5 Financial Tips for New Parents

July 2, 2018

Parents Bringing Newborn Baby Home In CarMy wife and I welcomed our third child in April — and our third boy! And while we have a lot of experience caring for newborns, another child means we needed to adjust our finances, yet again.

But this time around we anticipated some major expenses and planned ahead. For example, we knew months ago we’d need a new vehicle with three rows to accommodate everyone. So we bought a new minivan in December, believing that we’d get a much better price buying in December than in most other months.

New parents spend the vast amount of their initial months caring for their new infant’s physical needs — as they should. But at some point, they also need to make some financial changes that will serve their new expanded family well.

While new parents are trying to find a few hours in the day to catch some sleep, here are five recommendations for them that will provide some financial peace of mind:

  1. Update Your Medical and Life Insurance.

Parents have 31 days to add their new child to their medical insurance coverage. Hospitals provide a document called a “Confirmation of Birth” that must be provided to your insurance company along with other information. This document is vitally important as your child will have at least seven checkups for vaccines and to monitor growth in the first 12 months.

Whether you’ve had your first, second or third child, speak with a life insurance agent to get a new policy or update an existing policy. And make certain both spouses are covered for any situation. For example, if one spouse stays at home and passes away unexpectedly, the remaining spouse could need to pay for child care for many years. A homemaker provides enormous support for the family and is often overlooked since he or she helps the family avoid sizable bills.

However, there is some good news on the insurance front. If you have been waiting to schedule medical procedures, consider scheduling any procedures during the same deductible year. Due to costs associated with the new baby, you will likely hit your annual deductible. For example, I waited to have a minor surgical procedure until the year of our child’s birth so it didn’t cost thousands extra.

  1. Revise Your Monthly Budget – Significantly.

Everyone knows they will spend more, but most people don’t realize the increase will be significant. The expense for diapers is one of the best examples. With our first child, we used the first box of diapers in 10 days. I needed to make a trip to the store for a new box, which means I couldn’t get the best possible price.

I recommend increasing your monthly budget by 10% for the first year to cover these expenses. The increase will likely need to be more with the first child, especially if family and friends can’t pitch in to help buy some costly items. For example, outfitting a nursery from a name-brand store can easily cost in the thousands. With a first child, parents make large, one-time purchases such as swings, cribs, changing stations, car seats and baby toys.

Don’t overlook day care or nanny expenses if both spouses will work full-time. The national average cost of an infant in day care is almost $11,000 per year. That’s like having a second mortgage payment!

  1. Organize and Track Your Records.

Make certain to get paper copies of key records — the birth certificate, Social Security card and immunization record. Order three copies of the newborn’s birth certificate — one for you, one for your child later in life, and one for your guardian. Your child’s Social Security card will arrive by mail. Also, start keeping a record of immunizations, especially if you need to place your child in day care. Place them in a packet with all other documents and keep them in a fireproof safe.

Finally, record and track all medical bills, both pre- and post-delivery to ensure you don’t overpay, or pay twice, for the same procedure. Parents are often required to prepay for certain providers, such as the obstetrics/gynecologist physician, so don’t forget to ensure you are reimbursed if you met your deductible prior to the delivery.

Call your insurance company if you have any concerns or questions prior to cutting a check.

  1. Review Your Estate Plan.

With every birth, especially the first, review and update your estate plan documents, including your will and any trusts. For instance, make certain to nominate a guardian for minor children in your will. A guardian is someone who has legal custody over the minor and control over any assets left to them, such as insurance proceeds, in the case of the death of you and your spouse. Absent direction, the courts will appoint one, which takes this decision out of your control.

If a new child is born and it’s been several years since a will was written, you may need to update beneficiary designation forms for your 401(k), IRA and life insurance. It is important to note that the beneficiary form on file for these accounts — and not anything you might designate in a will — controls where the funds go.

  1. Open a College Savings 529 Account.

These education savings plans are meant to help families set aside funds for future college costs. Funds contributed to the 529 plan account can be invested and grow tax-free, and aren’t taxed when withdrawn to pay for qualified educational expenses, such as tuition. In addition, over 30 states currently offer a full or partial tax deduction or credit for 529 plan contributions.

