expenses each month. You probably already know what you pay for mortgage, car payments, 529 plans, insurance, childcare, utilities, and cell phones. However, what about the intangibles that change regularly, such as replacing outgrown clothing, dining out, birthday presents, medical deductibles, and other unexpected expenses?

     For a month, keep a notebook and record every expense — note the amount, date, and item or category of the expenditure. If you’re more tech-oriented, check out the best budget apps and personal finance tools for 2018. You’ll see everywhere your money goes, including such things as haircuts, a bottle of wine, a Wawa trip for coffee, and a new novel by your favorite author. Creating a complete picture of what you spend will help you develop a more realistic budget and identify areas where you may be able to cut back.

Review Work Benefits Annually

      Many employers offer their employees opportunities to obtain life insurance, but those plans aren’t one-size-fits-all policies. Educate yourself about the benefits your life insurance pays to your partner, whether the benefit is taxed, or whether your long-term disability will cover expenses should you become disabled. Does your company have a Health Savings Account (HSA) or Flexible Spending Account (FSA)? Are there other benefits worth exploring?

Create a Savings Cushion

     We can’t look into a crystal ball to see what unforeseen expenses lurk in the future. There’s always something, so protect yourself by building that emergency fund. Most experts recommend having between three and six months’ worth of savings to cover minimum monthly expenses (whatever you have to pay, like the mortgage, regardless of the emergency). If your typical monthly expenses average $6,000, including entertainment and other “optional” items — but your minimum monthly expenses are $4,450, you should save at least $13,350.

Determine Your Net Worth

     It makes good financial sense to know your net worth, because it develops a more complete picture of your current financial situation and provides a reference point to measure progress toward your goals. When you’re building your savings for a rainy day — or future college bills — you’ll want to determine your assets. Those assets generally include:

●      Investment accounts

●      Your home’s market value (you can use an online tool for this)

●      Bank accounts

●      Cash value of insurance policies

●      Personal property, like art, jewelry, and furniture

●      Your car

Next, create a list of your liabilities — or what you owe — for major items with outstanding balances. These liabilities usually include your mortgage, car loan, student loans, and credit cards. Your net worth is determined by subtracting your liabilities from your assets.

Never Be Late on a Payment Again

     There’s not much worse than getting an overdue bill notice. If you receive a regular, predictable paycheck, set up automated payments for bills that never vary. Caution: You may not want to use autopay for these nine bills.

Schedule time to keep on top of your finances; make a plan with your partner to create and use a budget. You’ll alleviate some stress and money worries and gain priceless peace of mind.

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About the Author:  After losing her husband Greg, Sara Bailey created to support her fellow widows and widowers. She is also the author of the upcoming book