Single to Married, and then Parenthood: Review Your Finances When Life Changes
“Change is the only constant in life” – this adage could not be truer for the transition from being single to married, and then finally have a family!
Getting married has a financial upside as well as a flipside. You’re clubbing two earning members into a joint unit, and statistics point out that married people pay substantially less in basic living costs than singles do. Married couples also get relief on both federal and social security taxes.
While some costs may dwindle with marriage, others crop up after it, such as buying a house, saving for retirement or planning a family. Once children enter the picture, married couples face a drain on their finances, since the cost of raising and educating children are staggering.
What Should You Do When You Face a Life Change?
Just as like our other needs change with marriage and then children, financial needs also undergo a sea change, and must be reassessed to accommodate for the changing expenses. Here’s why:
- Marriage will bring in the need for a larger house, repayment of loans for wedding expenses, or simply the money you need for your retirement together.
- With children on the way, things change fourfold, since you have to account for education, day care, toys, vaccination and paediatric expenses, clothing, and a host of other needs.
With these changes in your life you will need to reassess the following aspects of your financial life:
A review of existing life and health insurance policies is essential, to check if you should stick to individual policies or have your spouse covered as a dependent in your plan. You need to also check the benefits payouts, whether for healthcare expenses or death benefits, so your family’s security is unaffected if something happens to either of you.
You may also like to increase cover for assets such as property or jewelry. Factoring in maternity benefits and whether they’re covered in current plans is a must-do as well, if you’re planning to have kids. A quick calculation on LifeCentra.com or a discussion with our advisors will tell you how much of an increase you need to make in the amount for which you’re insured.
While you may have done estate planning when single, it needs to be reassessed once you’re married and with children. Changing the beneficiaries in your 401(k) and IRA accounts is a must, and paying special attention to any changes that you may need to make in your will or trust.
In case you have not created a will, then it is time to begin planning one so your family doesn’t suffer the indignity and headache of probate proceedings. In case of joint holdings, you may need to make changes like re-titling your cars, creating joint savings and brokerage accounts, etc.
Budgeting for the Bundle of Joy
Let’s look at an example to illustrate the need for re-planning your finances before a baby:
Linda and Ryan had successful pregnancy after several failed ones, so they left no stone unturned in welcoming their baby girl into their life. They went all out to remodel the nursery and buy the choicest clothes picked out carefully over months, with utmost attention to detail. Once the baby arrived, they realized that the things they went overboard with made little practical sense, considering that babies are hardly aware of their surroundings to appreciate them, and outgrow clothes every month!
It’s important to have a pre- and post-maternity budget (to cover day care expenses) in place, and look at maternity leave benefits that employers offer too. Try to create a buffer in case there is a drop in income during the pregnancy and first few months of the child’s birth.
The financial planning for changing stages of life can be always managed better by seeking advice from professionals, like the experts at LifeCentra, to help you sail through these transitions smoothly. It is especially important for estate planning and when you’re having children, since the latter can throw your financial calculations to the wind!