I hear from friends and clients all the time that they’re stressed out about having a baby because they’re not sure if they can handle it financially. I get that – kids aren’t cheap, and the unknowns of how that’ll affect your wallet when you’re already juggling a business, student loans, and gaining financial security is scary.

Maybe you already have kids, and you’ve handled the added expense, but you’re not sure if you’re missing something.

With the arrival of baby Amelia, I’ve been thinking about the financial planning moves we’ve made and will be making to be prepared financially.

Below are 4 financial planning considerations for kids:

1. Wills and estate planning documents

This is the unsexy part of financial planning, considering worst-case scenarios and how that’ll affect your family. Your will and estate planning documents will make your wishes clear for what would happen in the event of your death or if you’re incapacitated.

There are two important components of the estate planning process that are especially important for kids.

-Guardianship: who will take care of your kids if you and your partner pass away?

If you don’t set this up, it falls into the hands of the state, and I don’t know about you, but I’d rather make that decision myself.

-Living trust: how will your money be dispersed to your kids?

Should they inherit all your money right away, at a certain age, or in chunks over time?

**Note: I’m not an estate planning attorney and am just speaking from my own personal experiences. Your situation may be different than mine so always receive legal advice from an attorney.

2. Life insurance

Another unsexy, yet important part of financial planning. Life insurance pays a sum of money to your beneficiaries when you pass away. This could be your partner or your kids or whoever you want to leave money for.

Think about the financial situation your family would be in if you passed away. Would they have enough to cover your debt, pay your bills, and maintain their lifestyle? Would they have money set aside for college, travel, and other goals?

I help my clients figure out how much life insurance they need and the right type of policy for them. If you have questions on this, let me know.

3. Save for college expenses

Drew and I decided on the 529 plan to save for college. This is an account you can save into specifically for education expenses. It’s not as flexible as some of the alternatives, meaning you can only use this money for education. However, that money grows tax-free, so you get some great benefits there.

There are other options as well, but we like the tax free growth, and you can transfer the account to siblings as well. So if Amelia happens to get a scholarship or not get a traditional college education, we can use that money for one of her siblings. If you want to get real long term, Amelia could also transfer that account to her children one day. Nothing like getting a head start on the grand kid’s education.

4. Budget considerations

This is the one that’s going to affect you most immediately since it deals with your day to day money management.

Some expenses to consider…

Pregnancy

-Medical care: Your insurance company will be able to tell you what copays and delivery will cost. There may also be unexpected expenses that pop up, depending on how your pregnancy goes. You may also be undergoing IVF or fertility treatments.

-Baby gear: What will you need to buy for the baby? Things like a crib, stroller, and all the things you’ll want for your little one. I was fortunate enough to get a lot of these things as gifts from family and friends, but not everyone has that privilege. You can look to buy things used or maybe you have some mommy friends who are willing to give you what they no longer use.

New monthly expenses
-Diapers
-Food
-Clothes and other miscellaneous items
-Health insurance and expenses
-Childcare

You can put some numbers to these things and get a sense of how much it’ll cost. If you want some help, I’m here for you.

Dealing with variable income

As a business owner, another level to this challenge is dealing with income that can change from month to month.

Some thoughts I have on planning for variable income…

-Know your numbers: How much do you average each month? Is there a minimum number you always make? What about if you look at each quarter, or over the period of a year – is there an amount you can reasonably count on and plan with?

If you can find a baseline level of income that you can make pretty confidently, you can start your plan with that, and higher-income months can be a bit of a bonus. Maybe you see some patterns on a quarterly basis, and you have to budget out a few months ahead. Look for patterns and see if you can create a plan off that.

-Forecast your cash flow: I have a spreadsheet where I have all my forecasted revenue and my business expenses for at least a few months ahead of time.

For my revenue, I start with a conservative estimate of what I already know is coming in, and then I can add in goals and potential new clients from there.

For my expenses, I’m super clear on what they are. I know all my on-going monthly expenses, an average of things that vary from month to month, and I plan ahead any investments I’m going to make ahead of time. I no longer make impulse purchases of courses or shiny objects, without thinking it through and looking at my numbers.

You can get a sense of your revenue, expenses, profit, the money you’ll need for taxes, and how much you can pay yourself in salary. Does that salary number match up to your cash flow needs in your personal bank account?

-Set up a salary account and pay yourself regularly: Decide on an amount you want to pay yourself every month or bi-weekly. You can set up a separate bank account specifically to pay yourself with.

You can work towards saving a few months of salary into that bank account. That way, if you have a slower month, your salary cash reserves can still pay you. This may take some time to build up, or you may have some cash for it right now that you can set aside.

Managing cash flow in your business and personal life is a big area I help my clients with so reach out with any questions or if you want some help in this area.