Having a child is more expensive than many people think. In fact, Child Poverty Action Group estimates that raising a child to age 18 costs more than £150,000.
If you’re going to cope with the costs of being a parent, you need to make sure your finances are in good shape. So, what can you do to put yourself in the best financial position possible?
In this article, we’ll share five ways to improve your finances when becoming a parent.
Get rid of debt
Debts eat into your income, impeding your ability to face the many costs of parenthood. With debts dragging you down, you’ll find it difficult to cope. This is why it’s crucial you enter into parenthood debt free.
Choose from debt-clearing tactics like the snowball method, avalanche method, or taking out a debt consolidation loan. Whatever strategy you choose, ensure you make the minimum monthly payments on all your debts to stop them from accumulating further.
Set a budget
A budget gives you better understanding over your financial situation, helping you take control of your money. After setting one, you’ll have a clearer idea of how much money you have to work with and how you can achieve your goals.
When creating your budget, start with the following steps:
- Calculate your net income
- Track your spending
- Set realistic goals
- Make a plan for how you’ll achieve your goals
- Adjust your spending to stay on budget
- Review how things are going regularly
The trick is to create a budget that helps make your quality of life better, rather than one that makes things more difficult.
Prepare for the future
As a new parent, it’s easy to get lost in the here and now. But you should also start looking towards your future needs. That’s why working on building a strong credit history is so important, as it will help create better opportunities for you later down the line.
For instance, as your child grows, you might want to take out a mortgage on a house with a garden. Or you might want to finance a more practical family car. Either way, your ability to do so depends on you preparing today.
Cut back your expenses
When it comes to putting your family in a better financial position, every little helps. Try and find ways to cut back on how much you spend, no matter how small. For instance, you could try:
- Switching to LED light bulbs
- Installing a programmable thermostat
- Using comparison sites to find cheaper insurance
- Cutting back on eating out
- Cancelling unused subscriptions
Many parents fall into the trap of splurging on toys for their children. Young children are usually happier playing with wrapping paper and boxes than the expensive toys inside, so try to find cheaper alternatives to keep them entertained.