In 2018, the annual gift tax exclusion amount is $15,000. Beginning in 2018, each parent and grandparent will be able to contribute up to $15,000 annually per child and exclude these contributions from gift taxes. For example, both sets of married grandparents can make gifts of $30,000 each — $60,000 in all — to their grandchild’s 529 plan with no estate or gift tax consequences.

 

Source: Kiplinger

Money Advice for Newlyweds

June 28, 2018

Wedding. Wedding day. Wedding couple. Beautiful couple, bride and groom look at each other and hold hands, against the background of the exit from the cathedral (large tall doors)For richer or for poorer… that’s what you agreed to when you spoke your vows in front of friends and family. But while it can be easy to promise to love and to cherish no matter what situations arise, the reality is that money is often a source of contention for newlyweds.

In fact, money is the most common reason for arguments in the first three years of marriage, according to one study. It easily beats out religion, fights about kids, and even how many hours one spouse spent in front of the television. So, what can newly-married couples do to prevent money from impacting their relationship?

Here are five financial vows that all newlyweds should make. These will not only set the foundation for financial success, but they’ll also help keep the peace over the years.

I Vow to Be Honest About Money… Always

The easiest way to break your partner’s trust and ensure that money is a constant source of contention is to lie about it. Whether you’re fibbing about how much those new shoes cost or hiding a secret savings account, the result is the same. And it’s not good.

According to a recent study, 31% of respondents said that financial infidelity–the act of hiding credit cards, debt, or savings–was worse than physical infidelity! While it can feel like no big deal to tuck money aside or keep an account to yourself, this deceit has the potential to do some serious damage.

Never lie to your spouse about money. Even if it’s uncomfortable to admit that you blew the budget or need to rein in your spending. It’s better than the alternative: betraying your loved one’s trust. And failing to be honest about your entire financial situation prevents you and your spouse from setting accurate, realistic money goals.

I Vow to Have SMART Goals

There are few financial success stories that didn’t first start with good goals. Whether your plans involve saving more, spending less, earning more, or better managing what you have, it’s important to determine what you want to achieve.

By setting SMART financial goals–Specific, Measurable, Actionable, Results-driven, and Time-bound–you will accomplish a few important things.

First, you’ll ensure that the goals you set are realistic and able to be achieved in the first place. “I want to be rich soon!” isn’t a goal worth setting–what is “rich”, when is “soon”, and how will you know when you get there? Saying that you want to be debt-free and have $XX in a retirement account by the time you’re 50, however? Now that is a goal you can measure, has a time-constraint, and is specific.

Second, you will be able to ensure that both you and your spouse are on the same page as far as your financial future. It gives you the opportunity to talk through differences in plans and ideals, determine how you’ll reach your goals and what changes you need to make to get there, and you can keep one another accountable.

I Vow to Make Our Future a Priority

Starting a new life together is fun and exciting. You might think about buying your first home, planning exciting adventures, or starting a family. Unfortunately, all of those things cost money.

When you’re a newlywed, it’s important to think about the future, and that includes thinking about how your choices now will impact your finances down the road. If you spend more than you can afford (or more than you truly need) today on a big home, fancy car, expensive trips, or even just flashy purchases, you’re affecting your future… and your new spouse’s future, too.

It’s not nearly as fun to live modestly, especially when you are young and don’t have kids to think about yet. The money you could start putting into retirement today would lay a wonderful foundation for a long, prosperous future with your loved one.

I Vow to Plan for the Worst

We can’t control what the future holds. Whether we will encounter tough times, emergency situations, illness, or even death is uncertain. What is certain, though, is that we can prepare our finances so that our loved ones are always protected… even in the worst situations.

This begins with establishing an emergency fund. Aim to set aside at least 6 months’ worth of expenses in a savings account, which can be utilized if either of you ever loses a job, gets sick, etc. Building up that big of a cushion will take time, so start off with $1,000 in a high-yield savings account, and add to the fund each month.

