Congratulations! You are pregnant, and new little human being is about to rock your world. And your wallet. Wondering what steps to take to get your financial house in order as you prepare your home for your baby?
Taking action on each of these six recommendations will give you peace of mind on the money front. Follow them, and you’ll be able to turn your attention to dreaming about cuddling instead of worrying about how to pay for it all:
1. Carefully review your current financial situation.
It’s sometimes harder to look directly into your bank accounts than it is to stare directly at a light bulb. But the temporary pain of putting everything – and I do mean everything – out in front of you is worth it. Sit down with your partner, and map out all of your assets and liabilities. Open an Excel file and enter the totals in your checking, savings, and retirement accounts. Spell out what debts (credit, education loans, mortgage, etc.) are out there. Knowledge is power, mama, and it’s important to get clear on your current state first. Also consider doing this type of review regularly. Finances are one of the topics my husband and I review on a monthly basis during our weekly Saturday Meetings.
2. Align your bank account and your maternity leave.
Do you know how much time you’ll be taking off when baby arrives? And how much of that time (if any) will be paid by your employer? Get in touch now with your human resources department to get answers to your questions. Don’t forget to ask about benefits, too. Will any retirement match you receive continue while you’re on leave? How do you add baby to your insurance? If your HR manager can’t answer your questions, be calm but persistent, and don’t stop until you get all your questions answered. To the extent you will have unpaid time off, do you have replacement income lined up? This takes me to #3.
I know, it’s hard. The expenses start piling up the moment you find out you’re pregnant, making saving seem nearly impossible. But it’s more important now than ever to save what you can. My husband and I have had the most success saving consistently when we use automatic savings accounts that pull certain amounts bi-monthly into accounts labeled with specific purposes. After having baby #1, for example, we immediately started pulling money monthly into an account designed for my maternity leave for baby #2. I then “paid” myself out of that account during my leave. Also, on the baby-gear front, see what you can get second hand, and check out Baby Bargains, which is a bit like the Consumer Reports of baby stuff.
4. Set up a college savings fund for your baby.
Yes, college is a long way off (and I know you have to get through the astronomical expense of child care first), but the price tag of higher education is large, and it will be here sooner than you think. Now is the perfect time to open a 529 account for your baby, particularly as any generous monetary baby gifts from friends and family may need a financial home. These so-called 529 accounts offer tax advantages that other types of accounts don’t. My husband and I researched the various plans early on (they differ by state, and you don’t have to live in a particular state to use its plan), so we wouldn’t have to worry about doing that homework after baby arrived. Check out this website for some help comparing the various plans. Contribute small amounts now, and then more as your childcare expenses decline.
5. Get end-of life issues squared away.
Thinking about the end of your life at the beginning of your baby’s is depressing. I get it. But there are a few subjects you just shouldn’t avoid as you take on this parenting gig. Chief among these uncomfortable tasks, get help drafting and executing a will. You’ll spare your loved ones much agony and probably feel better yourself if you know how things will shake out if something were to happen to you. Spell out guardianship issues clearly to give yourself peace of mind with respect to your baby. And consider your life insurance options. You want to know your children will be okay financially, even if you aren’t around to support them. My husband and I bought life insurance policies before our kids were born and then added additional coverage after they came along.
6. Don’t stop contributing to your own retirement.
And by the same token, don’t use your retirement savings to pay baby-related expenses. Remember that these are the years that matter most to your overall financial success in retirement. It’s infinitely harder to “catch up” if you wait until your 40’s and 50’s to start contributing. One day, when that little cherub is off functioning independently in the world, you’ll want to be able to have the financial ability to retire.
Getting stuck figuring out which of your many baby-related financial goals is the most important? My favorite advice on this front comes from working mom and financial planner, Kristin Michel Rodriquez: “Because we get very emotionally tied to the well-being of our kids, try to use the ‘worst case scenario’ concept when you’re having trouble setting priorities. What is the worst that could happen if you don’t save for or pay for this particular thing?”
Good luck, mama. Having a baby brings comes with serious complexities and certainly isn’t cheap. But it’s the best investment you can make in an amazing and fulfilling life. I promise.
Lori K. Mihalich-Levin, JD, is the founder of Mindful Return, author of Back to Work After Baby: How to Plan and Navigate a Mindful Return from Maternity Leave, and creator of the Mindful Return E-Course. A partner in the health care practice of a global law firm, she also is mama to two beautiful red-headed boys. Lori holds a law degree from the Georgetown University Law Center and completed her undergraduate studies at Princeton University’s Woodrow Wilson School of Public and International Affairs.