After ten or 12 years, your marriage is as comfortable as Saturday’s flannel shirt. Now the real work begins. Developing a sound plan to secure the financial future of your marriage has probably been lost in the crush of kids and career.
Many couples live paycheck to paycheck and don’t take a long view of their finances. This is the beginning of future money problems that will strain the marriage and could be catastrophic if one spouse dies or is incapacitated.
There’s a message in your burgeoning gut and the quickly evaporating balance in your current account: You’re not a kid anymore and you’ve got to think about things like the mortgage, insurance, saving for school, retirement and even the unthinkable such as naming a legal guardian for your children should both you and your spouse die.
The type and amount of insurance you need is a good starting point for making a detailed financial plan. If the family depends on two incomes to cover daily expenses, think about insurance to cover medical costs and to replace at least a portion of the lost income if you or your spouse can no longer work.
According to recent figures from a research source in Ghana, a baby born now will cost a middle-class family overGHS 50,460 to raise through age 17. The figure climbs to GHS 70,180 — about GHS 25,000 a year — if a family’s annual income is above GHS 65,800. And that doesn’t even include school expenses, now averaging GHS 26,070 a year at private schools and GHS 11,976 at public ones. Covering the costs will inevitably be a stretch, since a recent Consumer Finance Survey indicates that nearly two-thirds of households with young children are saving no money at all.
Research shows that, given the same income, people who commit to a financial plan save twice as much money as those who just wing it.
The warm, fuzzy upside: The more financial decisions you work out ahead of time, the more fun you’ll have with your new baby.
First Month
Cut down credit card debt. The first trimester is the time for cleaning up your financial act. A good place to start is with credit cards. Balances in the thousands of dollars cost hundreds in annual interest — money you’ll need for new expenses. They also hamper your growing family’s ability to get loans for big-ticket buys like a home or the inevitable minivan.
Consider transferring your balance to a credit card with a lower interest rate. Next, you’ll need to create a new budget. To start, keep track of every penny you spend. The easiest way is to reserve a compartment in your wallet for receipts for all cash purchases. When the time comes to crunch the numbers (the third month), those receipts — along with credit card records and a scrupulously kept checkbook log — will document your spending patterns.
Second Month
Install finance software. These personal-finance workhorses, provide forms for creating a budget and chart-making tools for tracking your cash flow. It’s too early to enter numbers, but you can get acquainted with the program’s functions.
Of particular benefit to busy parents is the software’s capacity to organize financial records in one place. You’ll come to appreciate this convenience at tax time, loan-application time, and any other time you need to put your fingers on details like account numbers and balances.
Update your beneficiaries. Double-check for and delete any out-of-date beneficiaries on your company-sponsored life insurance, particularly if you were single when you started your job. Whenever there’s a major lifestyle change, you need to look at those beneficiary statements. Your parents, siblings, or even an old boyfriend may still be listed.
Third Month
Check up on your credit report with any of the three Bank of Ghana licensed credit bureaus. Even if you pay your bills on time every month, errors can slip into your credit report. Save time and aggravation by correcting mistakes now, when your life is relatively sane. A clean record is particularly important for expectant parents since they may soon be in the market for a bigger home or car.
You can order your credit report from Dun & Bradstreet Credit Bureau limited at Airport, HudsonPrice, or XDS Data. Be forewarned that applying for a free credit check from less reputable providers can be an invitation to identity theft. In addition, limit yourself to only one a year. Any more than that can hurt your rating.
Crunch the numbers. Now it’s time to get down to the last step of budget-making. Your checkbook log, credit card statements, and the receipts in your wallet will give you the numbers you need to get started. Type them into your software program’s budget worksheets, along with your household earnings. Print out the results — this is the “before” shot for your budget makeover.
The “after” picture will need to be a lot leaner. Your goal is not to just break-even but to save money regularly.
When creating your new budget, keep in mind your upcoming childrearing costs. According to a research calculations, households with an annual income above GHS 65,800 can expect to spend about GHS 1,120 a month to provide an infant with basics like food, clothing, shelter, transportation, and childcare. If you take an extended leave from work — or switch to part-time hours — you’ll face the financial double-whammy of covering these new expenses on an income that is suddenly smaller.
Couples who can’t seem to save their way to the 10% mark may want to book an appointment with a certified financial planner, a pro trained to help clients set monetary goals. You can always consult me (Gabriel) for further discussions on that.
Fourth Month
Make a friend in HR. Get a full briefing about maternity or paternity benefits from human resources. Companiesmostly in Ghana requires of you to give at least 30 days’ notice when requesting time off under the Family and Medical Leave Act, which entitles any new parent who works for a company with at least 50 employees to take up to 12 weeks of unpaid, seniority-protected leave. Your employer must pay the usual portion of your healthcare benefits for the duration. In addition to any paid leave you might have.
Practice austerity. Last month you set a new budget; now you may be tempted to put it on hold and enjoy the good life until the baby comes. That would be a mistake.
In the second trimester, you need to make sure you’re putting something away. Start by earmarking funds to offset the loss of income you expect from any unpaid maternity leave. Figure out what the gap will be and then try to make up for it beforehand. If you also plan to furnish a nursery from scratch — or purchase pricey baby gear — set aside additional savings toward that goal. Put the amount you’ll soon spend on the baby into short-term fixed deposits accounts or money-market accounts. You should have a tidy sum by your due date — if you begin today.
Fifth Month
Soul-search and cost-justify. When the baby arrives, will you return to work or stay home? You don’t need to lock in a decision right this minute, but you should schedule a heart-to-heart with your spouse soon. When making your decision, keep in mind the following expenses. Full-time, out- of-home childcare averages GHS 4,000 to GHS 6,000 a year, GHS 12,000 to GHS 15,000 in major cities like Accra and Kumasi. Nanny care can be even higher. Commuting and incidentals like coffee also take a chunk out of a paycheck.
Author: Gabriel Ofori Yeboah
Fund Manager, Investor, Broker, FX Trader, Consultant–(Investment, Financial Analyst, Banking) and CEO & FOUNDER–GOY FINANCIAL SOLUTIONS
Email:gabbynanaoforiyeboah@gmail.com Tel: 0246751535
