Start by making a monthly budget
When it comes to financial planning, you’ll need to know a few important things about your finances before you can make additional decisions. Carefully track your spending for a month (or better yet, three months) and create a clear picture of how much money you’re spending, how much you’re making, and what you have remaining that can be put into savings.
It can be useful to think about expenses in three general categories:
- Fixed expenses: Rent/mortgage, loan payments, work related expenses, utilities and other bills
- Flexible expenses: Food, entertainment, home upkeep, travel
- Unnecessary expenses: Luxuries, technology, fashion, generally buying new things when old things would do
Save on small things
Once you’ve got your budget, you can start making adjustments. Hopefully, you’ll have more money coming in than going out.
If you need to reduce expenses, first take a look at flexible and unnecessary expenses. How can you cut down? For instance, maybe making dinner instead of going out saves you $5. Do that every day for a week and you’ve saved $35. Every day for a year and you save thousands. Saving a little every day can add up in a big way.
Start a rainy day fund
The first place you should put those savings is in a rainy day fund. If you can, open or start contributing to a savings account with money that you don’t touch. If something big and unexpected happens, having a financial cushion can actually save you money in the long run.
Consider life insurance
There are some things you can plan for, and some things you just can’t. It can be a great relief to know that if something tragic happens your family will be taken care of. Life insurance policies are often very affordable, and easy to start.
In addition, if you don’t have a will you may want to write one, or update the one you have to include your child as a beneficiary.
Get going on college savings
The difference between starting to save just $50 a month for ten years now, or waiting two years then starting, is about $2,000. When you consider that’s money that you won’t have to take out in student loans with interest attached, it’s considerably more than that.
To start putting money away for your baby’s education, you can open a 529 College Savings Plan, which are tax advantaged savings plans offered by most states. They’re inexpensive to get started, and are designed to be the best way to save for school.
The money you save can be used at nearly all colleges, universities, community colleges, and vocational schools. You can even use the money on more than just tuition expenses, like a computer or room and board. In addition, unlike a regular savings account, the money in your 529 plan will count very little against your eligibility for financial aid.
Our partners at T. Rowe Price were rated Gold by Morningstar, an independent investment researcher, for their 529 plans. We’re happy to refer you to the financial experts at T. Rowe Price to answer any questions you might have, and to help you easily start a college savings plan.
Perhaps the best thing about 529 plans is that anyone can contribute. What gift do you get a baby? Well, how about the gift of higher education? Consider making your child’s first holidays and celebrations an opportunity for your loved ones to help secure their financial future.
Tap the button below to learn more about 529 College Savings Plans from T. Rowe Price, and how they’re a great compliment to your financial planning efforts.
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