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One of the most daunting tasks a parent faces these days is affording a child. According to the USDA, the average cost to raise one to the age of 17 years old is now $233,610. That’s a lot of money. I know, my wife and I just had our first baby. And, while we couldn’t be happier ⏤ he’s healthy and handsome ⏤ we’re still bracing for the hella expensive.
Fortunately, there are a handful of financial rules that my wife and I used before he was born to help meet our own savings and investment goals. We intend to use them to also support our son’s future expenses. I worked at an investment bank in a previous career and, in the process, became the finance nerd I am today. I learned a ton about finance and investing, but the most important thing I picked up was how to set financial goals and achieve them.
As parents, we all have a lot to balance ⏤ work, relationships, kids ⏤ and finances often fall by the wayside, an afterthought to making sure the lawn is mowed and our kid gets to daycare. At some point, though, we all want to retire and enjoy the fruits of our labor, while also ensuring that our kids enjoy a stable financial future. Here are the three simple steps we use to help keep us focused on our financial goals.
1. Get Into a Saving Mindset
It all starts with a conscious effort that you will save and invest ⏤ both for you and your child. This is a mental hurdle, and often the hardest (and highest) one to jump over. For us, we sat down one night and listed the financial goals we want to achieve by the time our son went off to college and we retired. We were honest about how we wanted to raise him, at what age we wanted to retire, and the type of life we hoped to enjoy in our golden years. We keep this list of goals in a place where we can reference it often, and doing so helps stay on track.
2. Make a Budget
My wife and I spend one hour together each month going over our itemized budget, which is fairly rigorous and includes everything from nails (both from Home Depot and the beauty salon) to outdoor activities to hair appointments. Trust me when I say that my wife was not happy with our sessions at the beginning. Now that she’s gotten used to them, however, she actually looks forward to the review ⏤ on occasion, she’ll even ask “when are we budgeting for the month, I need to get my nails done!” While there are plenty of budgeting apps out there to make financial management easier, you can also use a simple excel spreadsheet or even a Google doc template to track your income and expenses.
Obviously, once we had the baby we added a section for all the stuff we buy for him, including wipes, diapers, incidentals, and, of course, the big one ⏤ childcare. Now we have a clear vision of where we are spending our money and where (if needed) we can cut back to help support our little man. Note that we don’t always stick to our budget. There are months where we go over and events arise for which we cannot plan. Still, we have general guidelines and they keep us honest about our spending.
3. Automate Your Savings and Investments
The easiest way we’ve found to ensure that we save and invest each month is to automate the process. By setting up automatic transfers, we never actually see the money in our accounts. It’s like it was never there. We save for ourselves via our 401(k) accounts at work and also put money into both our investment accounts and our son’s 529 plan for college using an online automated investment service. Doing so removes those decisions from our day-to-day lives and ensures we don’t spend the money elsewhere.
Derrick Deese is a father of one and a marketer living in Seattle, WA. He enjoys exercise, attempting to be as cool and talented as his wife, and nerding out over investments, history, and cool architecture.