Know Someone Who Just Had a Baby? Let the Planning Begin!

having-a-baby-inset
Key Takeaways:

  • Life events necessitate many changes, both personally and financially.
  • After having a baby, estate, insurance and college planning become particularly critical.
  • Reevaluating your budget is important after a life change in order to make adjustments and continue to save for your future.

Time goes fast when you’re a new parent. As I mentioned in a previous blog, my wife and I were expecting our first child in April. We were anticipating mid-April, but (much to my wife’s dismay) it turned into late April. My son Archie was born on April 28th, a happy and healthy little boy. A lot has changed in our lives during this time, and it’s all been a blur. I’m beginning to see what everyone was talking about when they told us “enjoy this time, before you know it he’ll be all grown up”.

Some specific changes that stick out for me:

  • I undervalued sleeping in
  • Someone’s peeing/pooping habits become a main topic of conversation
  • Most times there’s something you can do when a baby’s crying, but sometimes there isn’t
  • Always buy more diapers than you think are necessary
  • It’s a shocking but liberating thing to now always put yourself second

There were also some other big changes that my wife and I needed to start thinking about as a family. What happens if I get hit by the proverbial bus tomorrow? What happens if we both get hit by that bus? How much is college going to cost in 18 years? How can someone that small need so much stuff?

So I thought I’d list out a few things that we’re doing to ensure our family is financially secure. These apply to anyone having a child, going through a major life event, or just as a reminder if these aren’t some things you’ve taken care of yet.

  1. Getting a Will – Now that we have a child, we want to make sure that a structure is in place to ensure he’s safe and taken care of. Wills allow you to make specific bequests in the event of your death, name guardians who would care for a child if the parents pass away, and also set up descendants trusts so money will be held aside for a child until they are of age.
  2. Plan for Incapacitation – Since we’re getting a will prepared, my wife and I are also putting together our Healthcare Directives (aka Living Will) and Durable Powers of Attorney (both health and financial) so our survivors can fulfill our medical and financial wishes if we are unable to speak for ourselves.
  3. Obtain proper insurance – I want to make sure that if I were to pass away tomorrow, my wife and son will have enough money to maintain their standard of living. For the policy on my life, we determined the amount of coverage by estimating a number of years to replace my salary, estimating childcare costs, covering outstanding debts like a mortgage, and projecting out college expenses. We went with term insurance since it tends to be much cheaper than permanent.
  4. Update Beneficiaries – My wife and I each have each other as our primary beneficiary on all accounts. However, we updated our contingent beneficiaries to ensure a trust in my son’s name will inherit the funds in the event we both pass away before he’s an adult.
  5. College Savings – We hope to help pay for Archie’s education, so we enrolled in the Utah 529 plan to take advantage of the tax benefits provided. Reasons for choosing a 529 plan (particularly the Utah plan) are covered here and here.
  6. Budgeting – My wife and I both have full-time jobs, so we’ll be hiring a Nanny or using daycare. Both are expensive, so we use a free online budgeting tool to determine how we’ll adjust our spending so we can afford the care (and diapers!) while still saving for our future.

This is a high level summary, but if you have other suggestions of things we should be doing I’d love to hear it. Please feel free to email me or call me at (610) 695-8070. I also hope you enjoy the picture of our family, I’m a lucky guy.

About Patrick Runyen

As a Wealth Manager at Independence Advisors, Patrick Runyen, CPA/PFS, CFP® works closely with clients to implement wealth management solutions. He leverages his technical financial planning and consulting experience to assist clients with investment counseling, retirement planning, estate planning, wealth enhancement, asset protection, tax planning, and other personally significant financial decisions. CLICK HERE TO ASK PAT.