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By Garry S. — Published May 08, 2018
The decision to expand your family is a big one. If you are planning on having kids, then you must know that your finance plays a big role in determining how well you will be able to look after your family today and in the future. Financial responsibility takes a steep incline once you have babies and for a very long time, you will need to be prepared for schools, colleges, hospitals, marriages, literally anything and everything.
This is why it is important to reach certain financial milestones before you decide to have kids. In order to ensure that you will be able to provide the best for your family, it is important to lay down some goals for yourself.
Here are 5 money milestones you must reach before having kids:
Think about career stability
When you are young and just starting out, you have a lot of liberty to change jobs, switch between different career paths, and wait for good opportunities. But once you have decided to have kids, job security and career stability are extremely important. You need to have a steady income, stable job once you have kids.
A stable job and regular income will help you manage your children's expenses without a lot of hassle.
Plan investments for you and your children
Investments, especially those that are meant to help you out when you reach retirement is quite an important money milestone you need to reach before you have kids. Plan how you will invest your income. Research on various retirement plans as well as investment plans that will benefit your children in the long run.
There are a number of child future plans available today that can help you set aside money for your child's school, college, and maybe even to finance the purchase of your child's first home.
Disposable income is what is left of your income after all the different taxes have been deducted. When you have children, you will find that often, your expenses outweigh your earnings.
Disposable income is what pays the fees, rent, and bills.
Before you decide to have children, make sure that you have enough and more when it comes to disposable income. If you find that your expenses are higher than what you earn, then it is time to find ways to bring in more money and also to implement a reasonable budget.
Try to pay off all your existing debt
Once you have children, you will find that existing debts become a headache. With children in your family, you may find the need to take loans to purchase a home, fund their education, and so on. In such cases, paying off your previous debts along with your current debts can prove to be quite taxing.
The best strategy is to pay off all your debts right before you have children. The earlier you pay off your loans, the easier it will be to manage your finances as your family expands.
Be sure to have contingency plans
As your family expands, it is always best to keep aside some funds for emergencies. It is smarter to open a separate account for emergencies and to automate your payments to this account. Emergencies can range from anything medical to natural disasters to even a broken heater.
The thing about emergencies is that you can never predict what it could be or when it might occur. This is why it is important to keep aside some contingency funds. If you happen to get some unexpected income, do not think about spending it all at once, instead, keep aside a fraction of such funds and put it into your account for emergency funds.
Refrain from withdrawing money from such an account unless necessary. Always keep it as a last resort if nothing else works out.