Bottles to Budgets – Preparing for a Secure Financial Future
My husband and I are expecting our first baby this fall, a little girl! Although our sweet bundle of joy has yet to arrive, we have already encountered a whirlwind of decisions to be made. From picking out the perfect name, to deciding on a complementary shade of pink to paint the nursery walls, the most impactful decisions we have made or plan to make will be surrounding our finances to promote a positive and secure future for our family.
As an expectant mother and Certified Public Accountant (CPA), here are a few tips for those that are preparing to step into the role of parenthood:
I am sure you have heard “Babies are expensive!” Prior to your baby’s arrival, create a “baby budget.” In your budget include anticipated baby-related expenses. A new baby introduces new expenses into your everyday life, like childcare costs, medical expenses and baby gear. For instance, my husband and I prioritize car seat safety; therefore, we purchased a car seat with exemplary safety ratings, even if it meant we splurged a bit on the price tag. We then cut costs on other baby items, and luckily, received hand me downs from family and friends. When it comes to formulating a budget, I have found that writing down income, fixed expenses and discretionary spending is helpful, as it creates a visual to review areas where you can improve on and cut out unnecessary expenditures.
Medical expenses can strain a family budget, especially large, unexpected ones. Placing an emphasis on forming an understanding of your health insurance coverage including the deductibles, co-pays and out-of-pocket expenses can help you mitigate negative impacts to your family’s financial strategy. You will want to include any known out-of-pocket medical expenses in your “baby budget.” If available through your employer, Health Savings Accounts (HSA) or Flexible Spending Accounts (FSA) prove to be invaluable tools to help cover co-pays, prescriptions and other qualified medical expenses. As a bonus, both accounts allow you to contribute pre-tax dollars, which ultimately reduces your taxable income.
It is hard to imagine, but one day you will be dropping your baby off at college. Helping your child with their college education costs is a major financial goal but so is securing your own financial security during retirement. With a thoughtful financial plan, you can build both a college savings fund and a retirement fund, so do not exclude either contribution from your “baby budget.” A CPA or a CERTIFIED FINANCIAL PLANNER® professional can help you formulate a budget that prioritizes your children and your personal goals.
Of course, there are many unknowns that naturally come along with parenthood, so it is impossible to plan for everything! Budgeting early, confirming you have adequate insurance coverage, and a thoughtful financial plan will allow you to focus on the joys of becoming a parent. Hopefully, with a balanced “baby budget” you will feel a sense of peace as you welcome your new baby into your family.
Published in the Victoria Advocate.
Carlee Gibbs, CPA is a staff accountant for Keller & Associates CPAs, PLLC.
