It’s likely the most expensive thing you’ll ever do. In fact, an article in Time magazine puts the price of raising a child until the age of 17 at over $230,000. Do the math, and it works out to around $1,130 a month. Furthermore, there’s little reason to assume that figure, which includes housing, transportation and clothing is going to decrease in the years ahead. If you want to give your little one the advantages in life they deserve, it’s going to take a serious effort on your part. Here are a few things you need to do in order to stay on top financially.
Budget for Child Care
Start setting money aside now, which requires taking an honest look at your income and your expenses. A writer with personal finance website the Balance insists on listing every reliable source of cash you have, which could mean coming up with an average if you’re self-employed. As far as the outflow, consult your bank statements to get an accurate picture of what you spend on utilities, food and other necessities. Chances are that some spending will have to be cut so you can meet your monthly savings target.
Rein In Your Debt
The first step is to pay off as much as possible before your angel makes their appearance. Chances are you’ve been struggling to do this for years already, but there may be a few tricks that you didn’t know about. For example, a writer at the financial site MagnifyMoney suggests cutting your cable service and finding a cheaper phone plan to scrounge up a bit of extra cash while trading in your car or downsizing your home for much bigger winnings.
Then Consolidate It
Not only does that simplify your payments into just one monthly bill, but also it may reduce your interest rates while improving your credit score. So what kind of debt can you consolidate? There’s the big one, student loans, along with credit cards, medical bills and even back rent in some states. However, this is no magic bullet as you’ll need to knuckle down and cut back on leisure activities to meet your obligations.
Chip Into Emergency Savings
Life is full of the unexpected such as layoffs, injuries and car trouble, and you don’t want to go digging into your regular savings to get you out of a bind, especially with so much earmarked for the little one. To keep this from happening, open a separate high-yield savings account, and then pitch in a little each month until you reach the recommended three to six months of living expenses.
Put Money Aside for College
Remember that astronomical sum from the first paragraph? Unfortunately, it doesn’t include higher education, which means you’ll have to add tens of thousands of dollars more. On the bright side, there are a number of tax-advantaged savings accounts to help you in this endeavor. One is appropriately named the Education Savings Account into which you’re allowed to contribute up to $2,000 a year per child. If you want to chip in more, a 529 plan may be the better option.
Choose the Right Insurance
This depends on what coverage you and your spouse have from your employers as you may be able to add your child to one or the other. Take a close look at the fine print on those policies before deciding which is best. Besides premiums, you’ll have to consider copays and deductibles, otherwise you may find yourself giving more for less. Once your child is born, you normally have 30 days to add them to your employer plan, or 60 days for an insurer that you sought out yourself on the market.
It may seem daunting, but the sooner you start making these decisions, the better off you’ll be and the more you can focus on the happier parts of raising a child. It will be a wonderful experience, no matter how much you manage to save up.
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