So you’re expecting. Congratulations! Babies are a gift. They bring great joy, but the reality is children also come with a hefty price tag. Before you pick the paint for the nursery, let’s take a look at your financial situation.
The average cost of having a baby in the U.S. is between $5,000-$11,000—and that doesn’t take into consideration all of the financial obligations pre- and post-partum. But with a little planning and intentionality, you can ensure that your family can be financially prepared for your newest addition. Here are a few things to expect when you’re expecting.
It's not just diapers and baby wipes
You will be purchasing more diapers and baby wipes than you likely care to imagine, but there are all sorts of other expenses that accompany your new bundle of joy. There are things big and small that, prior to your growing family, weren’t line items in your budget.
You’ll need to add your child to your healthcare plan, which might increase the cost of your monthly premium. Your average household expenses also go up when you’re buying for another person. One more body, even a tiny one, means a spike in utilities, too. There will be unexpected hospital visits for that high fever (or cough that makes you nervous). And it’s possible, when sleep deprived, you’ll choose convenience over price comparison shopping. You’re likely to buy whatever you need at the most convenient place—regardless of price. Postmates, Caviar, and Amazon Prime offer wonderful convenience, but they all come at additional costs. That being said, preparing for these extra expenses and planning ahead is the surest way to ease yourself into the new financial situation.
You’ll need to add your child to your healthcare plan, which might increase the cost of your monthly premium.
Consider your childcare options—now
It might seem silly to start thinking about childcare when you first find out you’re pregnant, but in the Pacific Northwest, the market is very, very competitive. Some waitlists for childcare exceed the duration of pregnancy—so you want to start your search early. Daycare is not the only option, either. One parent may choose to stay home, and there are nannies, nanny shares, au pairs, and if you’re fortunate, eager mothers-in-law. Regardless of which direction makes the most sense for your family, you’ll want to be financially prepared. In 2016, Child Care Aware of Washington ranked Washington sixth in the nation for least affordable child care for infants, and 10th in the nation for least affordable preschool care—averaging $239 per week for home-based care and $381 per week for center-based care.
You’ve heard it before: The first year of marriage is the hardest. There is something about the nature of marriage that is an occasion for all sorts of challenges—especially around money. Talking finances can be uncomfortable, but having those awkward conversations is essential for creating a solid financial foundation that will last a lifetime.
Data shows that couples who talk regularly about money are happier. Of the couples who talk about money at least once per week, nearly half described themselves as extremely happy, while only one quarter of those who talked less than once a month about money reported personal happiness. So the simple advice is this: Talk early and often about money. If you don’t know where to start, consider these five financial tips for your first year of marriage. These resources will help support those important conversations around your financial health as a couple.
Set financial goals—together
If you were getting ready to go on a road trip, you wouldn’t set off for your destination without a map at hand. You’d have a plan—complete with gas stations, rest stops, and fast food joints. (What is a road trip without fast food?) Whether you’re paying down debt or saving for a down payment on your first home, having a plan positions you to reach your financial goals. And setting financial goals together is a great opportunity to connect about your future. Do you want to live debt free? Do you want to plan a trip for your first wedding anniversary? Do you want to buy an investment property? Carve out the time for this exercise, and make a date out of it. Ask yourselves: What are your top five financial goals as a couple? Then, together, chart your course on how to get there.
Get honest about debt
Debt is normal. (You read that right.) Most adults carry some sort of debt, from credit cards and student loans to home mortgages or auto financing. Debt is part of a healthy financial life, and no matter the type, talking candidly about that debt with your spouse is important. You can only build a strong financial foundation as a married couple if it’s focused on the truth. If you’re worried about disclosing your financial past, you’re not alone: One in three Americans admit to lying to their spouse about money. Among those couples impacted by financial infidelity, 67% said the deception led to an argument, and 42% said it caused less trust in the relationship. The truth is difficult, but lying about debt is even harder. We say, get honest. When you have a clear understanding of each other’s debt, you become available to tackle it together, and you can go a long way in building trust—the true currency of your relationship.
Debt is part of a healthy financial life, and no matter the type, talking candidly about that debt with your spouse is important.
