As a parent, it can be challenging to know how to plan for your future or prioritize your finances. It’s hard to focus on future goals when you’re up every night with your little one and struggling to make it through the workday.
However, thinking about your finances will improve your quality of life and give you peace of mind knowing you’re prepared for the future. Arrest Your Debt shares these tips to provide for your child, plan for the future, and enjoy life.
It Starts With A Budget
Not sure where to start with your financial plan? If you’re used to living without a financial plan and aren’t sure how to prepare your finances for your family, start with a clear household budget. Determine your monthly income and expenses, as well as any outstanding loans you may have.
Saving For A Home
As a parent, you want to provide for your child, give them a great home, and help them get through college. Start with saving for your dream home and give your family a stable base where your children can grow up happy and healthy. Start saving for your down payment and carefully consider your options.
You can buy a home with no down payment or a low down payment, but you may not be as attractive to buyers, or get the home of your dreams. With a low down payment loan, you’ll be paying off your mortgage for longer, and have to purchase private mortgage insurance.
The more money you can put down for your down payment, the lower your interest rate and monthly payments will be, so put down a larger down payment to save. When making an offer on your dream home, you want to put down around 20 percent with earnest money at the time of sale or around 1 to 3 percent of the final purchase price.
If you’re not sure how much money you will need for your mortgage, we recommend that you do explore using a free mortgage calculator. These are available online and will guarantee that you don’t end up in over your head when you purchase your first home.
Get A Tax Break
Did you know that many parents are eligible for a tax break? If you’re paying for child care for your little one while you’re at work, you may be eligible for a Child and Dependent Care Credit that can cover 35 percent of your child care expenses. You can claim this on your income tax.
Saving For Emergencies
Parenting is stressful enough without living paycheck to paycheck. Create an emergency fund and put some savings into this account. Your emergency fund should be around three months of living expenses so that if anything happens to you or your family, you’ll have enough to cover a job loss or any unexpected bills for a couple of months.
Saving For The Future
Once you’ve implemented a solid budget, purchased your home, and created an emergency fund, you can turn your attention toward the future. There are two main goals you’ll need to save for, and both are important.
You’ll need to create a college fund for your child and start saving for retirement. You may think that prioritizing the college fund will give your child the best start, but the best way you can help them in their transition into adulthood is to be prepared for your own future.
Plan for retirement and enjoy time with the grandkids.
When you become a parent, you have new financial concerns. You wonder if you can afford to take time off work or if you’ll have enough money to send your child to summer camp and pay for music lessons.
Don’t let the financial stress overwhelm you; instead, make a financial plan and enjoy peace of mind knowing you’re providing a safe and happy life for your little one.