Authored by WILL ARMFIELD AAMS®, AIF®, CRPC®
If you or a loved one are planning to start a family, there are changes coming your way. Many you have heard about: changing diapers, soothing crying babies, or getting the bottle just the right temperature. Those are important, but the ones you don’t know about can be even more critical to prepare for before the little one comes.
Creating a budget for the pregnancy, labor and delivery, and first year after birth can be critical. It is recommended that you build an emergency fund to be prepared for some unexpected expenses.
A budget will keep you from buying too many gadgets that friends/bloggers/ads say you “NEED.” You will find that you don’t need too many gadgets, although it’s certainly okay to have items that make life easier for mom and baby. I would also recommend not buying too much of one thing. Yes, having more bottles is nice, so you don’t have to wash them as often, but you’ll still have to wash ALL of them! Try starting with one or two of some things just to make sure you like them. You can always get more very quickly these days if you find you need more. Sometimes it’s not that you don’t use it, but that you found a different version you like better. It’s easy to get lost amongst all the options that are available. I mean how many strollers could you possibly need for one child?!? (That one will make so much sense after a few years for some of you.)
Ok, more on the strollers…
You have an everyday stroller, but it’s not great for jogging/soft soil, so you may be tempted to buy a jogging or all-terrain stroller. Also, wouldn’t it be great to have an umbrella stroller for those quick trips or for airports? That’s three! Just wait until you have a second child and you want a double stroller or find a brand that you didn’t know about with some cool new feature. It can add up quickly!
Back to general budgeting…
Make sure you don’t buy too many newborn-sized clothes or diapers. Your baby will grow out of that size fairly quick. For diapers, I would buy some newborn size, mostly size 1 and maybe a box of size 2’s. Don’t go overboard and buy past size 2. It will be a long time before baby needs to move past those, and many children will stop at Size 4, go through potty training and never need anything bigger.
On the baby clothing, you may feel pressure to buy your kids designer brand clothing or special outfits, but that can get out of hand quickly. Try to stick to off-brand clothing most of the time, especially when they are young because they will literally wear it once in some cases.
Employer Benefits / Health Insurance
If you have health insurance coverage, it’s important to learn your deductibles and max out-of-pocket costs. Some plans will cover some local hospitals, but other hospitals are out-of-network or carry a higher deductible. When choosing your doctor, make sure he or she delivers at an in-network hospital. You will need to choose a pediatrician that is in-network as well.
If employed, does your employer offer paid maternity leave? You are entitled to 12 weeks of leave under FMLA (Family and Medical Leave Act), but your employer may provide some weeks of paid leave. You can use PTO or vacation/sick leave to cover weeks of paid leave. Keep in mind that if you have a health plan through the mother’s employer, you will need to cover your portion of the healthcare costs during leave that normally come out of your paycheck. Often times, you can spread out your PTO/vacation days, so you won’t have to come out-of-pocket for those premiums. If you still have unpaid weeks at the end, you’ll need to decide if you can afford to take the full 12 weeks, which would result in an income gap.
Your employer may provide short term disability, or it may be optional to elect through payroll. This typically provides some coverage for income replacement due to pregnancy, but each policy is different. If you have a short term disability policy, please consult with your benefits manager or financial advisor.
Also, some employers offer a FSA for Childcare (Flexible spending account) sometimes called a Dependent Care FSA. If you have a FSA, you have to choose between it and the Dependent Care Tax Credit. Consult your tax advisor to help make the right decision for you. This is different from a standard FSA, so if you have questions please consult with your benefits manager for more information.
Childcare is something you should discuss well in advance of needing it. Several questions will need to be addressed. Will mom work after maternity leave? If so, will you use daycare or have family to help out? If family is willing and able to help, spend some time discussing a schedule with them. They will be giving a significant portion of their time, and they may not realize what they are committing to. Even if they’re committed to the time aspect, what happens when they need to go to a doctor’s appointment or get their car serviced? Mom might not have any PTO left if she used it all up during maternity leave. If family cannot assist full-time, is there a part-time daycare that you could use to give them a break? If any kind of daycare is in the plans, you might need to get on a waitlist for a spot for your child.
529’s / UTMA’s / Savings
One way to help prevent wasted spending on gadgets AND plan for future expenses, is to take the money that you receive in lieu of gifts at the baby shower and fund a 529 or a UTMA for your child for college savings. We are going to elaborate on this topic in more depth on National 529 Day on May 29th, so be on the lookout for a blog on this topic soon.
A wise step to take before baby arrives is to create or review your estate plan and beneficiaries of life insurance or existing retirement plans. Estate plans can be drafted to include all children you have/will have so having a name, birth date, or social is not required in most cases. You can also adjust in the future, but it is best to go ahead and put a plan in place as you will have little free time after your baby is here to meet with an attorney. As part of that review, you’ll want to consult with your financial advisor to see if you have an appropriate amount of life insurance.
Birthing Class & Hospital Tour
And finally, as you enter the third trimester, I highly recommend going to the hospital where you plan to deliver and signing up for a class for new parents. This will cover a lot more than breathing techniques like your parents likely experienced. You will cover a wide variety of topics so when you hear phrases like, “my water broke,” or “you’re 10 centimeters dilated,” or “do you want an epidural?” You’ll know what to do! Plus, these usually include a tour of the hospital, so you know where to go when it is time. You will also be more comfortable knowing what to expect. Most hospitals give you the opportunity to pre-fill the birth certificate and social security application, so you don’t have to do it in the hospital after birth. That means you have to CHOOSE A NAME! (Something my wife and I seem to always do at the last possible second!)
These are just a few things to think about when planning a family. As you think about these topics it is always recommended to consult with your tax, legal or financial advisor where appropriate to make sure you are making the right decision for your specific situation.
Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.
WILL ARMFIELD is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262 and can be reached at (336) 885-2530.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.
Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.