Becoming a parent is often the most wonderful and magical time of person’s life, but it can be difficult to enjoy the miracle of creating life when you are burdened by financial debt. Raising a child is not cheap, and all the prospective bills can seem catastrophic for a couple in debt. However, there are ways to manage it.
Assess your financial situation
Do not wait until your child is born to figure out your finances. Sit down and assess your situation as soon as you can, whether that be while planning for child or soon after finding out you’re expecting. Knowing precisely how much money is coming in and going out each month –and to where– is imperative to figuring things out. Research every baby-related cost you can think of and write it down.
Reduce your expenses
You will probably have to cut back on your expenses. This is especially true if you expect a reduction in income as a result of having the baby, which many couples experience.
Determine if you can save on essentials like household bills and groceries by looking for deals, cutting coupons, buying only in-season produce, and buying off-brand products. Then, examine your non-essential expenses. What can you cut out? Gym memberships? Streaming services/cable packages? Eating out less often? Anything that is considered a luxury should be cut so you can save for the upcoming essentials.
Reduce your debt load
If you are unable to pay off all your debts right away, prioritize them and pay off the most important ones first (IE the ones with the highest interest).
It’s of the utmost importance to not ignore your debts and pay the minimum each month. With credit card debt, try to switch lenders to get the best rates. Remember that debts with fixed repayments, such as personal loans, may charge you for early repayment.
Start putting money aside as soon as possible. Look into all the possible savings accounts available to you. Putting some money aside for a rainy day to cover you during times of low income or unexpected expenditures is a sound financial practice. Tax Free Savings Accounts (TFSAs) and Registered Education Savings Plans (RESPs) are good options but ensure that you know the costs involved with early withdrawal as they can be high. Keep in mind that you may need to access these funds in the future as the cost of raising a child is often much higher than anticipated.
Make sure that you are aware of all available tax breaks to somebody in your position. Every little bit helps and there’s no sense in leaving money on the table if you can reduce your expenses by claiming provided tax benefits.
It may sound overwhelming trying to pay off your debts, save for the future, and buy all the necessities that your baby will need, but it is possible. To learn more about this topic and all manner of financial subjects, don’t hesitate to contact Kevin Thatcher & Associates today.