It is a fact that starting a family costs money. On the other hand, waiting to become financially stable to start a family is not an option because it can take forever. You also need to understand that balancing your needs with those of your spouse is critical when starting a family. The problem is that most individuals rarely take time to discuss finances with their spouses, but instead choose to overlook the matter altogether.
Failure to address the issue of finances as you start a family paves the way for future arguments, leads to stress, and if you are not careful, you may eventually find yourself in a lot of debt. Additionally, children are part of the reasons for starting a family, and when they come, that is when some parents realize they will be experiencing a money vacuum.
Here are some tips for avoiding debt if you are starting a family or are planning for one.
1. Learn to Prioritize
The first year of family life is so memorable for most people. That is partly because they videotape and photograph every moment of their new life. Over time, such memories fade away, and your children will not remember any of that. That implies that you cannot afford to book a professional flamethrower for your kid's birthday or opt for Amazon for Christmas presents every year, even if you have the money.
The reason is that there will be a lot of big moments in your family life, and none of them should cause you to slide into debt. Knowing your priorities as you start a family can spell the difference between debt and financial stability.
2. Consider Setting Up Automatic Payments
The tendency to maintain a mental checklist of your payment schedules as you start a family is normal, but it is not advisable. Today, automation is gaining ground in most homes, and it should not be an exception when it comes to family matters. The reason is that automatic payments will help you avoid penalties and late charges for bills when they slip your mind as a result of prioritizing other demanding commitments.
For instance, you can adopt the paycheck budgeting method, which allows you to allot payments and savings depending on when you get your paycheck. You can also consider switching to a biweekly payment schedule if you pay for baby gear using your credit cards. That way, you will avoid accruing additional interest, which dents your overall budget.
3. Increase Your HSA in Advance
Most probably, you have a birth plan that includes increasing your Health Savings Account (HSA) contributions. If that is the case, you should consider piling up tax-free savings in your HSA. By doing so, you will avoid incurring debt through your high-deductible insurance plan following the delivery.
4. Establish an Emergency Fund
You need to anticipate unexpected costs when you have a child, even if you have a financial plan ready for the arrival of your baby. But what happens when your young one cannot latch on, and you want to save by breastfeeding? In some cases, a baby may need pricy formula because they are lactose intolerant.
5. Open a 529 Account
Your child's education is a priority, and you should plan for it before getting there. A 529 savings plan offers tax-free growth and tax-sheltered withdrawals for such educational expenses like college tuition, K-12 private school tuition, and apprenticeship programs. Opening a 529 account allows you to prepare for your baby's education beforehand.
These are some of the challenges you need to expect as you start a family because they can increase your emergency expenses. Setting up an emergency fund and adding extra dollars to it will cushion you against the impact of unforeseen spending.
Staying out of debt is the secret to starting a family on the right foot. Adopting the tips above will help you achieve this objective.