When you are expecting a new baby, the list of tasks you need to complete to be prepared can seem never-ending. If your list includes getting your finances in better shape, however, you may be relieved to know that this process doesn’t have to be as confusing as it seems. You just need to begin with these essential financial planning steps and the rest should fall into place.
Start Taking Stock of Assets
You can start your financial planning process by taking steps to understand your assets and how these financial resources can provide benefits for your growing family. The term “asset” applies to any tangible or intangible item that has monetary value and can be used to obtain cash when needed. In terms of your personal finances, the most common assets are going to be banking accounts, investments, and personal property. Investment accounts can include retirement savings, annuities, and life insurance (which we will touch on later).
Consider Purchasing a Home
Real estate can be a valuable asset for families to have as well and can keep you from wasting money on rent each month. So, if you are not already a home buyer, it may be worth considering the steps you need to take to purchase your first home. Buying a home can require some serious financial planning, but you can get started by figuring out how much home you can afford. It can also be helpful to get pre-approved for a loan and start looking for homes online, but one step you won’t want to skip is connecting with a reliable real estate professional. Working with an agent can simplify the homebuying process, especially for first-time buyers.
Obtain and Review Credit Reports
Whether you plan on buying a home before your baby arrives or just want to get started with financial planning, understanding your credit is a must. Even though credit can be so important for financial stability, many Americans still do not fully understand how to use their credit wisely. If you are one of these folks, there’s no need to feel anxious or ashamed! If you want to provide a stable financial future for you and your children, however, you should take control of your credit ASAP. Start by pulling copies of your credit reports from all three bureaus and then check those reports over for potential errors and potential opportunities for improving your credit score.
Focus on Establishing Savings
With your assets, real estate plans, and credit reports taken care of, you can start looking for ways to increase the stability in your overall financial plan. While most new or expectant parents think that paying off debt is the key to doing this, most experts recommend putting that money toward essential savings before you start to pay off every single debt you currently owe. Having enough savings to cover emergencies, including unexpected home repairs and sudden family illnesses, can keep those surprises from interfering with your financial goals. If you want to protect your family’s future, you should also focus on saving for your retirement.
Then Consider Paying Off Debts
With your emergency and retirement savings on track, you can begin to put more of your money toward reducing your debt. As you pay off bills, however, make sure you do so wisely. Many people make the mistake of thinking that all debt is bad, but in reality, having debts like a mortgage or even student loans on your credit report can help your score. You just need to be able to make those payments on time. If you do have any high-interest credit cards or loans, those should be the debts you pay off before your little one arrives to free up your finances.
Being financially prepared for parenthood isn’t necessarily easy, but it doesn’t have to be overly complicated either. With a few basic steps and some helpful resources, you can make sure your money worries are minimized before your little one arrives. If you need additional help and guidance, you can also consider working with a financial advisor.
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