New Parents: Here Are Your First Two Money Moves When Baby Arrives

I’ll never forget holding my infant son in my arms and rocking him back to sleep in the middle of the night by the fireplace. In that moment, life stood still for me.

Whenever I think of those early days, that wonderful memory of holding my tiny boy comes back to me as if it were yesterday, even though it was 28 years ago.

Your life will change a lot in your first year as a parent. As with most life milestones, there are a couple of very important financial moves to make during that time.

Before you do anything else, such as starting a college fund, make sure to put some protections in place for you and your spouse, the family’s breadwinners.

1. Review your life insurance policies to make sure you have adequate coverage.

If you’re not sure how much you need, you can run a life insurance needs analysis yourself or talk with an insurance agent to determine the amount based on your income, assets, and future needs and goals. Go to LifeHappens.org for a needs-analysis calculator.

Another way to determine the amount of coverage you want is your “human life value.” Obviously, you are more than just your salary, so the term may seem odd, but the calculation can be helpful.

This formula takes into account the amount of your future earnings, your tax bracket, life insurance already in force, and how much you have already saved. Check out a human life value calculator here.

Take an inventory of how much life insurance you have individually and in your group policy at work, if applicable. Then fill the gap between that and what you calculated. You may be able to increase your group term coverage at work, because having a baby counts as a life event. This may allow you to make a change in your benefits during the year, instead of having to wait until open enrollment.

2. Protect your income with disability insurance.

If you ever get sick or hurt, your family may still need your income. Don’t count on qualifying for Social Security disability insurance, as the requirements are steep: You have to be severely disabled, and must be unable to work for a year or have a condition that will likely be fatal.

Instead, find out if you have a group disability plan through your employer and/or look into an individual disability policy. After a waiting period (depending on your plan it could be 30-90 days), benefits start if your injury or illness leaves you unable to do your job.

Check the definition of disability on your policy. It could be defined as not being able to fulfill the duties of your “own occupation” (best) or “any occupation” (not as good). Some policies will pay a benefit if you can’t do your particular job for a certain time period, such as two years, and then the definition switches to “any occupation.”

The longer the benefit period, the better the policy. A great policy will pay a disability benefit for many years, up to age 65, and a basic policy will pay a benefit for at least two years, as long as you are disabled for that whole period.

If you don’t have any disability insurance, your family would need to scramble to make up for your lost income if you had to stop working.

You don’t have to do it alone. Get some help from an experienced insurance agent or Certified Financial Planner™ Professional to point you in the right direction.

So before you start funding college for your little one and planning all kinds of great vacations and adventures to show them the wonders of the world, get protected.

Late at night, when you wake up to feed your little boy or girl, wrap them up, hold them tight, and rock them gently until they fall back asleep in your arms. Savor that moment, because if you are like me, you’ll remember it fondly for the rest of your life.

This post appeared first on Forbes.com under the title, New Parents: 2 Crucial Money Moves To Make Within Your Baby’s First Year

New Parents Dilemma: Should I Save For My Child’s College Or My Retirement?

This story originally appeared on Forbes.com as New Parents: Which Comes First, Saving For Your Kid’s College Or Funding Your Retirement?

Saving for college before funding retirement seems like a no-brainer for new parents.

When a new baby is born, you may think, “College is only 18 years away, while retirement is way down the line!” You may even think you’ll never retire at all, so why worry about it now? You certainly don’t want your kids burdened with student loans like you were.

This knee-jerk reaction could pose problems later. Regardless of your gut instinct, saving for retirement comes first.

You may be wondering why a financial planner is discouraging new parents from saving for college — aren’t planners always telling people to save for their goals?

Not when it comes at the expense of their own retirement.

Here’s why you should prioritize saving for retirement over saving for your children’s college educations:

Retirement is harder to fund.

It’s exceptionally challenging to create an income stream to last 30, 40, or even 50 years. College expenses last only four years and often come during a parent’s highest-earning years.

There are no scholarships, grants, or loans for retirement, either. College funding is an investment in a growing asset — your child’s earning potential. Conversely, retirement funding relies on depleting assets — it is a spend-down plan.

