Tips For New Parents On Taxes And Personal Finance

Building a larger family? Raising a child is one of life’s greatest joys, as well as one of the most expensive endeavors, whether you’re still in the planning stages or your bundle of joy has already arrived. And we’re not just referring to college expenses. Parents are frequently astonished by the steady outflow of money that begins days after bringing a newborn home, from diapers to daycare, from braces to bicycles.

While there is little you can do to prevent these costs from occurring, you can undoubtedly lessen their impact by being prepared and knowledgeable about what to expect. You’ll find a list of mistakes to avoid, useful links, and actions you can do to increase the likelihood that raising a child won’t be as taxing below and more of a pleasure.

Have you ever been told that a baby only requires a drawer for a bed, a bottle, and a lot of cloth diapers? There are many people who sing that tune, however we have some bad news: they are mistaken. If you’ve already given birth, you probably already know about some of the fees, but if you’re still preparing, be sure to account for the following costs as you get ready:

  • Medical checkups throughout and after pregnancy for the mother and the child
  • Costs of pregnancy and delivery
  • Baby gear includes clothing, nursery furnishings, car seats, a playpen, a glider, a highchair, strollers, and a baby bath.
  • Childcare
  • Shampoo, infant creams and ointments, diapers and wipes, etc.
  • Breast pumps and milk storage bags, or both, or formula and bottle-feeding supplies

And that only applies during the first couple of years of parenthood. You will need to include in the expenditures of toys, clothing, bicycles, braces, summer camps, and birthday parties as your child gets older. Additionally, it will have a substantial impact on your household’s disposable income if one of you two decides to stay at home to care for your child, even part-time.
The average cost of raising a child from conception to adulthood, according to the government, is $233,610. However, this figure takes into account both the highest and lowest spenders. Talk to your friends and ask them to discuss their expenditures in order to get an accurate idea of how much you can expect to pay, especially when it comes to childcare. Those figures can be truly eye-popping. 

Benefit from Tax Breaks
Many people make jokes about how their child is like a tax break, but the joke is real. The government has established a number of credits and deductions to lessen some of the costs associated with raising a kid, but these benefits are not granted automatically. You must correctly complete your tax returns and obtain the benefits to which you are entitled. Make sure you are aware of all the options open to you. These may consist of:

Child tax credit – if you have a dependent child and your household income is within the government’s criteria on an annual basis, you may be able to drastically reduce your tax obligations.

Child and Dependent Care Credit: If you and your partner or spouse file your taxes jointly and pay for your child to attend a summer camp or before- or after-school program so that you can work or look for work, or even to have them cared for by a daycare, nanny, or babysitter, you can deduct a sizable portion of these costs from your income taxes.

Earned income tax credit: Parents with one or more dependent children may qualify for the earned income tax credit (EITC), which lowers their tax obligation, depending on their income.

Most Important of All is to Start Thinking Ahead
Planning for the future today, possibly even yesterday, is the most important advice any new parent can offer. Many parents spend the first few years of their child’s life claiming they don’t know how they’re going to pay for college while doing nothing to change their situation. The folks who begin saving little sums of money regularly while their children are young and who continue to do so throughout their child’s childhood are the ones who sleep peacefully as college approaches. It is never too early to make a financial plan for your own retirement, your children’s schooling, as well as a contingency fund. Your thorough financial plan should include:

  • A retirement account, whether it be a self-directed IRA or a 401(k) offered by your firm
  • A reserve of money set aside for emergencies, such as car trouble or unanticipated medical costs. Most people advise saving enough money to last for at least three months without a job, while some advise saving for six months.
  • An education fund. You’ll be grateful you did later if you open a 529 college savings account and make regular deposits.
  • a will and a life insurance policy. It’s comforting to operate with the presumption that you’ll always be able to provide for your family. However, accidents and unforeseen illnesses do occur, and far too many people who don’t prepare to purchase life insurance leave behind families who must deal with their loss and financial condition. Taking care of fundamental legal documents like a will, advance healthcare directive, and power of attorney is also a smart idea.

What Is Basic

Start saving now if you’re planning to pay for medical visits, hospital stays, and other expenses that are not covered by insurance, as well as for lost wages from working during your last trimester of pregnancy or after giving birth. Additionally, you should look into the benefits and family leave policies that your business provides.

A new family member can be difficult to prepare for. Contact us right now if you need help getting your finances in order. We can assist you in reviewing your existing circumstance and developing a strategy that will be effective both now and in the future.

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