Sunday, August 22, 2010

Honey-Do List for Financial Security Before Starting A Family

After five nights in the hospital, my husband and I bring home our first baby. We had dreamed of this day for the past couple years and had done lots of preparation and planning to get to this point. Much of the preparation included our finances, because as everyone knows and everyone warned us- babies are not cheap. Department of Agriculture estimated in 2008 that it cost 220,000 dollars to raise a child from birth to the age of 18, which does not include college tuition! In order to alleviate unneeded financial stress from our daily lives and be able to focus more on enjoying our future family we checked off our to-do list before having our first child:

Clear/Establish credit

In today’s society, you can’t get anything without decent credit. Or in some cases, if you’re lucky, they’ll give you what you want but make you pay up the wazoo for it. After tying the knot, we moved into our first “home” which consisted of expensive rent being flushed down the drain each month, but we lacked the credit to buy. In order to buy a house, we had to take care of my long list of medical bills that had racked up through my college years, thus clearing and establishing my credit.

My husband was learning a tough mistake of co-signing for an ex-girlfriend’s credit card. The fact that he had to file for bankruptcy at the age of twenty-three, and still had a higher credit score than me, was highly disturbing. He still had the black mark on his credit, but he had such great credit established previous to sharing a credit card with his ex that he still had a score in the 600’s with the bankruptcy mark. Credit is the most illogical thing I have encountered. Lesson to learn: NEVER co-sign with anyone on anything unless they are your spouse or child. Just don’t do it.

Set-up Retirement Savings

Once we had cleared my credit report, now we had to patiently sit and wait for my score to increase over time. In the meantime, we set up our retirement savings plan. The easiest place to start is to check out your work place. Many provide retirement options (ie: pensions, 401K’s, financial advisors for money markets and annuities). Find out what your company provides and take advantage of it. Remember to not put your eggs all in one basket. Have a couple different options set up to save for retirement. Then have it directly taken out of your paycheck so that you never even see it. Thakor refers to a simple formula for figuring how much retirement you need stashed away: take your annual income and multiply it by 25 to get a number to shoot for.

Buy a House

Time for all that hard work we did on my credit to pay off. With a decent credit score I can now make it through the strenuous loan application process, as well as get a good interest rate, which will save us substantial money over the long haul. My first word of advice here is to not buy the house of your dreams, but buy a smaller starter house first to gain some equity. Manisha Thakor, writing for, refers to the rule to remember when buying a house and asking yourself if you can afford it: You should not buy a house that is going to cost you more than 3x’s your annual income.

Build General Savings

For all of life’s unexpected quirks, have some funds set aside. We worked on this from day one, but this is a must to always keep an eye on.

Dependable Income

I teach, and being a special education teacher gives me a bit more job security than the rest. I also know there are a couple people below me on the seniority list for special education. After being caught in the unemployment statistics our first year of marriage my husband had found an hourly job at Wesco, one of the few companies who will pay for college. His job brings in some extra cash and is helping him to invest in his future, and did I mention for free?

Health Insurance

Kids get sick- a lot. I don’t have an impressive track record either when I talked about clearing my credit tarnished with unpaid medical bills. Good health insurance makes your paycheck worth that much more. There are many people out there who cannot get good insurance, and if that is the case at least have a plan (medical fund built up, Care Credit, payment plans, etc).
Once we had our to-do list checked off, enter baby. We had been patiently waiting to get our list completed, and were quite proud with ourselves that we had covered it in two years. Granted, we had a bit of a head start on things before meeting each other. But we wanted our family to be settled on a firm foundation. My husband and I both came from families where we saw our parents struggle from poor money management, which makes for a stressful marriage, feelings of guilt, and missed opportunities. We recognized these errors in our families and learned how to be financially responsible once we were out on our own. A couple times we had to learn the hard way, from mistakes, but one couldn’t ask for a better teacher than experience.

I look at my son as he lays sleeping in his bouncy chair. I want him to pursue everything he wants in life- travel, jump at opportunities that arise, take up a new sport or hobby, on top of learning the ethic of hard work and frugalness. Being financially stable provides much more flexibility and freedom to help these things happen.

Maybe someday he wants to be a neurosurgeon, a software programmer, or a teacher. Wait a minute- time to start a new honey-do list: Saving For College. The clock is ticking. But because we had gone through our to-do list for financial security before starting a family, we are now in a great position to start that college savings from the day he is born. I can’t think of a better gift to give my child- the assurance of higher education. As Edward Everett said, “Education is a better safeguard of liberty than a standing army.”

Have you passed the lessons of a personal financial hardship on to your children? Share your story with our readers.

Did you know can help you save more for college? Every dollar counts!

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