Just because college may come first chronologically doesn’t mean it should be funded first.

Financial planning isn’t linear. People have multiple goals that compete for savings and investment dollars. Rather than immediately opening a 529 plan for a new baby, parents should take a step back and come up with a strategy for meeting both goals, with retirement at the forefront.

Here are 7 ideas on how to fund your own retirement and help your child pay for college expenses:

1. Flip flop the “401(k) delay.”

Fund retirement as early as possible — don’t delay early in your career, like many people do. When your child is in college (and you’ve got a solid retirement balance), then delay. If necessary, temporarily suspend contributions to your retirement plan during your child’s college years and use the extra income to pay educational expenses.

2. Fund retirement first to take advantage of a lifetime of compounding interest.

Starting early makes a monumental difference. According to the JP Morgan Guide to Retirement, an investor who starts funding their retirement at age 35 and funds $10K per year for 30 years until age 65, earning 6.5% interest, would have an account balance of $919,892.

Contrast this to an investor who starts at the beginning of their career at age 25 but only invest for 10 years and then stops contributing altogether. They only put in $100,000 in total (instead of $300,000) but at age 65, their account balance is actually higher at $950,558 than our contributor who started ten years later.

Starting early can make a huge difference in funding a successful retirement.

3. Plan to pay out of pocket.

Though not always the case, your peak earning years often hit when your kids are in college. Plan to earmark earnings and bonuses for college funding, and reduce your retirement savings at that point.

4. Choose investments that do double duty.

A 529 plan is great, don’t get me wrong. The earnings can be withdrawn tax free for qualified college expenses, and some states even allow a write-off on your state tax return for your contribution. The account, however, is one dimensional — it can only be used for college expenses. Consider investing in accounts that have more flexibility and can provide multiple benefits.

A Roth IRA, for instance, can double as a retirement funding vehicle and college savings account if needed. Anyone can withdraw their contributions with no penalty or taxes at any time. However, if funds are used for qualified college expenses (such as tuition and books,) the IRS allows some special exceptions where account holders can also withdraw the earnings without a penalty.

5. Tap into your home equity to pay for college.

Your investment in your home can double as a college-funding vehicle. You may be able to take out a home equity loan or line of credit to pay for college expenses. You could pay the loan off over time, or if you downsize your home, you could use the proceeds of the sale to pay off the loan.

6. Invest in rental property now for income later.

A rental property can double as retirement income and a college-funding vehicle. Though being a landlord can be fraught with headaches, those inclined to invest in rental property obviously can use the income for whatever purpose they want. The cost of college can be offset by real-estate cash flow. Then, when your student graduates, the income can be redirected to fund retirement.

7. Start a “side hustle” now.

Your little business could turn into an income stream later. You could drive an Uber or Lyft on Friday nights or take advantage of one of the thousands of small business opportunities on the internet — anything from blogging to selling collectibles. A small side business could turn into a big income stream later to offset the high cost of tuition, room and board.

Do a little of all of the above

Your college funding strategy may end up looking like pieces of a puzzle you put together.

It could be a jumble of paying out of pocket, pulling from a Roth IRA, taking a loan against a 401(k), using a home equity line of credit, and tapping a “side hustle.”

Additionally, your student can apply for every scholarship known to man, take out a few student loans, and max out free or inexpensive units by taking AP classes in high school and courses at a community college.

It may not look pretty, but it can be done without sacrificing your retirement savings.

5 Easy Ways To Keep Some Of Your Money

When your paycheck hits your bank account, it might not look like much.

Federal, State, Social Security and Medicare taxes are taken out. Medical, dental and vision insurance and your 401(k) contribution are withdrawn before you even see your check.

Automatic deductions such as your Employee Stock Purchase Plan, car payment and transfer to savings hit, too. Your net pay looks a lot different than your gross pay. Don’t let that fool you though.

When you look at one single net paycheck, your income stream might look small but when you look at how much money you make over your lifetime, it’s astounding!

For example, if you make $50,000 and get a 3% raise each year, even if you never get a bonus or promotion, you’ll make $3.7 million dollars over your lifetime!

