Ah, the juggernaut of new parenthood. Don't you feel like a warrior? You have a million things to tackle, and yet there are quiet moments you look at that little bundle of joy and think, "I'm sure I should be doing some sort of financial planning here... but what?"
I'm so glad you asked. Here are the three key priorities you should tackle.
1. Update (or Start) Your Estate Planning
Estate planning means everything related to your will, trust, health care proxy, and any other durable powers of attorney.
The most basic activity you'll want to tackle is your will. Essentially, you need to figure out who will get what if and when you pass away, and (more importantly) who will take care of your child. You might find this morbid, especially if the little peanut has only just arrived, but this is not an issue you want to leave to chance or the epic fighting abilities of the respective in-laws.
Talk about it, think about it, and write it down.
While you're at it, tackle the other stuff: If you have significant or complicated assets, you might consider a trust, and no matter what you have, you should definitely put together your health care proxy. This document will tell your family and medical team what to do in the event of various unfortunate occurrences.
It's not a pleasant task, but taking the time to do it will save your family a lot of stress if something should happen to you.
2. Start Saving
Your long-term savings strategy should be twofold: First, save for retirement. The last thing you want is for your little pumpkin to have to shoulder all the costs of your old age, much as they might deserve it after crying for two hours straight every night for the past week.
That means joining the 401(k), opening an IRA, or even just starting to set money aside in a savings account. Whatever you need to do, take the time to do it. Your future self (not to mention your child's future self) will thank you.
The second part of savings should be directed to your munchkin's education. As you've probably noticed, college costs have risen dramatically over the last 10 years, and there's no evidence that the trend is going to reverse.
So, consider a 529 or Coverdell savings account. Both allow your contributions to grow tax-free for qualified expenses, meaning the earlier you start, the more time you have to put together a substantial pot of savings for your little one's future.
3. Start Reining in the Spending
To better afford your ambitious and excellent savings program, get used to being a bit frugal. Kids are expensive at the best of times, so don't make it harder on yourself by getting them accustomed to eating out and drinking babyccinos all the time.
Instead, take advantage of children's endless tolerance for creativity and start doing things for free. Instead of signing up for that class at the aquarium, go to the beach and look at the tide pools, play a dress-up game in the backyard, or organize a hike or bike ride.
With a little imagination, you'll find that you don't need expensive and structured activities to have a great time together. After all, as you've probably noticed already, all your new baby really wants, more than anything in the world, is your attention and your time.