You're Having a Baby! Now What?

That’s so exciting! Congrats!

You'll soon be responsible for another human being! Woah. That's a heavy responsibility.

So now what? Now you get your $%&# together. You need to do 3 things before Junior comes along and if she's already here then you're behind the ball. Get on it!

(BTW if your friends (or your kids) are with child, share this article. I promise they won't know any of this and they'll appreciate the knowledge bomb.)

In order of importance, here's what you need to do for your child.

       1. Buy more life insurance. Why? If you don't have enough life insurance, your family will be UP - THE - CREEK - if something happens to you. How would your spouse raise your kids without your income? Would grandma & grandpa need to babysit while your spouse works a second job? Would they need to move to a smaller house and/or a cheaper area of the country? Your kids will probably have to pay for college through student loans, which could haunt them for the rest of their lives. Your wave of unpreparedness will ripple through your family's lives for the rest of theirs. Get the picture?

Have life insurance through work? Awesome! But I can pretty much guarantee it's not enough. If you're a typical Bay Area family, you need a $2,000,000 life insurance policy. You can't get that through work.

If you do only one thing on this list, get enough life insurance. Have a financial planner run a Life Insurance Needs Analysis which will tell you how much you need given your specifics. Then get a cheap term policy that will last until your kids are out of college and off the payroll. For a healthy 30-year-old, a $2 million, 20-year term policy is around $80/month. It's a no-brainer.

(Full disclosure, I do NOT sell life insurance. But this guy does. And he's awesome. He'll even buy me a beer if you get your life insurance through him.)

       2. Get an estate plan. Why? Without one, if you and your spouse get hit by a truck while the kids are at home with the babysitter, your kids will be UP - THE - CREEK. The State of California will decide who takes care of your children. Then the State of California will make the guardian's life a living hell. They'll require the guardian to track and literally submit receipts for every single penny of yours they spend on raising your kids. And then when the kids turn 18, they will inherit whatever is left. All of it. (I don't know about you, but I was an idiot at 18.)

Please note, a will is NOT an estate plan. A will is a suggestion that the court may or may not follow. An estate plan is instructions that must legally be followed. In your estate plan, you will designate who takes care of your kids, who takes care of the money for your kids and when your kids will inherit your money once they are adults. Unless you want the State of California to make those decisions for you, you need an estate plan.

(Have a financial planner walk you through the estate planning decisions you need to make. Then rope in an estate attorney, like this one to draft the documents. She's awesome. She'll even buy me a beer if you draft your estate plan through her.)

       3. Get a college savings plan. Why? Sending your newborn to UC Berkeley in 18 years will cost $250,000. If you use a 529 Plan to start saving early, you won't actually have to save $250,000. Money in a 529 Plan grows tax-free as long as it's used for college expenses. The sooner you start saving, the more time it will have to grow. And the more time it has to grow, the less you'll have to save (and the less taxes you'll have to pay).

How do I know all this? Because we are experts in helping young families. It's The Financial Zen Group's bread and butter.

The Financial Zen Group can develop a Life Insurance Needs Analysis for you. We can walk you through the decisions you need to make for your estate plan. And we can help you establish your college goals and develop a savings plan.

But whether you leverage The Financial Zen Group or some other independent, fee-based financial planning firm, please get help somewhere. This stuff is way too important and way too complicated to try to figure out on your own.

I'd argue it's not hyperbole to say - your kid's life could depend on it.

Disclaimer: This publication is for educational purposes only and should not be considered financial, tax or legal advice.  These statements have been simplified for illustration purposes.  Consult your financial planner or tax advisor for help with your specific situation.