Even if you are at the tail end of your career, you’ll still make a lot. For example, if you have 10 years left to work and make $100K per year, you’ll make another million dollars before you retire.

Let’s face it. A lot of money flows through your hands. It might not seem like it, but it does.

The key is to keep some of it.

Check out this Lifetime Income Calculator and see how much you’ll make during your career.

If you are inspired by this idea, do something about it.

Here are 5 ways to keep some of your money:

1. Bump up your 401(k) by 1%

2. Start a Roth IRA (if you qualify)

3. Set up an automatic transfer from checking to savings or an investment account (timed to hit on payday)

4. Enroll in your employee stock purchase plan at work

5. Start a micro savings/investing plan like Acorn (an app to invest your spare change) or Stash (an app to invest small amounts in simple portfolios.)

If you need to, change your mindset. Tell yourself:

I make a lot of money, I’m going to keep some of it.

Watch Six On History Channel But Watch Out For The Negative Money Message

Love the show, Six, on The History Channel.

Hate the money message, though.

After seeing actor, Walton Goggins play Boyd Crowder on “Justified,” I’ll watch him anytime anywhere. That means I am watching — “Six” a mini-series based on Seal Team Six.

My take: entertaining show. I love the positive theme “Never leave a brother behind.”

It’s the underlying money message that really bothers me.

Let me explain:

At Ricky “Buddha” Ortiz’s daughter’s quinceanera, it comes to the attention of his SEAL team members, Buddha hasn’t told the guys he is leaving. Read: daughter needs special dance academy and government salary low so he has to take a job with private industry. Buddha’s going to an international security firm that pays top dollar.

When he tells the guys, his mates see Buddha’s move to corporate America as a “sell out.”

The money message here is ridiculous.

A career move from Navy Seal to a corporate security firm is far from selling out, it’s a fantastic lifetime career strategy. To become a Navy SEAL means you are part of an elite group. You have skills very few people in the world possess which absolutely should be rewarded financially.

Similar to a mechanical engineering degree, graduating top in your class at Duke Law School or specializing in underwater welding, Navy SEAL skills are highly marketable — as they should be.

The US intelligence community recruits the ranks of the SEALS. In fact, former Navy SEAL and 3 Star Admiral Robert Harwood was just offered the job of National Security Advisor in the Trump administration. He turned it down as he serves as an executive with Lockheed Martin.

Clearly a career path that starts with Navy SEALs, ends with “write your own ticket.”

The premise that a SEAL who goes to work at a corporation is selling out is preposterous. The move is a smart career strategy. Corporate executives and corporate interests need protection. Executives in industries such as energy and mining could be kidnaped and held for ransom in countries they do business with around the world.

By the way, many Americans have a vested interest in the success of such companies. We may own them in our 401(k)s (if they are publicly traded.) Look at the annual reports of the mutual funds you own in your retirement plans, the companies held at the time of report are all listed. For example, if you own an S&P 500 index fund, you own global companies such as Caterpillar, Marriott Hotels, and Ryder Systems.

Working in a high level position for any multi-nationals corporation, is far from a sell out.

That said, go ahead and enjoy the show. Just be sure to ignore the negative money messages that appear to say, “Corporations = bad” and “Strategic career moves that involve lucrative compensation packages = sell out”

Neither is true.

Making such a move is not necessarily “leaving a brother behind.”

In fact, a smart career move could simply be moving on to a new band of brothers (and sisters.)

Smart Shoppers Guide: Look Fabulous For Less Money

I used to be excited when I bought something on sale. The “deal” was my indication of success. In hind sight, I wasted a lot of money with this mindset. Price is only one part of the equation.

A better way to think about your purchases is to determine the cost per use.

For example, when I changed jobs 3 years ago, I needed a lap top bag for client appointments. Professional looking was a must and something sturdy was vital. I decided on a black Michael Kors tote so it could double as a purse. I’ve used it just about every day for three years now and it looks brand new. I anticipate it will last at least another two years.

