How to Prepare Your Finances Before Having a Baby
Bringing a baby into the world brings many responsibilities, one of which is the management of your finances. A baby will create many changes to your income and expenditures. By getting your finances in order early you can look forward to a bright future throughout parenthood where finances aren’t a cause of stress or worry.
Consolidate and Reduce Existing Debts
It’s easy to accrue debts on credit cards, store cards and personal loans. Why not consolidate your existing debts into one place to reduce your monthly interest payments? You can consolidate debt from credit cards using a balance transfer offer such as 0% on balance transfers for 6 months. During these 6 months you should focus on reducing the debt as much as possible.
Make Extra Home Loan Repayments
If you have a home loan and are both currently employed you should use your dual incomes to make as many extra repayments on your home loan as you can manage before dropping to one income. Make sure your home loan has a free redraw facility so that you can pull any extra repayments back out at a later date should you need it. Even if you pull most of the money back out after you have the baby you will still of reduced your interest payments in the meantime and further reduced the principle balance.
Check your Health Insurance Coverage
Having a baby can rack up some big healthcare bills — especially is there are any complications. If you don’t have private health cover you should consider taking it out in advance of getting pregnant as many funds have a 12 month wait before they pay out for maternity expenses. If you already have health cover, check the policy and ensure maternity cover is included. If not, you may need to upgrade or shop around for another policy.
Protect your Income
While an additional expense, it is seriously worth considering income and life insurance should the worst happen. The upbringing of a child creates a large financial responsibility. You need to be confident that your home loan could be paid off and essential costs such as education and living costs are covered in the event that an income is lost or something happens to one of you.
Save for your Future
Think about saving for education and other future costs by starting a high interest savings account. Online-only savings accounts often have higher interest rates and lower fees than traditional banks. If you looking for bigger returns with a long term investment then you could look into managed funds or shares.
Is your retirement plan working for you? Make sure you have your entire retirement plan in one place to avoid paying multiple account fees. Look for retirement plans with low fees and strong performance results. The thought of your children growing up may seem a long way ahead but you need to get your money working for you now to ensure a good financial position for yourself when they eventually leave the nest.
Try Out Living on One Income
It can be a shock moving from a dual income household to a single income household when you have a baby. To make things easier why not try and live off one income for a while before the baby is born. The other income can be put towards extra home loan repayments or reducing debt as suggested in the other tips.
Don’t Spend Money When You Don’t Have To
The great thing about having a baby is that friends and family are keen to help out. If you have friends who have had babies before, why not see if they have toys, clothes or equipment that they don’t need anymore. Ebay, online classifieds and your local newspaper are also excellent places to find baby goods second hand
Babies Can Save You Money as Well!
While there may be no shortage of costs around bringing up a child, you’ll probably notice you spend less money on entertainment such as going out to restaurants and bars, especially in the first years after having a child. They will provide you with plenty of ‘entertainment’ and keep you occupied day and night.