Raising a child comes with a long list of responsibilities and a huge cost. In fact, the latest report from the US Department of Agriculture states that the average cost of raising only one child in American society, from birth to seventeen years of age, has been estimated to be nearly $233,610. However, when you take into consideration the impacts of inflation, this figure may easily exceed the $260,000 mark to raise a child born today.
Although you have heard that buying a house is one of the biggest expenses an average household makes, raising a couple of children is by far the largest than that for most Americans. For instance, if you add the expense of raising two or more kids and their educational costs, there are countries where you can buy two homes for that amount.
However, similar to preparing for buying a house, it might be a good idea to get your financial situation in well-maintained order before you choose to bring an infant into this world. In fact, it is your need to improve your money matters and do necessary bookkeeping when you already have kids and are facing financial hurdles. Here are five money milestones you should strive to cross before having children.
1. Ensure Career Stability
Establishing a solid and secure work situation is crucial before having children. While it can imply entrepreneurship, freelancing, traditional employment, or some blend thereof, you must have a firm foundation that not only supports your growing family but also helps achieve your financial goals.
Thus, work on a career path that can continue even after your kids are born. This money milestone of career stability should come with a salary that effortlessly covers the childcare expense that typically amounts to nearly 16 percent of the complete cost of a child’s upbringing, on average.
You have to consider more than just salary. For instance, a career that affords you advantages like healthcare and dental care, maternity or paternity leave, and a decent personal or illness leave policy so that you may take a day off easily to provide care for your ill child instead of being out of a pay day.
2. Have Adequate Disposable Income
Certainly, $233,610 sounds a lot to just about anyone. But, when broken down to $1082 monthly, it makes a lot of sense. Calculate the estimated annual expenses of raising a child and take that into account when preparing your budget so that when the costs come rolling in, you’re prepared. This is your next money milestone that helps you make fine adjustments for your earnings as well as other variables that may affect your situation. This will also let you know the amount of disposable income required to be distributed for raising your children. In addition, it ensures you have sufficient savings to compensate for estimated variable costs.
3. Pay Off your Debt as Soon as Possible
Debt can be a huge financial burden in your life. If you fail to control it, eventually it controls you in many ways. Therefore, getting rid of debt should be your crucial money milestone that you strive to hit before having children. Aim to pay off the debts first on credit cards and others with a high interest rate. It is a good idea to do a part-time job to get some more income to eradicate your debt. It will not only improve your financial situation but also your credit score.
4. Make an Emergency Fund Available
Certainly, life is full of many uncertain events that may include unexpected loss of employment, a chronic health issue with one of your family members, or some other financial or natural disaster. All of these can miserably affect your living when you are not prepared for such events. That is why financial experts suggest having an emergency fund amounting to about three to six months of your living expenses, which you should also hit as your money milestone before having kids. Such a fund will protect and help you and your family in many ways during life’s inevitable messes.
5. Make Saving a Habit
One of the famous quotes by Warren Buffet says, “Don’t save what is left after spending but spend what is left after saving.” Thereby, your fifth money milestone should be to make saving money a habit before having children. In fact, start saving a sufficient portion of your income right away so that it does not affect your life. Simply aim to live within your means, considering your financial goals.
6. Contribute Towards Your Retirement
The cost of raising your children will increase as they grow. Therefore, your next money milestone should be to save for retirement to make your future secure and independent, before having kids. This is because, once you have children, you will have a harder time contributing towards your retirement fund, as other expenses will inevitably appear.
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