Create a budget
Budget is not a four letter word (it’s a six letter word, if you’re counting). In fact, it’s one of the most important components of financial health. At its simplest, a budget is an estimate of your income and expenses—your financial inputs and outputs—for a set period of time. There are plenty of tools available for creating a budget. You can keep it low-fi with an Excel sheet, use money management software like Quicken, or take advantage of dozens of savings and personal finance apps. (There are even apps made specifically for couples, like Honeydue!) When you learn to budget and have a clear idea of how to strategically pay down debt (or save for the things you want), you can set realistic goals as a couple—and feel good knowing that you’re mastering your finances together.
Make money-talk a habit
Most of what we do as humans is habitual. It’s the way we’re wired. It’s likely you have plenty of habits you don’t even consider habits at all! (In what order do you brush your teeth and wash your face? That, friend, is a habit.) Some habits come to us naturally, and others have to be developed. There’s quite a bit of brain research on how to create new habits, most specifically by tapping into existing behaviors. Do you and your spouse have a show that you’re currently binge-watching? Try adding in a brief discussion of weekly finances before rolling into the next episode. There are lots of little habits that govern your weeks and weekends. Find one that gives you the time to talk about finances. If all else fails, put something on the calendar and stick to it.
Have some fun
Tending to your finances should be a discipline, not a prison—you have to leave room for some flexibility. The more time you take to talk about your financial situation, set goals as a couple, and stick to a budget, the more control you’ll ultimately have over your money. That means you’ll have a better sense of when to save and when to splurge. And you can create space in your budget for tiny indulgences: date nights, weekend getaways each quarter, and gifts for one another.
Managing your finances as a couple doesn’t have to be a drag. There will be hard conversations, but they are conversations worth having—especially during your first year of marriage.
One of the trickiest things about becoming a more financially literate adult is understanding all of the terms that come with it. From Roth IRAs to 401(k)s, questions abound—and that’s OK. Today, we’re unpacking an acronym that, whether you realize it or not, plays a huge role in your financial present and future: your FICO score. Let’s get to it.
What does FICO stand for?
FICO is an acronym for the Fair Isaac Corporation, a data analytics and credit scoring services company based in Southern California. The Fair Isaac Corporation has been around since 1956, and while there are other companies that do what they do—essentially, predict the likelihood that you’ll pay your bills on time—the FICO score has become the industry standard.
What is a FICO score?
Simply put, your FICO score is a number between 300 and 850 that predicts the amount of risk you have. The higher your score, the higher the likelihood you’ll pay your bills on time and in full, and the lesser the risk you are to the lender. If you apply for a loan, for example, and your FICO score is 750, there’s a good chance you’ll not only be approved for the loan, but that you’ll get a good rate. If it’s 500? You may be perceived as having a lesser likelihood of paying on time and in full when compared to someone with a higher number.
We’ll talk about your FICO score in terms of loans from here on out, but remember that when someone loans you something, they’re simply letting you borrow it—so long as you pay it back, generally with interest. Things like credit cards and mortgages fall into this category, so keep that in mind when thinking about your FICO score.
The higher your score, the higher the likelihood you’ll pay your bills on time and in full, and the lesser the risk you are to the lender.
How does my FICO score affect my rates?
A loan rate is often based on what is referred to as risk-based pricing. With risk-based pricing, people who have a lower FICO score or are otherwise considered riskier for being less likely to repay on time or in full will pay a higher rate. The better the FICO score (or less risky the borrower), the lower the rate.
What is my FICO score based on?
According to the Fair Isaac Corporation, your FICO score is calculated from the data in your credit reports from the three big credit bureaus: Equifax, Experian, and TransUnion. The data is generally grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).
What's a good FICO score?
That depends. Not every financial institution uses FICO, and not every credit reporting agency that pulls your information calculates your score in the exact same way. In general, the higher the score the better, but different loans have different lending criteria—and there are many factors that go into whether or not you’ll be approved for a loan beyond your FICO score (like your debt-to-income ratio).
Why does my FICO score matter?
First and foremost, it may help determine whether or not you’ll be approved to borrow money and what sort of rate you’ll get. That’s a big deal, especially when it comes time to apply for a big-time loan for something like a car or a home. But it counts for more than that, too. Ever had a potential employer, landlord, or auto insurance agent ask for your social security number? It’s often to pull your credit report and make their best educated guess about whether you’ll be a good employee, renter, or driver based on your history.
How do I improve my FICO score?