That tote was a great purchase. It was about $250.00 at the Michael Kors factory outlet store (not on sale.) Since the purse is a classic style, made to last many seasons and goes with everything I own, it was a winner.

Let’s look at the cost per use of my designer laptop bag purchase. I’ll use it 5 days a week for 50 weeks out of the year (since I love it so much, it’s always by my side.) The tote is intended to last 5 years – after 3, it still looks brand new.

The break down:

5 days a week x 50 weeks = 250 days a year
x 5 years = 1,250 uses

$250/1,250 = $0.20

Cost per use for designer laptop tote/purse = 20 cents per use

Let’s compare my purchase to a less expensive tote that would last one season because it wouldn’t hold up to constant use or we’d get tired of it because it wasn’t fabulous.

Nice lap top tote bag for $78. This bag is anticipated to last one season.

Let’s check out the cost per use.

5 days a week x 50 weeks = 250 days per year
x 1 year = 250 uses

$78/250 = $0.24 per use

Rounded up, it costs about 25 cents a use for the bag for one year. It costs slightly more per use than the fancy bag.

So what would you rather have though, something you really love that’s special or something basic you’d need to replace each year?

I vote for fabulous.

If you take really good care of your things, and have the funds to make the initial investment in a higher quality item, you could end up either paying less in the long run or having something nicer (or both.)

Remember: The longer you keep your stuff and the more you use it, the better the cost per use — in every single case.

I still love my bag and even use it on the weekends. What about you? What was your absolute best clothing or accessory purchase? Please tell!

Check out my Tightwad Tuesday Episode 10 video on how to determine if your purchase could be considered an expense or an investment.

5 Benefits Of Building A Winter Wardrobe Capsule

Have you heard of The Project 333 Challenge: Reduce your wardrobe to 33 total items?

The system consists of paring down the clothes in your closet to the items you love the most, fit the best and go together well. Now that’s a sensible idea! Courtney Carver, the mastermind behind Be More With Less, recommends 33 total items including footwear, accessories and jewelry. Workout clothes, pajamas, and sportswear are exempt.

Why would I pare down my closet to 33 pieces?

I like to try new things. Ever since my 50th birthday, I’ve tried something new every single week. This practice helps me stay open to whatever life throws at me. So “new” I’ve got down.

It’s “letting go of the old” that’s my problem. When my husband and I lived in California, we had a house with a 3 car garage, 4 bedrooms, an office, 7 closets and a huge pantry. When we bought something new, we never had to get rid of anything. Can you relate?

Even though we live in a smaller space now, my closets are still stuffed. So I figure the problem must be me!

How did I do? Well, it was pretty tough I have to say. I failed: Thirty three items is an itty bitty wardrobe. So I modified (as Courtney suggests) and ended up with 44 pieces (not including jewelry and shoes) instead. Though I pared down to a much smaller wardrobe, not a tiny one, I am never going back and you shouldn’t either.

Don’t worry, you don’t just throw things away. You pack up the other season’s clothes in boxes. I did toss some things, sold a few, and gave the rest to St. Lawrence Thrift store.

Here are 5 unexpected things I learned and changed immediately in my life (and you can, too):

1. My clothes don’t fit but I keep them anyways.

How lame is that? I had 7 pairs of work slacks and only a few of them fit well.

What am I doing about it?

Fashion show time. I tried them on one at a time for my husband and we rated them. I kept three, sold one and gave away the rest.

Why was I keeping pants that didn’t fit well and I didn’t like? I have no idea! But they are gone now.

2. I keep things I don’t like.

My closet was packed with pants, shirts, and sweaters that I don’t really care for. I’ve done that all my life. (Please tell me I am not the only one.)

What am I doing about it?

Selling on consignment. I sent them to ThredUp. This online consignment shop sent me a “send in your stuff bag” in the mail. I filled it with cute dresses, sweaters, and “on trend” tops to sell for cash or ThredUp credit. I’ll let you know how that goes.

(Have any of you tried it? I’d love to hear your experience with online or physical consignment stores.)

