Episode Details

Starting a family is a huge step in a great many of our lives. Bringing a new little human into the world. So much hope. Scary too! Completely life changing. Financial Autonomy is about you taking control of your finances, and not being controlled by your finances. The focus of this audio blog is to think through the financial implications of taking this big leap, and what you can do to prepare for this major transition in your life. Also, if you're reading or listening to this during the pregnancy phase, and are anything like my household was prior to the birth of our first child, you've probably read enough books like What to Expect When Your Expecting, and Up the Duff. I promise there will be no references to what pregnancy will do to your body, or any of the seemingly infinite ways we can be a terrible parent and ruin our child's life. My name's Paul Benson, and thanks for listening to Financial Autonomy, the audio blog. Let's dive into today's episode, how to be financial ready to start a family. How to be financially ready to start a family could easily be rephrased as "How to survive on less income and with more expenses". The stereotypical scenario is that dad continues to work full time after junior's arrival, whilst mum stays at home and try's to maintain her sanity. Of course there are all sorts of permutations and combinations of how different families make things work, but almost inevitably, there will be less money coming into the household than there used to be. On top of this, you now have an extra person in the household, who maybe doesn't eat that much (yet!), but goes through nappies like it's an Olympic event, and for whom every little cough is diagnosed by the new parents as likely bird-flu, requiring your next month's wages to be donated to the local chemist. So financially, starting a family is a very big deal. But with some planning, it needn't be stressful. Sleep deprivation will be stressful enough. So where to start? You need to understand your cash flow. How much money comes into the household, how much goes out, and where does it go? The cash coming in is fairly straight forward assuming you are an employee. Possibly less so if you are self-employed, though hopefully you have a good sense of the normal cycles of your business and can forecast your income with a reasonable level of certainty. If one of you runs a business and the other is currently an employee, there may be scope to split income after the baby arrives. It's a bit of a curiosity with the tax system, but two people each earnings $40,000 will end up with more money in their pocket after tax, than a couple where one person earns $90,000 and the other nothing. This may also point you to a solution of each parent working reduced hours, instead of the more typical one at home and the other working full time. Something to consider at the very least. So in terms of being financially ready to start a family, you've got a clear picture of what the income piece will look like once bubs arrives. What about the expenses? Hopefully you've got a budget. If not, visit the resources page on the financialautonomy.com.au web site and download our template. Look up your bank statements via your internet banking, fill in the figures, and away you go. It is important to understand where your money is currently going and then think through how that will change once your family moves from 2 to 3 people (or maybe more if you're really efficient!). Maybe public transport fares will drop. You may spend less on eating out. But of course you will now have the cost of nappies and all the other bits and pieces a new born demands. Once you have your head around the numbers, it may be valuable to adjust to living on one wage before the baby arrives, assuming your plan is the most typical scenario of one parent at home and the other in the workforce. If you can demonstrate that your household