Expecting your baby is a really exciting time, but it can also be a worrying period financially. Getting your finances in order before your baby arrives can help to alleviate some of your concerns and leave you free to enjoy your new arrival.
Here are 6 key tips to help you get your finances in order before the big day arrives.
1 Review your current financial position
Start by reviewing your current budget by looking at your household income and outgoings. You then need to consider how this will change when your baby arrives and what steps you need to take to prepare for this.
If your income will reduce significantly whilst you are on maternity leave, then you need to look at how this will impact on your household income. Do you have adequate savings to boost your finances during this time? You also need to consider how long will you be off work and whether you intend to return to a full or part time post, as this will all impact on your future household budget.
You also need to consider what additional expenditure you will now face, such as preparing the nursery for your baby and buying equipment, like car seats. When setting your future budget you will need to factor in child care when you return to work, as this can represent a significant expense for working parents.
Planning ahead to take account of the forthcoming changes in your lifestyle is key to making sure that you set an achievable budget that you can stick to.
2 Consolidate your debts
Reducing your debts at this time is a good way to increase your disposable income. If you have a number of sources of debt, such as loans or credit cards, consolidating them into one single loan might be a good way to reduce your expenses. Clearing all your outstanding debts with a single loan not only makes managing your finances easier, it can also bring down your monthly outgoings, especially if some of your current debts are on high interest rates.
With the average APR on a credit card being around 40%, replacing this with a low rate secured loan or second charge mortgage, with an APR of between 6% to 10%, would see your monthly repayments substantially reduced, particularly as secured loans can be taken out over a much longer period of time, spreading the monthly repayments. You can use a secured loan calculator to see your repayment options for different loan amounts and terms.
Whilst this may mean that you pay back more in the long run due to the longer term of the loan, it can mean that your monthly budget is more affordable, at a time when you have other costs to cover.
3 Look for ways to reduce your outgoings
Take a good look at your current expenditure and review what is actually essential, particularly during this new phase of your life. See if there are any non-essential expenses where you can cut back and make some savings. As your expenses will increase with a new baby, you may need to look at non-essential items that you can cut from your budget. From takeaway coffees to memberships or subscriptions, there may be a number of areas where you can make savings.
Also take a close look at your household bills and use a comparator site to see if you can make any savings on things like utilities and car insurance. Prices are generally going up at the moment, but you can still make savings by shopping around, particularly if you have been with the same provider for a number of years.
4 Take advice on benefits and entitlements
You may be entitled to benefits, such as tax credits and Child Benefit to help you with the cost of having a family. If you’ve never claimed benefits before it can be quite daunting to know where to start and how to find out what you are entitled to. Using the benefits calculator at https://www.gov.uk/benefits-calculators will help you to make sure that are claiming all of your entitlements to help your budget go further.
5 Build up your emergency savings
Building up your savings ahead of the new arrival means that you will have a financial buffer at a time when your income is decreased but your expenses are likely to increase. Use the months before your baby is born to try to put aside some money where you can.
If you can reduce your normal monthly outgoings this can really help you to add to your savings. This can then help to supplement your income whilst you are on maternity leave.
6 Protect your family’s finances
With all the planning in the world, sometimes the unexpected can still happen. So, with a baby on the way, it’s a good time to make sure that you have taken appropriate steps to financially protect your loved ones.
Taking out life insurance is really important to ensure that your family will be financially provided for should something happen to you. Cover is relatively inexpensive, particularly if you are relatively young and a non-smoker.
Writing your will is also a really good idea, as should something happen to you and your partner, you will want to have set out who would raise your child and be responsible for their finances. Whilst no one wants to have to think about these things, it’s much better take care of these arrangements before your baby arrives, so that you can then focus on enjoying your new arrival.