You should also consider buying a life insurance policy, both for you and your spouse. This is especially important if you get a mortgage, have children, or if either of you depend on the other financially. Even if you or your spouse would do just fine financially if something happened to the other, a life insurance policy could cover final expenses and maybe even make life a bit more comfortable for the one left behind.

Creating a will and a financial binder are just as important. This way, your loved ones won’t be forced to scramble to find accounts, align finances, or wonder about your wishes.

No one likes to think about the worst happening. Failing to at least plan for it, though, is unfair to those you love.

I Vow to Make Us Just as Important

You already know that maintaining a healthy, happy marriage is hard work. Nothing good in life comes easy, and a lasting union certainly isn’t the exception.

As important as it is to iron out the financial logistics, it’s just as (if not more) important to make your new relationship a priority. This will not only spare you many of the money-related fights that could occur, but could also potentially save you a ton of money in the end.

Half of it, to be exact.

By being open and honest with your significant other, you will avoid the feelings of betrayal that come with financial infidelity. By spending wisely and planning for the future (even worst-case scenarios), you show your spouse that they, and your future together, are your first priority.

Make sure to put your relationship and your connection with your spouse above the daily grind if you truly want to save yourself some heartache–financial and otherwise. Couples that make time for one another, even if that means free activities like a walk through the park or eating dinner (sans cell phones) on the back deck, often find success in their relationship as a whole.

The more respect you have for your spouse and your relationship, the more you’ll make it (and its future) a priority. Plus, by putting daily emphasis on maintaining a healthy relationship, you can hopefully avoid one of the biggest financial impacts of all: a divorce.

Marriage is an exciting adventure, filled with challenges and achievements along the way, and the joining of finances along with your lives brings with it unique challenges. By making these five money vows from the very beginning, you can hopefully avoid many of the financial problems that plague couples today.

 

Source: DoughRoller

5 Ways to Beat the Hidden Costs of Airline Travel

June 18, 2018

The classic Disney vacation is a rite of passage for American families, something that many parents spend years saving up for and planning.

But it wasn’t always this way.

In 1980, the price of a single-day admission ticket to Walt Disney World in Florida went up from $7 to $8 for adults and from $6 to $7 for kids. A night in Disney’s Polynesian Resort went for about $70 per night, and many families could travel by car for less than $100, given that gas was going for just about $1 per gallon in those days.

Oh, how times have changed.

As of 2017, one day at a Disney park will set you back about $100 per person, most of the Disney hotels charge more than $250 per night, and the average family can expect to spend $4,000 or more on the typical vacation trip to the “Happiest Place on Earth.”

Increased costs in the airline industry are not as noticeable as the skyrocketing price of a Disney vacation, but that doesn’t mean air travel today is a deal. In fact, the average price of a domestic airline flight in 1980 was nearly $600, according to The Wall Street Journal, and about $509 today.

But there’s more to the story, because today, the base fare of a flight is just the beginning — the overall cost of airline travel to the consumer has been steadily increasing faster than inflation for decades. Domestic airfare has risen 10.7 percent over the past five years, according to the Associated Press and, unlike in years past, today’s base fares cover only the bare minimum (and on some discount carriers, that doesn’t even include a seat).

It’s the hidden costs that are getting us now. These include:

  • Baggage fees, which brought airlines $6 billion in revenue in 2013
  • Extra taxes, which add nearly $50 to the base fare of almost every flight in the U.S.
  • Add-ons and upcharges, many of which used to be included in the fare, such as free food, movies, more leg room, or even reserved seat assignments

With careful planning and a little research, you still can take a family trip without going broke. Here are some tips and tricks to save money in the air without ruining your plans.

Consider Time as Well as Cost

Lower-cost flights tend to be at off-peak times or overnight. If a flight has three legs, departs at dawn, and takes 11 hours to reach a destination that’s usually only a three-hour flight away, is it really worth the cost difference?

