This was originally published on Monday, October 19, 2015, in the Pacific Daily News. Click here to subscribe to the PDN.
Question: My wife and I are expecting a baby girl in November. She will be our first child. We know that raising a child is expensive. Do you have any tips that could help us prepare?
Congratulations on soon becoming parents. As much excitement there is that surrounds such a joyous event, there are a lot of nerves and anxiety that go along with it. As adults we are concerned about ourselves, but once a little one comes into the picture, we realize that another human who cannot take care of him or herself now depends on us. One can never really prepare for a child, because you certainly cannot know what the future holds. Here are a few tips to get you started:
- Get your paperwork in order. At a time of elation, who wants to think about a time of sadness? But the reality is that 60 percent of adult Americans do not have a will. If something were to happen to you and your wife at the same time, what will happen to your daughter? You and your wife should sit down and select someone who you feel is the best person to parent your child in the event something terrible happens to you both. Remember that this person is the one person who will raise your daughter if you can’t. To avoid hurting others’ feelings, tell the person you select, there is no need to discuss it with other.
Besides naming a guardian in your will, you will have to appoint someone who will be your executor and you will name your beneficiaries. Decide how your assets will be divided. You also will want to complete a living will for both you and your wife, giving instructions to a doctor on how to handle resuscitation and life support. Other documents you need drafted are medical and financial durable powers of attorney. Generally, this would go to a spouse but you may also want to include someone else in case something happens to the both of you.
Along with getting your wills and powers of attorney ready, you should reevaluate your insurance. Once she is born, add her to your health insurance. Talk to your home and car insurance companies and see if there is additional coverage or paperwork needed. If you do not have life insurance, now is the time to get a policy. Lastly, talk to your employer and see what documents and policies will need updating.
- Get your debt under control. Studies have shown that one of the major reasons for divorce is financial stress. Financial stress can make arguments become personal. Having a baby is stressful enough; you don’t need finances to stress you out more.
- Savings. If you haven’t started saving, now is the time to start. Be sure you have an emergency fund started. If you think saving prior to having a child was difficult, wait until you are faced with feeding and clothing a child. It is important that you put your efforts into starting an emergency fund. You should not have to go into debt to get your car repaired or to buy a new refrigerator.
- Income. As you mentioned in your question, having a child is expensive, which means you will need to assess your income. Are you making enough just to make ends meet? Does one of you plan to be a stay-at-home parent? Do you want a job that has more flexibility? Are you going to be requiring childcare while both of you are at work? If you see the necessity for more income, are one of you willing to take a second job or look for a better paying job?
- Retirement. As a non-parent, it is easy to think that you may not necessarily have to plan for retirement. When you become a parent, you wonder how you are going to pay for it all. You probably feel that you will have to work till you are well past retirement age. That is where a retirement fund comes in hand. By the time a child graduates from college, you may be getting ready to retire. Be sure that you have enough set aside to enjoy the fruits of your labor. It is important to ensure that your financial future is steady.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at firstname.lastname@example.org and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.