How to financially prepare for starting a family
When you're planning on starting a family, there is plenty to prepare for when it comes to organizing your finances. From diapers and clothing to food, children can cost thousands of dollars each year. To financially prepare for starting a family, there are a few steps that you can take to get a head start.
Save an Emergency Fund
It's important to build an emergency fund of at least $1,000, which can cover unexpected costs or bills that come up throughout the year. This can include car repairs and medical bills that you didn't anticipate paying for and aren't necessarily in your budget each month. Although credit cards are helpful when an unforeseeable emergency takes place, it’s best to have an emergency fund ready when you need it. It's important to rebuild the emergency fund immediately after using it to ensure that you continue to be prepared financially for the future.
Practice Living on a New Budget
Plan out what you expect your child will cost. Remember to factor in diapers, medical costs, doctor’s visits, increased health insurance, formula, food, clothing, hygiene products, car seats, toys, nursery furniture, and anything else that your baby will need. Some of these expenses are one-time costs, whereas others will be monthly. Adjust your budget to reflect saving for these one-time costs, and start practicing living on less to ensure that you’re financially ready to grow your family.
Cut Out Unnecessary Expenses
It's important to take a look at your expenses to determine any luxuries that you can cut out to reduce how much you spend just to live. Here are four ways that you can save money every day. This will provide you with more wiggle room on paying for diapers and nursery furniture once the baby arrives. Paying off credit card debt or student loans will also give you more money in your budget to pay for expenses.
Save Three to Six Months of Income
Many people suffer from a job loss at one time or another after starting a family. To ensure that you can make it through difficult times, it’s important to have three to six months of your income saved to continue paying for your mortgage, utilities, car loans, and groceries. This will allow you to take your time looking for a new job instead of compromising on the position that you're hired for just because you need to pay the bills.
Starting a family is an exciting milestone for many. By planning your finances and starting to save before having a child, you will save yourself the stress of worrying about money later on.