It’s been a little quiet over at the Financial Fashion Planner but I promise there is a reason. For those of you who don’t follow me on some of my other social channels, I’m happy to share with you all that my husband and I are expecting our first child this fall!
One of the first big surprises, after finding out we were expecting, was how rough the first trimester of a pregnancy could be. I will spare you all the details, but I will share that I was feeling VERY under the weather and had little to no energy at the end of the workday. At the end of a workday I had the decision to take a nap or create content, and I think we all know who won that battle…
Happy to report the pregnancy has gone well thus far and I am safely into my third trimester. I used the extra boost of energy to tackle projects around the house like converting my home office into a nursery and we finally bought our new car. While these were meaningful items to tackle and I love my new “mom car”, I wanted to share with you all the personal finance items we tackled or are in the process of tackling as we prepare for baby’s arrival.
One of the first things we did after we decided to start growing our family was purchase life insurance. We did this before we found out we were expecting for a couple of reasons, the first being we were turning 30 and wanted to lock in rates at our current ages and levels of health. The second reason we started the life insurance process early is because we had recently bought our home and thought it would be smart to have some level of coverage to protect the other spouse and allow them to stay in our home in the event one of us passed unexpectedly.
I won’t go into the specifics on how much insurance we got on our lives but will direct you to a previous post I wrote on the topic of life insurance. In this article, I share the formula we used to determine how much life insurance coverage to purchase.
As a fun fact, we completed the underwriting process in early January, and I later found out I was expecting in late January. Talk about good timing!
The second financial conversation we had around growing our family is how it would change our financial landscape. As this audience knows, I am a huge advocate of SMART Goals, and we had recently gone through this exercise as a couple at the end of the year. With a baby in the mix, it was time to revisit these goals planning for our new addition. At the highest level, welcoming a child is not going to change our larger retirement goals, it will force us to reevaluate our cashflow and savings ability to accommodate for new financial goals and expenses like saving for college…
Discussions around supporting future college expenses were another conversation we had early on. My husband and I had very different college funding stories. I’ve shared in previous posts that I was fortunate to have parents that were proactive in saving for college while my husband took out student loans to pay for his education. Given our different backgrounds, we had some really healthy and productive conversations around what we wanted to provide for our future children. At the end of the day, we decided that we want to be more proactive than reactive in saving for our child’s college.
The million dollar question then became, how much do we want to save and where to set aside these funds? My plan is to create more content around this topic of college planning, but I will share that we spent time answering these questions before running college cost projectors.
- What type of school do we want to save for? Private, Public, In-State, out-of-State?
- How much school do we plan to support? Undergrad? Graduate? Post-Graduate?
- Do we want our child to have some skin in the game? (i.e. save for 3 years and have the kid figure out year 4 funding.)
As for how we will go about saving for college, our plan is to open a Bright Direction 529 (State of Illinois sponsored plan – hello tax deductions!) and actively fund the account and invest for the future.
As you all are well aware, I am quite the shopper. As evidence by my wardrobe and love for fashion. It didn’t take long for me to start shopping for baby and creating a registry full of all the necessities (and some not so essentials) needed for our little bundle of joy. With the registration process came the realization that kids are expensive (I’m guess the first of many times this realization will hit!) and we are going to need a game plan to ensure we can responsibly purchase these items.
Our strategy has been to create a sinking fund for our baby expenses. I’ve previously written another article on this exact topic (we were saving for a trip to Hawaii that was cancelled due to COVID) as a way to proactively put money aside each month for an upcoming big-ticket purchase. The case for creating a sinking fund using a separate savings accounts is to ensure your emergency fund stays intact. Having a separate account to source funds for larger expenses will keep you in budget and better prepared to resist the temptation of dipping into your family’s safety reserves.
We’ve been funding and using our sinking funds along the way to make purchases for the nursery but are saving the majority of the shopping for after my baby shower when we will have a better picture of what is left to purchase.
Medical Powers of Attorney
As we get nearer and nearer to D-Day, the most recent discussion we’ve been having around baby is getting our estate planning documents in order. Our plan is to hold off on drafting the majority of our documents until after the baby arrives so we can name them specifically in the document. The one set of documents we are going to complete prior to delivery are medical powers of attorney. These documents are important to have in place, especially for me, as it will authorize my agent (husband) to make decisions on my behalf if I am unable to make those decisions myself. While the hope I will be able to make my own health related decisions during delivery, you can never be too prepared especially when medical procedures are involved.
Once the medical power of attorney is complete, I plan to give a copy to my doctor and have another at the ready in my hospital bag.
Once the baby arrives, the list of financial items to tackle will be even longer. Top of our list will be to complete our estate planning documents and open the 529 college savings accounts, among other things. But for now, we feel good with the steps we’ve taken thus far to prepare of our incoming bundle of joy.
What things did I miss? For those of you who are already parents, I’d love to hear what steps you took to financially prepare for baby. Drop a comment below.