Did you just buy a pregnancy test kit?
Are you planning to start a family?
Many Singaporean are rejecting the idea of having a baby. Some of the main reasons are because it’s too expensive to bring up a child, too much responsibility, losing too much self enjoyment. In this first article of our series of Pathwise Financial Matters, we will share with you 4 financial tips for baby planning
Getting Out Of Debt & Cutting Unnecessary Expenses
When you have a baby, the last thing you want to worry about is your debt. When is the monthly installation for my study loan? My credit card bill is due soon. My gym membership fee is coming up. None of these thoughts are supportive in your experience in taking care of your lovely baby.
Go through your current monthly cash outflow, list out all the regular monthly items and ask yourself whether you should still keep them when baby is born.
If the answer is no, then consider stopping the membership or subscription, and channel the budget to baby finances.
If you have debts that you are paying for the next few years, re-look into them and see how you can shorten the repayment scheme so that these debts will not be on your mind when the baby arrives.
Allocating more budget to the monthly instalments will not only clear the debt faster, it also save you from paying more interest to the creditors
Emergency Fund For Baby
During any financial crisis, be it losing a job or suffering a pay cut, most of us will cut our expenses like eating out less, reduce our entertainment, etc.
However, most of the baby expenses are critical and cannot be axed away. No one will feed baby one meal less, or drink less milk during a financial crisis.
No one will feed baby one meal less, or drink less milk during a financial crisis.
When an adult fall sick, he can choose to self medicate instead of consulting a doctor. However, no parent will risk doing the same when baby fall sick. Some even insist to see a specialist should the baby is unwell, regardless of the financial situation then.
This baby emergency fund will take care of these unforeseen situations or incidents.
Prepare For 2nd Income Stream / Passive Income
When a baby is born, some parents may be able to get help from the grandparents to look after the baby. Some may not or choose not to enjoy that support. In this case, usually the mother will choose to resign and stay home to look after the baby full time. Then the financial burden will lay fully on the father to earn dual income. This may be unhealthy to the family balances.
Create a second stream of income or a work-from-home income while you still work full time. This will help a lot when you choose to stay home to look after the baby. Choose something you are passionate about, do it as a hobby and take advantage of the social media platform to start a small business. If you can generate 10% of your current income now by doing so, then you may be able to replace 50% of your income when you stay home looking after the baby.
Budgeting and forecasting
This is one area that many people neglect. Some people choose to ‘Spend First, Save Later’ while the wiser ones ‘Save First, Spend Later’. Whichever you adopt, most people don’t know exactly what they are spending on. Through budgeting, you will be able to know how much of your expenses are fixed and how much are variable. With the knowledge, you will be able to make adjustments intelligently.
Furthermore, you should build on the current budget to forecast future expenses when the baby arrives. Some of the main expenses will include feeding, a full time care giver, medical, etc. This forecast will prepare you mentally in adjusting your lifestyle and personal expenses so that your focus is on the baby and not on the misery of losing your lifestyle when baby arrives.
Planning for baby finances takes lesser time than planning for your next holiday.
Your holiday is one week or one month at most. Your baby is your lifetime.