3. There are hidden items in my mess.

Things I found in my closet:
10 pairs of gym socks (who loses 10 pairs of gym socks?)
2 pairs of black leggings – wearing one right now
Several cute scarves
10 ball caps (who needs 10 ball caps?)
2 pairs of awesome Fabletics yoga pants
A back massage “tapper” from Sharper Image (putting to use right now)

You can’t wear what you can’t find.

Biggest find: my purple Smart Wool ski sweater in the bottom of my sweatshirt bin. I’ve been skiing and snowshoeing 8 times this season. I seriously could have used the sweater.

That’s my purple wool sweater under that black vest.

What am I doing about it?

I pared down to 44 things. These little gems of mine hang in my closet or are stored in my line of sight in clear plastic bins. The clothes from other seasons are labeled and boxed up, waiting for me to open them when the weather changes.

4. I am not wearing my favorite clothes all the time.

My biggest take-away is that as a grown up, I can wear what I want! Why wouldn’t I wear clothes I feel great in? My friend Sheri asked me how the challenge was going and initially, I told her, “Not well. I think I am a hoarder!”

What I didn’t tell her was I feel like I need a series of meetings with a psychologist or to read a book titled, “You Are What You Wear.”

What am I doing about it?

Wardrobe capsules. I set up separate wardrobe capsules for work, home and date nights. I organized my outfits around my absolute favorite pieces of clothing.

I’ll put together several outfits based on a favorite anchor item. For example, my favorite skirt is a super classy black textured pencil skirt from Express. The skirt pairs well with a cream colored polka dot shirt and a black suit coat. To make this a wardrobe capsule, I keep the skirt as a base and change out other pieces adding a statement necklace or accessory.

Now when I am heading to work, I’ll have at least 4 outfits pre-planned that go well with my favorite skirt.

I’m envisioning some happy mornings in my future. What a difference in my attitude when I look in the closet in the morning, instead of thinking “nothing fits, this doesn’t work, and I have nothing to wear.” I’ll be thinking, “awesome, I love this skirt.”

5. I have everything I need.

How amazing is that?

By going through my closet, purging, and then putting everything back together in an organized way that works, I realized, I don’t need anything else. In fact, I even have enough to give away.

Going forward, if I pick up a piece of clothing, it will be something I absolutely love, of great quality and goes with everything.

Now I have a question for you. How does your closet look and what are you doing about it?

Check out Courtney Carver’s blog, BeMoreWithLess.com and TheProject333.com

One Easy Financial Move To Start Your Year Off Right

Are you looking to make your financial life easier? I just came across a tip you might have heard but forgotten.

Review your credit reports to spot errors – for free.

There are a lot of errors, by the way. A Federal Trade Commission’s study showed 25% of credit reports had errors and 80% of disputed claims produced some kind of modification. Since it is free, it’s worth it. Check your credit report at least once a year.

Guess what? I just got mine and it only took me 5 minutes from start to download. Most of that time was spent answering questions to verify my identity such as streets I’d lived on and dates of financial accounts I’d opened.

The credit bureaus have to give you this information. The Federal Trade Commission requires them to provide information to individuals at least once annually for no charge. You won’t obtain your credit score this way but you’ll at least get your credit information.

Here’s how:

Go to Annualcreditreport.com, verify your identity by answering the questions and either order reports from all 3 agencies at once, or stagger them throughout the year. If you plan on making a large purchase such as a car or obtaining a mortgage, order them all at once. Also, frankly, if you are a procrastinator and just want to knock this out and be done, do it.

Otherwise, you might want to order one report now, another in the spring and the final one in the fall. That’s what I did. This way you are on top of your credit reporting throughout the year.

By the way, this is the legit site – watch out for copycats. No credit card required. Oh and if you do find an error on one of your reports, dispute it right there. It’s easy.

I’d be happy to help – I’ve done it a few times myself since the name Anderson is extremely common, my husband and I end up with some interesting items on our credit reports! So let me know how it goes.

For more information check out the FTC’s site here:
https://www.ftc.gov/faq/consumer-protection/get-my-free-credit-report

Happy New Year and cheers to meeting your financial goals in 2017.