Whether you’re newly married, expecting a baby or your children are leaving the nest, your family financial needs are always in a cycle of change. Here is a helpful guide to address your budget as your family and finances evolve.
So, you recently got married, congratulations! Now that you have made the official commitment, it is time to start talking about how you will manage your finances together and discuss what your financial goals are as a family.
To start, you’ll want to build a financial plan together. In your plan, you’ll want to list out all of your assets and debt and discuss how you will or will not combine finances. Some couples choose to have joint accounts while others stick with separate accounts. Checking and savings accounts come in many different shapes and sizes and there is no one right answer. A financial advisor can discuss different options and money management strategies with you to determine what might work for your specific needs.
While building your financial plan, you and your partner should also discuss how you both like to spend money. If you are a saver and your spouse is a spender, you’ll want to come up with a plan so you are on the same page about your budget.
Money can be a tough topic when you are enjoying the newlywed phase. Your financial partner can discuss your goals as a family and help you build a financial plan as you combine two separate lives. It could take some trial and error to discover what works best for you, but don’t be afraid to lean on the knowledge of your financial team to find new tips and tricks.
Budgeting for a new baby
Having a baby is one of the greatest joys someone can experience in life, but it is also one of the costliest. Families can anticipate spending on average $15,000 in the first year‡. And while this may come as a shock, there are several actions you can take now to prepare for your new bundle of joy.
- Preparing for the medical bills. One of the first costs you will incur when you find out you are expecting is for medical care. If you have insurance, your benefits will likely cover a large portion of the bill, but you may still have several thousand dollars of out-of-pocket-expenses to budget for. You can also consider using your health savings account(HSA) and flexible spending accounts (FSA) to pay medical bills. Both accounts pull money from your paycheck pre-tax, which provides added benefit. Finally, don’t be afraid to ask about payment plans with the doctor’s office or hospital if a lump sum payment presents challenges.
- Planning for baby items. There are several baby cost calculators‡ you can use to estimate expenses. These tools allow you to plug in different expenses and see a list of potential costs to help you budget.
- Budgeting for daycare/childcare expenses. Depending on where you live, childcare costs could range from $10,041 to $16,945 a year. This can be a daunting cost for many but lean on your banker to help you determine a budget for your family to ensure you can afford the care needed for your child.
- Preparing for long-term savings for the child. Once your child is born, consider opening a 529 account to start saving for educational expenses like private school or college. Your bank could also offer a youth savings account so you have a safe place to deposit money your child might receive on their birthday or holidays.
Expenses to plan for with school-age children
As your child grows, back-to-school timing, and the cost associated with school supplies, new clothes, sports and physicals and technology, can be the costliest season for your school-age children. During this time, start early, shopping throughout the summer can help spread out expenses. Also be on the lookout for tax-free weekends or deals and coupons for necessary school supplies and technology.
As your children grow, you might consider teaching them about smart financial practices like budgeting and saving. When appropriate, you can include your kids in conversations about spending or you can start giving your kids an allowance and teaching them the importance of wants versus needs. As they get older and get their first job, these money-saving strategies can help them make smart financial decisions. You can also work with your child to open a youth savings account or checking account, both which will help further prepare them for financial success as they get older.
Another time to reevaluate your finances is when your child leaves the house for college or for their first professional job after graduating high school. Do you want to fully pay for their tuition and other expenses, help within a budget or are you not planning to offer money at all? The transition from having a full house to an empty nest can be financially liberating. Take advantage of this time to work on the following financial tasks:
- Build a new budget. Start by reviewing where your expenses have changed. Your grocery bill and utilities might decrease since fewer people will be in the home raiding the fridge and using water and electricity. You might also need to shift some money to send to your college student or young professional every month if you are helping them cover their school or living expenses. By reviewing where you can allocate your funds now, you can set some new financial goals like adding more to retirement savings, taking a long vacation or paying down debt.
- Use investment accounts. If you are helping your child pay for college and the expenses that go along with it, you can still put money in a 529 account once their semester has started. Or you might want to consider refocusing on your own retirement savings.
- Tackle debt. If you have funds freeing up, evaluate if you have debt that you can pay down. Now might be a good time to also start a new savings strategy if you plan to make a large purchase, such as a new house, second home or vehicle so that you can avoid new debt in the future.
This is also a great time to have more financial conversations with your family as this is major season of change. Your financial partner can also help you and your kids navigate the evolution of your budget and savings goals.
Whether retirement is right around the corner or you’re still a couple of years away, it’s best to be proactive in your planning and establish your retirement priorities so you can enjoy retirement comfortably. To determine your “magic number” consider the financial implications of several areas including: current savings, average living expenses, healthcare costs, mortgage or rent, property and other tax obligations, charitable giving, legal considerations and business succession.
Depending on your age, here are a few financial tips to consider in your 50s, 60s and 70s:
- At the end of your 50s, you should aim to save 8x your salary and should find ways to reduce expenses. You can do this by cutting everyday expenses or taking larger steps, such as downsizing your home.
- In your 60s, you should make a new budget after retirement that better represents your income, expenses, debt and other important considerations. Carefully choose when you start receiving Social Security or pension payments. Starting at the minimum age of 62 means lower payments over a potentially longer period of time, while waiting until full retirement age means larger monthly checks. At this time, you should aim to save about 10x your salary.
- By the time you’re in your 70s, you are hopefully enjoying all the fun things retirement has to offer. But just because you’ve retired, doesn’t mean you should stop investing. Lifetime income helps you live comfortably, so be sure to maintain an active investment strategy through your golden years in partnership with a reputable financial planner.
Your budget is going to look different in every life stage. With every year and new stage of your family, consider doing a full financial review. It is never too late or too early to enlist the help of a financial partner who can work with you as your family’s needs evolve.
UMB personal banking solutions are here to support you through every step of your financial journey. From checking accounts to home and auto loans, UMB will build a relationship with you and empower you to find the right products to help you achieve your financial goals.
When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.