How Good Is Your Financial Health?
Financial health is an important part of an overall healthy lifestyle.
Parenthood comes with a host of daunting responsibilities, not least of which is keeping one or more young people safe and healthy. Another of those responsibilities is being sensible about your finances, both when it comes to everyday expenses and planning for the future. Tending to your financial health is part of keeping a healthy lifestyle overall—but if this isn't what you're good at, where do you start? Kelley Holland, founder of Own Your Destiny Coaching, a financial coaching practice for women, and Jennifer Streaks, a financial and affordable lifestyle expert, offer tips on ways parents can make sure they're staying financially healthy for their families.
1. Budget, budget, budget.
You may have gone most of your life without planning how you spend your money, but children make freestyling a much riskier proposition. "It's a lot harder to wing it with your finances when the kids arrive," Holland says. Streaks agrees.
Calculate your weekly, monthly, and yearly expenses, then try to anticipate costs before they change on you — remember that a new family member will increase things like grocery bills. Use online resources and calculators to look up what it costs to raise children in your area, and talk to people in your community to get an idea of what to expect. Don’t forget to include the “fun” stuff in your budget too, like vacations or kitchen upgrades, to come up with a full picture of what you really spend.
Snapping into focus and coming up with a budget will help relieve your money stress. It makes sense: You worry less when you know exactly how much you have and where it's going, whether it's out on expenses or away into a savings account.
2. Put money aside.
Speaking of savings, you should try to start squirreling away for three things: emergencies, education, and retirement. Streaks suggests setting aside extra money as soon as you know you're expecting. A rainy-day fund of three to six months of expenses is the recommended cushion, according to Holland. She advises a set-it-and-forget-it strategy: automate the process of putting money into savings in order to build up that cushion. Many banks let you set up a regular auto-transfer of money between accounts; consider timing yours with payday.
If you want to save for your child's future education, look into starting a 529 plan, a tuition savings plan that is offered in every state. You can shop around and choose the one that works for you. Holland recommends starting early. "The earlier you put your money to work, the more it will grow for you," she says. "If you save in the first five years of your child's life and invest that money, it will grow to significantly more than when you save from when your child is five to ten."
It's easy, in the midst of day-to-day expenses, unexpected costs, and saving for emergencies and college, to put your retirement savings on the back burner. Try not to do that, Holland says. "It's hard to imagine this when you have a little tiny baby or you're pregnant, but someday, that person is going to be an adult and potentially caring for you unless you've provided for yourself." Take advantage of your employer's 401(k) plan or pension, if it's offered, and you'll be taking care of your kids (and yourself!) well into the future. If not, talk to your bank about opening an Individual Retirement Account (IRA), or ask to speak with a financial advisor to go over other savings and investment options.
3. Get insured.
The chances of your kids getting regular coughs and colds are pretty high (not to mention the chances of you catching them), and unfortunately, you never know if something more serious will hit any of you. It's time to sign up for an insurance plan if you don't have one already. "Make sure you get decent catastrophic coverage and think about the balance between how much of a deductible you can have and what you want your insurance to cost," Holland says. Learn the ins and outs of your policy, Streaks suggests, so you know what's covered and what your out-of-pocket expenses will be, especially during and after pregnancy, and once you add a child onto your plan.
But health insurance isn’t the only kind you should think about. Holland recommends looking into life insurance as well. "It's like a great big security blanket for your children. If you're not there to bring your paycheck home, you need enough insurance to cover that."
4. Don't let shiny things derail you.
Fact: baby stuff is the cutest stuff. But when you're shopping, consider whether you really need that very specific product that your child will grow out of in a few weeks' time. "It's very easy to get caught up in that whole whirlwind," Holland says. "Every choice you make on spending affects the choices you can make on saving and providing for the future." And it's not just about the impact on your wallet. If you're conscious of the stuff that's on this planet and want to reduce your impact, you can look into things like stroller rental or secondhand clothing — friends with kids older than yours will likely be able to point you to local resources, or hand down some of their things to you!
5. Have regular check-ins with your money.
It's not enough to have a budget; you have to keep tabs on it. Streaks likes what she calls Wine Sundays. "You get a glass of wine, sit down with your budget and your bills, and just see where you are every week financially," she says (feel free to change this to Hot Cocoa Sundays). "Look at your financial picture and make sure you're on track. If there are any tweaks that need to be made, you can get on top of things immediately." For Holland, there's another cue: Your anxiety. If money concerns are keeping you up at night, it's time to assess and make some changes.
6. Do what you can in a way that works for you.
You may not be in a position to provide everything for your children, including insurance and multiple types of savings, and that's OK. How can you prioritize? Holland suggests doing a values check. What's important to you? What's best for your family? Let the answers to those questions guide how you manage your money.