New Child, New Plan
As I write this, I'm planning for the birth of my own child. So whether this helps you or not, I'm going to keep on because it'll at least help me out to have this down.
With that being said, here are some of the main changes/additions you should consider as you bring a child into this world.
This is something I actually speak to several retirement-ready folks, but it's something I'm so convicted of that I will include it in a "how-to" for dads even in their 20s and 30s.
Creating an estate plan sounds like a massive project that is very expensive and time-consuming, but in reality you could sit down with your wife and have this hammered out in about an hour if done properly.
The truth is you at least need to start out with a will, which is different from a trust. Go ahead and read my article on the power of trusts here, but if not, suffice it to say a will is a great place to start, as it will put your wishes for you, your child, and your financial matters on paper so this way...the state won't get to decide what to do with your assets.
Huge one. Seeing monthly premiums get taken out of our bank account is not my favorite day of the week, but I remind myself that the fact that the premium got paid means another month went by that I didn't die. Great job, self.
Having the proper amount of life insurance is important because if you were to die today without life insurance, it means your wife would have to find a way to cover all of the bills that you were either helping with or taking care of entirely.
Buying insurance is never fun, but it is an absolute non-negotiable in my opinion. Now what type of insurance? I prefer term life, but for the sake of compliance I must leave this piece to a discussion between you and your financial advisor.
General rule of thumb says 3-6 months of your living expenses should be covered in an emergency fund.
Emergency fund can mean your savings account. It could also mean the amount of money you have in money market as well, or even a combo of the two.
Whatever it is, make sure you have enough stored away that if you were fired or some unforeseen circumstance popped up, you'd be covered to live.
To be more clear: if it's just you making a salary, you'll want to float closer to that 6-month level of money stored away.
As life insurance and establishing guardianship through a will are two of my most important on this list, this one would probably fall last, but that doesn't mean it's not important.
I know it's a hot topic nowadays if college is worth the big price tag that comes with it, but avoiding financial preparation altogether is never a good idea.
The most common way to prepare for college is to start a 529 Account for your child. This is an account in which you contribute after-tax money, invest it + let it grow, and the pull it out in a few decades to pay for college without having to pay taxes on the gains in the account so long as what it's paying for is qualified tuition, etc.
While I'm sure there are more I could add to this list, such as make sure you keep a Target or Amazon fund for the purchases your wife makes in order to properly prep for the nursery, I'll halt here.
Again these are all just my personal opinions, and I'd be happy to help out or direct you to the right person if you have follow-up's.
That'll be all for this Friday. See ya next time.
Action Item: Visit wherever you're investing your money to learn more about the benefits of a 529. This could be Fidelity, Schwab, etc. and they will all offer it. Second, if you have a financial advisor, ask for some referrals to both an estate attorney (or digital option) as well as a life insurance agent. A lot of advisors will actually sell you a life insurance policy, which I don't, so keep that in mind too.
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