Don’t overlook the value of time, and question any travel hacks that seem too good to be true. For example, it may seem tempting to fly into an airport that is a few hours away from your destination and rent a car to drive the rest of the way, if the fare savings is significant. But think about what that means — the cost of the rental car, gas for the drive, insurance to cover it all, and an extra half-day of travel time round trip. Is it really a deal?

Don’t Drive and Park

It costs nearly $20 per day to leave a car parked at most U.S. airports, and even more if you want your ride to be protected from the elements in a garage or under cover. At those prices, it doesn’t take long for the economics of driving to the airport vs. taking a shuttle or taxi to tilt away from driving yourself. Always do the math.

Play the Overbooking Game

No one wants to get bumped from their flight. It interrupts plans, throws off schedules and can lead to hours left sitting in an airport. But that doesn’t change the fact that airlines routinely overbook flights today. Bumps happen, and savvy flyers know how to take advantage of this loophole in the system.

Airlines are legally required to reimburse passengers up to several times the cost of the original fare whenever they are removed from a flight, in addition to rebooking them or putting them up at a local hotel if needed. Know the system and know what you’re entitled to before accepting any bump deal from the airline.

Ship Your Luggage

Not long ago, the idea of shipping your luggage to your final destination would have made little sense. But again, costs may start to add up when bringing multiple bags, large or oversized items, or particularly heavy luggage.

When the price of packing and shipping bags dips below the fees that your airline would charge to bring them aboard, sending large items ahead might be a money saver. Bonus: Shipping means no lugging heavy luggage through the airport or worrying about finding space in the overhead bins for your carry-on.

Choose Your Destinations Wisely

The airline industry has for years been cutting back on service to smaller, out-of-the-way destinations, in favor of airports in major cities. As a result, flying into smaller airports has become extremely expensive, even when flights are available. Not everyone can pick and choose where they travel, but when possible, large, well-traveled airports can be cheaper because more low-cost flights will be available.

Let’s face it, airline travel is expensive, but saving money on flights doesn’t have to be complicated. Sometimes, a little common sense and budget-watching can go a long way toward keeping the hidden costs of air travel under control.

 

Source: Smart About Money

Save on Your Vacation Lodgings

May 29, 2018

This room is amazing!Vacations are meant to give you some much needed rest and relaxation. Since lodging expenses can eat up a huge chunk of your vacation savings, you’ll want to make sure you find the best prices for them.

Here are a few websites to help you find the best deals on lodgings.

If you’re strictly a hotel-type of person, check out Hotels.com, Priceline.com which include filters that let you choose by star-class, reviewer ratings, neighborhood, etc. To get really discounted, last-minute bookings, use phone apps like SnapTravel and HotelTonight.

For cozier dwellings, check out BedandBreakfast.com or BBOnline.com. These places tend to be more pet-friendly than others, so this is an especially good choice if you’re traveling with your pooch.

If you’re looking for lodgings for four or more people, renting a home may be the perfect choice. You’ll have the comforts of home, including a kitchen and laundry facilities, at a much better price than renting multiple hotel rooms. Check out Airbnb.com, VRBO.com, HomeAway.com, and VacationRentals.com to find hundreds of homes you can rent for a day or longer.

What if you really just need a place to sleep and shower? Check out Couchsurfing.com where you can even rent a person’s couch or guest bed for a few nights!

By doing just a little research, you can choose vacation dwellings that will let you and your budget rest easy.

 

Source: Credit Union National Association

9 Smart Financial Gifts to Give New Grads Besides Cash

graduateDo new grads want cash? Yes — all day long. But you and I both know what new grads will do with it. Instead of setting them up for failure by handing over a hot wad of Benjis that’ll burn holes in their pockets, steer them toward success with these financially valuable, money-inspired gifts.

  1. Skill-based classes

I knew the basics of cooking and cleaning when I graduated college (I could scrub a toilet and do my own laundry, at least), but there were plenty of skills I lacked — like home improvements, vehicle maintenance, and, yes, money management. And while I had people around to help with many of those inconveniences, I was still kind of a disaster for the first few — OK, six — years on my own.

