Before the baby came along, you might have had it all figured out. You were finally in a good place financially, had enough money set aside for monthly bills, a plan to pay off debts, and even a little extra to add to savings each month. Then you found out you were having a baby, and all of that changed. Now that you’re about to become a parent, you have to prepare to broaden your expenses. Here are some tips for increasing your budget to accommodate the increasing financial demand of a bigger family.
Understand Your Budget
Hopefully, you have already been budgeting your monthly expenses before the baby became a reality. The post-baby life comes with its own set of budgetary needs that you’ll have to consider as you come up with the new number that’s needed to support your family’s life. There are many costs to include, such as food, diapers, clothes and other miscellaneous baby items, medical care, childcare, an emergency fund, college savings, a life insurance plan, and a bigger home -- and that’s just for the first year. There will be many more years to budget. This is the new normal. Your old way of spending just won’t cut it anymore.
Check Your Insurance Coverages
Everyone has seen the commercials claiming you can save 15% or more by switching your insurance. This is entirely possible and especially if you have multiple types of insurance through the same provider. Depending on your ZIP Code, insurance rates might be more manageable if you have your automotive and home insurance bundled. Before you switch, however, make sure you have enough coverage in case of an accident the road or if disaster strikes your home. The last thing you need now is to have a huge medical or repair bill to unbalance your budget.
Similarly, spend a few moments reviewing your health insurance. Most employers have multiple options, and you may find that you save more in the long run by switching to a more expensive monthly plan. These often have lower co-pays and may even provide prescriptions and other services at no cost.
Refinance Your Home
If you’re a homeowner, refinancing your home could be a good way to reduce your monthly expenses. Once you have home equity, which is the difference between your home’s value and what you owe, you can refinance your mortgage. Refinancing happens when your old loan is paid off and you start paying off a new loan with better interest rates and a lower monthly payment. And guess what happens when you make lower monthly payments? You can allocate that money for other things in life, like supporting a family.
Home equity can be your biggest asset, so you should figure out the value of your home when calculating the worth of your assets. From there, you can figure out how much you will save through refinancing.
Refinance Your Loans
Many adults who are starting a new family these days are still paying off student loans from college tuition many years ago. The good news is that you can refinance your student loans too. Much like refinancing your mortgage, you could reduce your monthly payment and lower your interest rates with a new loan. Refinancing consolidates your private and federal loans into one loan, which is purchased by a private lender and loaned to you at a lower rate. You can use the student loan calculator to figure out how much you’ll save each month and overtime.
Consolidate Your Debts
Are you surprised that there’s also a way to refinance the rest of your debts? You can do this through debt consolidation loans, debt management plans, or debt settlement. Debt consolidators work in a similar way as mortgage and loan refinancers. With a debt consolidation loan, you’ll make your payment to one lender who has purchased your debt from the creditors. If your credit score is good and your debt isn’t too high, you’ll be well on your way to paying less per month with lower interest rates, which means more income to put towards your child.
Every little bit adds up. Consider that the first year of a child’s life costs more than $10,000. Adding up your refinancing and consolidating options, how can you come up with an extra $1,000 a month to pay for this new life? It doesn’t always take a salary raise or a second stream of income to have more money each month. Sometimes, all it takes is reducing what you already pay out.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
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