If you aren’t where you’d like to be, there’s hope. The FICO is an ever-moving number, which means many credit problems can be solved over time. Here are some ways to start upping your number:
- Make your payments on time and in full. At the very least, be sure to make the minimum payment, but if you’re able, pay off as much as you can. Miss it by a day or two? It happens. Just pay it off as soon as you’ve realized it’s late.
- Pay down your revolving debt. If you have $20,000 of revolving credit available to you, it’s better to have that and owe nothing than to have that and owe $20,000. Your available credit limit can help or hurt you—it all depends on how much you have to pay down.
- Hold yourself accountable. From automatic payments to calendar alerts, there are ways to make sure that 20% of each paycheck goes toward paying down debt, for example, and that you never miss a rent check again.
- Focus on the big part of the FICO pie—35% of your score generally comes from your payment history. If you can, focus on that for the greatest impact.
- Everything you owe paid off? It’ll be tempting to shut down and cut up your cards, but don’t—the length of your oldest credit line is important, and so is the amount of available credit. To maximize your borrowing potential, keep using the cards or consolidate them to your best card(s), just make sure you’re using them wisely and not beyond your means.
- Getting the hang of things? Every time you apply for credit, there’s a small ding to your score. If you’re applying for a big loan, it’s not wise to go out and apply for a bunch of other loans for this reason. It is, however, worth noting that while it’s not as heavily weighted (generally just 10%), types of credit are important: having a revolving line of credit in addition to a loan you pay off in installments may improve your credit score.
And if you’re in a place where you aren’t able to immediately improve your FICO score or have made financial mistakes in the past, know that a low FICO score isn’t necessarily a life sentence—most things fall off your report after seven to 10 years and no longer affect your score. The key to constantly improving your credit score is to keep moving forward, making good decisions, and doing the right thing.
Saving on a tight budget might seem like an oxymoron. We get it. When you’re just trying to get by week to week (or day to day), the thought of stashing away even a small amount feels daunting. Don’t be discouraged: All financial goals are achieved one dollar at a time.
Saving shouldn’t have to be inaccessible—and we’re here to help. Inspirus Credit Union offers low- to no-fee accounts, so you can get started with our regular savings account with as little as $5. And with these three tips for saving on a tight budget, you can turn that $5 into exponentially more.
Buying wholesale is a great way to save money, especially for shelf-stable items like toilet paper and paper towels. A Costco Gold Star membership costs $60, but the annual savings can easily exceed the investment. If $60 is a stretch for your budget, consider going in on a Costco membership with a few friends (or you can purchase items in bulk through an Amazon Prime membership which can be similarly shared with a friend or a roommate). Smart Foodservice (formerly Cash&Carry) doesn’t require a membership, and if you’re okay with items scarcely past their prime, Grocery Outlet is a great option, too.
Buying wholesale is a great way to save money, especially for shelf-stable items like toilet paper and paper towels.
Account for everything
From online banking to budgeting software, technology has changed the way we think about, access, spend, and save money. This is both good and bad. It’s good because there is less distance between each of us and our assets. It’s bad because debit and credit cards make it easier to swipe our way into financial trouble. But the more you know, the better you can protect yourself.
There are a variety of apps available to help manage your money. Clarity Money is one of our favorites—primarily because it gives you a full view of your financial picture. Clarity Money also helps you cancel those pesky unwanted subscriptions and uses data science and machine learning to offer insights on how to save better (or spend less).
If you’re looking for a low-tech option, pick up a notebook and start tracking every single expense (yes, even that soda from the vending machine at work). When you have a sense of where every penny is going, you can identify new opportunities for savings.
Try the cash diet
In Seven Steps to Smarter Savings, we suggest trying the cash diet. The cash diet means ditching your debit and credit cards, and opting to use cash for your expenses. Some people like the envelope method, while others prefer pulling from a single stash. It’s up to you.
Once you’ve accounted for everything—rent, debts, savings, etc.—see how much you have left over. Let’s say you have $1,000 a month available after bills and savings. (We know that sounds like a lot, but round numbers are good for guesstimating.) Next, withdraw that cash, divide it over four weeks, and use $250 each week for all your daily expenses. You’ll likely be surprised by how quickly it goes—a latte here, an extra soda there. But using cash for daily expenses will help you pace your spending habits against what you actually have available. By taking advantage of these simple strategies, you’ll create newfound financial flexibility and be able to have a savings account that really grows.