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Our question of the month comes in from Stephen:
My wife and I are expecting our first child this year, so it will be a true test on how we work around the new costs we will be accruing. I am on pace to pay off a student loan in 3 years and I don’t want to break that. We max out our 401k and we pay extra on our mortgage and my student loan each month.
I don’t want to lose this momentum we have — we both promised ourselves we would never decrease our 401k contributions because we value investing in our future too much. I guess I’m divulging all of this to ask …
What do you advise so I don’t lose momentum when the baby comes?
We have what I consider a fair amount of disposable income after all the bills are paid and extra payments are made, but I’m assuming that will all go towards child expenses in a few months leaving us with very little extra to spend. We have 3 months salary set aside, so the emergency fund isn’t a big issue right now, but it’s also nice to know that we can enjoy a night out on the town once or twice a month and not worry. I appreciate any advice and suggestions.
All the best to you and your family this year!
Congratulations on the pregnancy, Stephen! What an incredible time in your life. Fatherhood rocks. You’ll love it.
As for your question, I have some marriage, kids and money ideas for you to could consider:
1. Continue to Date Your Wife
Setting aside special time together is very important for your relationship. This child is going to be a huge blessing in your life, but your marriage is most important. Keep dating and have fun with each other.
You’re doing well financially so invest your money in the most important asset you have … your marriage.
2. Realize Things are Going to Change
If you need childcare since you’re both working, then start researching your options sooner than later so you can understand the financial investment. You can look into daycares, arrange something with family or look into an in-home nanny.
The nanny thing might seem like something only for the super rich, but depending on how much you or your wife is making, $15-$20/hr. for a nanny could be a steal.
My friend who has an infant at home in Chicago pays his nanny $11/hr and they love her. They found her on UrbanSitter.
Outside of childcare, realize that young parenting is also pretty tiring. So you may opt for more nights at home watching a movie together instead of nights out on the town or hanging with friends.
Related Podcast: Why Date Night Is So Important
3. Plan for a 529 When Your Baby is Born
College isn’t getting any cheaper especially in the year 2037 when your child will be going to school!
By some estimates, college costs are rising at 4-6% per year. You need to take advantage of the power of the stock market and compound interest to keep up with those rates.
Once your child is born and then gets a social security number, you can start saving in a 529.
Here’s an interactive map that will help you find the 529 in your state. You don’t need to invest in the 529 in your state, but there may be some advantages you’ll want to know about.
For example, I live in Michigan. I’m able to deduct my contributions from my state income tax.
4. Realize Your Baby Doesn’t Need a Bigger House or Car
Resist the urge to inflate your lifestyle just because there’s another human in your house. Babies don’t really require that much space.
The same goes for your car. You don’t need to lease a big SUV just because you have a little baby. They fit in regular sized cars too. We have two kids and they fit just fine in our 10-year old sedans.
A lot of people start to spend crazy money when kids come into the picture, but it’s not necessary. They will adapt to your lifestyle. And they’ll learn from the choices you make.
Kids are like sponges mixed with video surveillance equipment … they absorb and watch everything you do.
Related Article: How to Become a Millionaire in your 30’s
5. Consider Saving Up More During the Pregnancy
You’ve got 3 months of savings and that is great! But it can’t hurt to have more when it comes to medical costs.
Perhaps you save up for 6 months of emergency savings and then after your wife goes back to work you can take that 3 months of savings and throw it at your student loan. That way you have the money just in case of emergency. If there’s no emergency then you can crush more debt!
6. Get Life Insurance When Your Child is Born
I’m not sure if you have term life insurance yet, but if you were to pass away unexpectedly, your family would need to replace your income
While you’re at it, check into your long term disability insurance coverage as well. You may have this through your full-time job.
You’re more likely to get a disability during your primary working years than pass away so cover yourself and protect your family.
7. Create or Update Your Will
Once you have a new child in the world, you’ll want to update (or create) your will. This will help designate important things
- Who takes care of your child if you both pass away
- Your burial or end of life plans
- Who the executor of your will would be
There are lots of great options to get your will done fast and cheap. Check out partners like:
I hope that helps Stephen!
You two are already on a great path. And soon, the three of you will be enjoying the results of all your hard work and preparation. Your decisions are not only going to give you and your wife a great life, but you’re setting up your child to thrive in the next generation.
That’s how family wealth is built.
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