New Baby, New Budget: How to Financially Prepare
How do you financially prepare and budget for a new baby? As expectant and first-time parents you are faced with a dizzying array of competing financial priorities. You may want to educate yourself quickly and make smart decisions, but time, money and even downtime often elude you.
Unless accounting was your favorite subject in school, most people would rather stick a nail in their foot than sit down and do a monthly budget. This is not your fault. It is the fault of an education system that, for the most part, does not carry courses on useful subjects like: ‘Personal Financial Planning’.
Let’s agree on one thing: with a new addition to your family, whatever budget you had before has now become completely irrelevant. So, our first step is to create a new family budget.
Budgeting For a New Baby
A budget is a budget is a budget. It is a set of numbers on a page that adds up what you consume monthly and subtracts it from your take home pay. The balance is what you save or, if it is negative, don’t save or borrow.
If a solid financial plan is your roadmap to a future of financial security, a well-thought out budget is the engine of your financial plan. Financially speaking, your family cannot go anywhere without one.
Why is a budget so important?
A budget will over time allow you and teach you to spend and save responsibly, to be accountable and ultimately to achieve your financial goals and dreams. Your financial planner or accountant can help you determine your budget in advance of life events, like having a child.
Record Your Expenditures
There are sites, such as mint.com, where you can record and follow your expenditures to the penny. If you are tech savvy, you can set yourself up with an Excel spreadsheet or work in QuickBooks, which will feed right into your annual tax returns. And then voila, your finances are done!
Do an online search and download a sample one-page budget that anyone can do. This is a good start point and one that you can fill in with your spouse. A sample budget will enable you both to analyze what you are actually spending. If an expense is something that you do annually, like take a trip to the Grand Canyon for example, you would need to amortize it. Amortize means divide it by 12, and then write it down on the page as a monthly expense.
Your Budget Will Grow and Change
If your new infant is now a toddler and you still have not done a “baby” budget then take heart. This is not a problem. You can start now, because a budget is a living, breathing thing, like an actual baby, that will grow and change over time. In fact, budgets are meant to change and all budgets should be reviewed at least annually.
About the Author: Paula Brancato, CFP®, CEPA, CLTC, MBA is a Financial Planner and Investment Advisor to new parents, growing families, business owners and family offices. Her strategic expertise derives from service as a CEO and CFO, as wells as from her work with hundreds of families and businesses she has advised and helped.
Paula Brancato is a registered representative of and offers securities, investment advisory and financial planning services through Barnum Financial Group 277 Park Avenue, 41st floor New York City, NY 10172.
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