If someone had gifted me a help-yourself class or two, however, not only would I have been better prepared to enter the “real world” more confidently, but I could have capitalized on those skills to earn side income (because that’s the real thing I’m great at). That would have come in handy when I was eating pizza bagels for every meal.

  1. Starter emergency fund

New grads won’t have the kind of emergencies that older adults do, but even the smallest crisis can turn into a major financial burden for someone just starting out. Lend a helping hand by setting up an emergency fund in their name at your credit union (not theirs) so they’re unlikely to drain it for early-20s nonsense.

Put aside $500 to $1,000 to start and add money as you see fit, or let the grad know that they can transfer money into the account when they have a little extra to spare. Their own contributions will provide even more padding when the going gets tough.

  1. Website domain

Most college grads — heck, even high-schoolers — are tech savvy, but they may not have thought to secure their name as an internet domain for future use. I love this idea because while it’s not a tangible gift, it is a gift that can spark inspiration. If someone handed me a website domain and told me to run with it, I’d at least ponder the possibilities, and that’s all some people need to go full steam ahead.

  1. Loyalty points

If you’ve racked up loyalty points and want to save money on grad gifts, look into gifting these transferable rewards.

“Loyalty points are a great money gift to give new grads instead of cash,” says U.S. Travel Association spokesperson Laura Holmberg. “Loyalty points allow them to cash in for unique travel experiences at the time and destination of their choice — maybe for a post-grad getaway, or to put toward that first vacation once they’re in the ‘real world.'”

  1. Big-idea books

New grads might not want to crack open a book right away, but gifting self-help books that lie in waiting until they’re ready will be worth every penny once they pick them up and implement the actionable advice.

Some of my favorites include author-entrepreneur David Pike’s The New Startup and The Startup Playbook by Rajat Bhargava and Will Herman (both are perfect for grads trying to figure out what they want to do with their work life), as well as David Carlson’s Hustle Away Debt (because there will be a lot of debt to hustle away).

  1. Gift cards for life’s necessities

Gift cards are a safe and popular gift to give, but when buying for new grads, think practical instead of frivolous. They might not appreciate $50 to a supermarket in the moment, but there will come a time they’ll recognize that gift card as perhaps the most thoughtful and useful of the bunch. Other sensible gift card ideas include cards for gas, a new interview suit, work supplies, and home essentials.

  1. Student loan payment

Many college grads start life with student debt looming over their heads, and you can help alleviate that burden somewhat by providing a few initial payments as a gift.

“Sit down with them and go through the process of helping them make a payment toward their student loans or contribute installments to their budget to help them on a monthly basis for a few months after they graduate,” suggests Alayna Pehrson, financial blogger for BestCompany.com. “Overall, student loans can feel like a major weight to many fresh college graduates, so this gift could really go a long way for your grad.”

  1. Investment starter capital

Broke college graduates don’t think much about making investments right out of school when they’re peering down a dark tunnel of 10 to 20 years of student loan payments. As such, this is a great opportunity for you to take the lead where investing is concerned.

“You can do this by giving them money to invest and starting them out with a well-known investing app like Acorns,” Pehrson says. “Again, going through it with them step-by-step can ensure that they actually invest that money.”

Take some time to explain how investing works, too. It’s scary for a lot of people, but knowing what to do, why, and when will help new grads wrap their head around why it’s important to keep this option open as a lifelong financial tactic.

  1. Roth IRA

Retirement is the farthest thing from a new grad’s mind, but you and I both know the earlier you start saving for that glorious day, the better. And in terms of the ROI, a Roth IRA is near the top of the list of best grad gifts.

Consider this: A max contribution of $5,500 in the starter account you set up for the grad at age 21 will mature to a staggering $71,000 by age 65, assuming 6 percent interest — and that’s with no further contributions. Given that 13 percent of Americans have $0 saved for retirement, according to a 2018 GOBankingRates survey, your generous gift puts them well ahead of the curve before life even begins.

 

Source: WiseBread