Everything changes when you have a child. Now it's not just you anymore and the stakes increase dramatically. While you could afford to live on the edge before, now you are more cautious and constantly thinking about the future. These 5 actions are ones that should be considered and if possible, you should take action.
Life Insurance – Life insurance is something that you hope you never have to use which is what makes it such a hard thing to commit to buying because it feels like you’re constantly paying for something that you’re not benefiting from. Life insurance is also something that if you ever do have to use, can keep an already stressful situation from becoming financially stressful as well which means that when you buy life insurance, the benefit you’re paying for is peace of mind. The peace that if something happens to you, your family won’t have to take time away from mourning their loss to worry about how they’re going to pay their bills.
Create a will or estate plan – This is a very emotional thing for many people and there are probably more people that do not have wills or estate plans in place than those that do. In addition to making you think about death, which let's be honest, no one wants to think about, creating a will or estate plan is a lot of work. It’s essentially taking an inventory of everything you own and figuring out what to do with it. But it’s so worth it and in the event that there is a death, having an estate plan or will just make it easier for your loved ones to find every important asset that you may have and it simplifies the process of transferring those assets to their loved ones.
Edit your beneficiaries – Your beneficiaries are the people who will inherit your money in the event that something happens to you and designating beneficiaries is usually something you do when you start a new 401k plan or other retirement plans. I would argue that this is the first thing that you should do because it’s the easiest to implement! You can usually do it online. As easy as it is to do, its very often a forgotten task when people have a major life event like marriage or a child is born.
Start a college savings plan – Even if you’re only able to save $50 a year to start, you won’t regret setting up a college savings plan for your child early on. Setting up a college savings plan from day one puts time on your side. The longer you’re able to put money away, the more likely you are to meet your goals. By stretching out your contributions over an 18 year period, you also put less stress on your finances annually. Additionally, by starting earlier rather than later, you have the power of compound interest on your side which means that in addition to your contributions, you’ll receive interest on your contributions which may or may not be a lot depending on interest rates, but everything counts! If you’re reading this and have a child that’s 5, 10 or 15, its still not too late! Starting later is better than never starting at all and by starting now, you’ll still be able to capture some benefits and it’s better than trying to figure out to do your child’s senior year of high school.
Start an emergency fund – An emergency fund is meant to be there for you when “things” go wrong. That thing could be the loss of a job, an illness or basically anything unexpected. The average recommendation for an emergency fund is 3 to 6 months of your monthly expenses. That number varies though based on your personal circumstances and you may need more or less depending on things like how stable your income is or whether or not you have other income that you receive. For many, it may be a struggle to make ends meet alone and the idea of an emergency fund seems like a fantasy, but living from check to check is already stressful enough when you don’t have a baby and absolutely frightening when you have a little one to take care of. If you aren't easily able to start an emergency fund try starting with small dollar amounts and building from there as you adjust to setting aside money for this purpose.
I started this off by saying, "if possible" because sometimes, we are literally unable to financially accomplish something even if we really want to. To that, I would say, don’t fall into the all or none trap where you feel as if you can’t crush your goals, you won’t do anything. Anything that you do will help and get you closer to your goals. Something is always better than nothing and if you do what you can, with the goal of doing more when you can, that counts as progress!