Over the last few years, I have had a lot change in my life. I am starting to feel comfortable going through the normal ebbs and flows of life. However, the biggest change to my financial life during those times is the addition of new children to my life. These kids are amazing and it has been such a rewarding experience.
With new life situations, there is a need to update your financial goals and how you can achieve them.
College?
College is expensive. Most people my age are still battling with college debt. I was part of the fortunate few to not have any student loans when leaving college, due in part to a scholarship. For my kids, my family is prioritizing now their college expenses and saving money in a 529.
The 529 is a great vehicle to put money away for college. First, it is tax deductible, meaning it helps to reduce your total income. Second, it is transferrable. Finally, there is a broad definition of education costs, which can include rent payments and book purchases.
Like anything, it is good to set a goal for yourself. Do you want to afford an Ivy League school? Do you want to pay for public university? Answering these questions will help you formulate how much you need to save now to be able to pay for college later. Compound interest is just as much of a friend here as it is your retirement.
I highly recommend starting as soon as you can. Being able to put in money now, means less I need to pay when the bill arrives.
For my budget, I have a set amount of money that is put away each month and it gets put into a managed account. No fuss, no worries, and it has performed decently. If you are wanting a no fuss solution and need to pick individual stocks, a market index fund like VOO (S&P), ITOT (Russell 3000), or QQQ (Nasdaq) are all good options.
Diapers cost what?
Adding a new family member brings new costs. You are trying to provide a whole new person with clothes, food, and health care. Diapers are expensive and are needed for 2-3 years of life. This is one of the largest recurring costs to your budget. I found it is best to leverage subscription services (like Amazon) for diapers since you will have a good idea of how many diapers are used each month. It is best to set this up after the first 3 months of life. Babies are too unpredictable until then. I also got a Target Debit RedCard. This is a normal debit card that can give you 5% off all Target purchases.
Another large purchase you will make is in books, clothes, and toys. If you have family that are looking to buy you things for the new baby, have them buy a variety of clothes based on seasons through Newborn to 6 months. This will give you a good foundation to start with. A great tip we found was to use a resale store or garage sales. Since babies grow so fast, many clothes in these type of stores are gently used, if at all.
Be Proactive
Just like with your own expenses, it is important to think about the future of your kids expenses. Do you foresee having to go to the doctor a lot? Do you want to go on a family trip with your new baby? Understanding what you want to do ahead of time gives you motivation to save for these trips and time to budget in the expected costs, such as hotels, souvenirs, and that last minute purchase.
