| 10 tips for soon-to-be parents |
| By Dana Dratch
• Bankrate.com |
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If there's a baby in your future, chances are you're
thinking about pink or blue. Just don't forget the green.
When you have a little one on the way, it's important to make financial
preparations. And be sure to take advantage of those work-related
benefits that can help ease the money crunch.
Here are some things to consider:
| Don't make the mistake of thinking
you have to do everything at once when expecting. Choose
the strategies that will help the most and still allow
you to focus on enjoying the big event. |
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| 10 tips for soon-to-be
parents |
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1. Build a nest egg.
Things happen. The car breaks down, you need a new washing machine
or one of you is laid off. So pare down the expenses and budget
now to set aside some money. And put it in something that allows
easy access, like a money market account, says David Foster, CPA,
CFP, principal with Foster & Motley Inc. in Cincinnati.
How much you need will vary depending on your circumstances and
whether you already have any kind of safety net. Bare minimum would
be about $5,000, says Foster. "Any less than that and you're
really living month to month," he says.
"I think you need three to six months of reserves
before funding the 401(k) to the max, the Roth and
all those things," says Kathleen Miller, CFP, of Miller Advisors
Inc. in Kirkland, Wash. "Because things happen."
Can't stretch that far? Save what you can manage.
2. Revisit
your life insurance coverage. You'll need it more than ever
if you or your spouse dies. You don't want to go broke buying insurance,
but if you can afford it, make sure you have enough and check out
term insurance, which should be less expensive.
"You're just making sure you've thought through, 'Hey, if
one of us dies, what kind of economic impact is it going to have?
How can we replace it with life insurance?'" says Foster.
If you have the income, you might also want to figure in additional
costs, like college tuition or paying off the house, says Foster.
Want to figure out just how much you need? If you need to replace
$30,000 a year, at a modest 5 percent, that would require a $600,000
policy.
One mistake couples make: only insuring the working party. If something
were to happen to your stay-at-home spouse, what would you need
annually to cover the cost of child care?
Another item to consider if you have the money: disability insurance.
First, find out if it's available through your job. If not, do you
want to spend the money to pick up an individual policy?
While it can provide a nice safety net if something happens and
you can't work for a while, it can also be expensive. "In my
own personal experience, very few people want to pay the premiums
to buy a private contract," says Foster.
3. Re-examine
your health insurance options. Which of your jobs offers
the best family medical coverage? Which includes your preferred
doctors or gives you the most autonomy in choosing who you want
to see? Which plan will give you the best deal when it comes to
labor and delivery?
4. Take
another look at your work benefits. "Look at all of
your options through your employer," says Foster.
Some companies offer plans that let you pay for medical
coverage or day care in pretax dollars, which is a nice way to slice
a healthy portion from your expenses. The downside: Many times any
money unused at the end of the year is forfeited. And you need to
know what happens to that money if you leave or are fired.
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