Congratulations! There is nothing more exciting than adding a new member to your family. Whether you are expecting a new bundle of joy or adding to your family through adoption, there is plenty to get in order. Painting the room, buying clothes and furniture, and getting organized are always high on the priority list. One thing that should not be neglected in the excitement is managing the financial well-being of your growing family. Here are several issues to consider.
Review your budget. Once that bouncing baby arrives, your monthly expenses will generally increase. Diapers, childcare, and even the loss of income from leave time can create a strain on a tight budget. Review your current budget to manage the increase in spending and pay off debt if possible.
Create or update your estate documents. Estate documents are important when adding a new member to the family. See an attorney to have the five basic estate planning documents put in place: will, power of attorney, living will, healthcare power of attorney, and trust (if applicable). If you already have estate documents, review these documents and update the beneficiaries as necessary. Also, be sure a guardian is listed for your child in your will. If no guardian is listed, it will be up to the court to decide who will take care of your children should something happen to you. Also, asa side note, remember estate documents vary from state to state, so if you happen to move to a new state, it’s a good idea to consult with an estate attorney to see if any updates are needed to keep your estate documents current.
Update your withholding status at work. Consider whether you need to update your tax withholding, and if so, communicate this with your employer. When in doubt, consult your tax advisor to determine if any adjustment to your withholding is necessary.
Review your beneficiaries. Review the current beneficiaries on all accounts that have a listed beneficiary; retirement accounts, transfer on death accounts, life insurance policies, etc. Ensure the appropriate person is listed as the primary and contingent beneficiary. Update your health insurance coverage. Contact your employer or your insurance company to see what is necessary to add your new child to your policy.
Review life insurance and disability coverage. A new addition to the family is a critical time to ensure you have the right amount of life and disability insurance. Take stock of your current coverage to see if any changes are necessary. Consult with your insurance agent if needed.
Plan for college. There are a lot of option here, so if needed, get help to find the right choice for you. We will revisit this topic more in later articles. Review possible tax or work benefits for adoption. Adopting a child can be an expensive process, and many employers offer some benefits or assistance. There also may be tax benefits you are eligible for. Your employer’s human resource department is generally the best place to start.
Having or adopting a child is a rewarding experience and a chance to lead by example. Your children will learn their most valuable lessons about money from you. Start them off on the right path by working through the items above.