5 tips on how you can budget for starting a family
It’s one of the most exciting times of your life – making the decision to start a family with your partner. Yet for some Australians, it can also be a time of significant stress as financial pressures threaten to overwhelm the joy of welcoming a new member to your family.
Suddenly you’ll face the challenge of transitioning from having a dual income back to one income – right at the time you’ll start experiencing increased expenses from having another mouth to feed (not to mention the nappies...!).
Plus of course, as your child grows older, the cost of childcare can be onerous – sometimes costing even more than private school fees in some cases.
Yet of course, it’s far from impossible to make the transition into starting a family! Plenty of families have managed to do it. So how did they set up their budget to be able to afford it?
Being financially prepared for having a baby comes down to how well you arrange and organise your finances.
In this blog post, the Henderson Matusch team look at how you can structure your finances so that you can look forward to this wonderful new time of family life with confidence instead of anxiety or nervousness.
1) Understand your current financial situation
Just as with any new life stage, when you’re looking at starting a family it’s really important to make sure you have an accurate budget (or spending plan) in place to begin with.
It may be possible to organise your budget so that you or your partner can have that precious first year off work to be with and care for your newborn.
Knowing you have a good grasp of your figures can help give you the confidence to plan for the changes you need to make, once you and your partner have a baby on the way.
2) Look at how your finances will change in the short-term
Once you have an accurate current budget, you can move on to planning for how you’ll fund your first year as a family.
You’ll not only have reduced income (as one partner takes time off work), you’ll also be dealing with many new spending priorities that can add hundreds of dollars of expenditure each month.
Take your current budget and remove one income, while adding some future costs on. How do your figures look then?
Remember that it’s not just the obvious things like baby wipes and nappies to take into account either. There’s also the potential increase to your health insurance premiums, the cost of child care, and even the expense of renovating the baby’s room – just to name a few.
On the other hand, you’ll also probably be spending less on things like going out for dinner, going to the movies, or going away on holiday. The joys of parenthood!
3) Restructure your finances to take the pressure off
Dealing with negative cash flow in your family finances for a year or so is by no means insurmountable.
With the accurate figures you’ve put together in the steps above, you’ll be in a great position to understand and plan around your cash flow shortfall in the months ahead.
So for example, if you estimate that your expenses will exceed your income by say $25,000, at this point you can rearrange your finances by accessing a well-structured loan that will enable you to cope with that cash flow shortfall.
4) Ensure you have the right mortgage for your changing situation
While you’ve probably heard about the importance of reviewing your mortgage every couple of years or so to ensure you’ve got the best deal, there’s actually more to your mortgage.
As we talk about in our Mortgage Broking page, simply looking for the lowest home loan interest rate may not be the best answer. Instead, you need the right structure around your home loan, together with a debt reduction strategy.
That’s why it pays to find a mortgage broker who doesn’t simply look at your home loan in isolation, but cares about your ‘big picture’ objectives too.
Having the right home loan structure could help you manage your short term cash flow so that you have better control of your finances.
5) Look ahead to your family’s medium and long term
Of course, good planning doesn’t only help with your short term situation. It’s important to have plans in place for your medium and long term as well.
For example, do you intend for your kids to go to private school? Even the most daunting of school fees can be accommodated with the help of a realistic financial plan.
And in the (hopefully very!) long term, it’s also prudent to think about estate planning to ensure your assets are passed on to your children in the best way possible.
Talk to Henderson Matusch for help with planning for your life’s changing situations
Planning around the ever-changing needs of your budget can be complex. That’s why at Henderson Matusch we focus on developing flexible strategies that adapt to your circumstances, so you can achieve your planned goals no matter what life throws at you.
To talk to a Henderson Matusch financial expert about your needs, simply call us on (07) 3229 3688 or fill out the simple contact form here.