Baby-proofing Your Finances

Whoever said that two can live as cheaply as one must have hung out with some pretty skinny people.

Costs rise as your family responsibilities increase. But there are things you can do about it, especially if you are a member of the federal family. And that’s the subject of today’s guest column by Certified Financial Planner Rebecca Schreiber.

Recessions make everyone think twice about long-term financial commitments. No one wants to take on additional risk during uncertain times. This trepidation causes many families put off having children during periods of economic stress. Though we’re not out of the woods yet, the American public is starting to show signs of renewed confidence in its financial future. With people starting to revert back to their pre-recession plans, many would-be parents are gearing up to expand their families.

Whether you are welcoming child #1 or child #4 into your family, here are some tips to help you keep your bearings:

  1. Once the baby is born you have 60 days to change work-related benefits that you normally only get to change during open season. The birth is considered a “qualifying life event” that triggers the 30-window for benefits changes. Take the opportunity to adjust your health insurance, medical and dependent care, Flexible Savings Accounts for the new baby-related expenses. If you miss this window you will have to wait until open season again to start saving taxes.
  2. Automate your savings and bill-pay. Over the next several months you’ll be surviving on precious little sleep. If you’re lucky you’ll remember the last time the baby ate, napped, or even the names of your other children. Chances are that a student loan, credit card or car payment will slip through the cracks. If it does your credit score will suffer and the late payment will haunt your credit report for seven years. Before the birth spend 30 minutes online and set up your payees and automatic payments. Your credit score will thank you.
  3. As soon as the baby is born submit a new W-4. This form, available through your HR department, allows you to increase your take-home pay by decreasing your tax withholding. The idea behind withholding is for your employer to withhold from your paycheck the amount you expect to owe in taxes that year. Since the IRS gives you a tax break on every dependent, you will owe less tax. Thus, increasing your deductions simply reduces the amount your employer needs to put away to pay your reduced tax bill. The W-4 is processed right away so by the time you’re paying for diapers there’s more money in your paycheck to cover it.
  4. Be open to the idea that you may change your work plans once the baby is here. I have seen many clients expect to want to immediately go back to work or stay home altogether, then change their minds once the baby is born. Keep your options open. Wait a few years after the birth to purchase a home or upgrade to a larger home. It’s tempting to get the home purchase “out of the way” before the kids come but it paints the family into a financial corner. And as many of us have learned the hard way, it’s pretty expensive to get out of a home we can’t afford.

Even after the housing bust many parents still believe that owning a home is the keystone to a strong family life. For many families in transition it is less expensive to rent a home than to purchase a house for the short-term. Make sure you cover your bases with a budget, an emergency fund, life insurance and retirement savings – then move on to home ownership. Be a professional now; be a parent now. Be a homeowner when you know you can afford it.

Rebecca Schreiber, who specializes in financial planning for Generation X and Gen Y folks, can be reached at To see a discussion of what she sees as the biggest differences between Gen X and Gen Y on the WealthChannel, click here.

Nearly Useless Factoid
by Suzanne Kubota

Before you quit that federal job to retire and grow poppies in Tasmania, you should know: wallabies might be a problem. Seems the marsupials are snacking on the legally grown crop, getting “high as a kite” and hopping around in circles, trampling the crops. Tasmania supplies about 50 percent of the world’s raw material for morphine and related opiates.

To reach me: