As many regular readers know, I have just become a father for the first time. When my wife and I first found out about the pregnancy, the “financial manager” in me quickly listed the following things off in my head as financial “to do” items:
- Update estate plan and will
- Increase life insurance policies
- Start education savings plan for child
- Increase monthly expense budget
- Increase emergency cash fund
Where To Start?
The biggest thing on my list of to-do items was to increase the amount of money that we saved in our ING Orange Savings Account cash reserve fund each month.
The reason that this was the most important thing was because the money in a high yield savings account could be easily re-directed where it was needed most. There were several larger items that we had to purchase. We tried to purchase the majority of the required items second hand (except for a car seat for safety reasons).
In addition to physical items for the baby’s care; we also had to do some minor renovations to our house such as painting the nursery room, decorating and updating the air exchange system. All of these require cash!
New Financial Territory
While I am OK with the increased spending due to the addition of another member to our family, it is very unfamiliar territory to me financially. Because it is such new territory for our family, we are going to begin tracking our monthly expenses even more closely(using Quicken) until we can determine the actual additional requirement. Prior to that, we have decided on a relatively arbitrary amount to add to our cash reserve.
We decided to add an additional 5% of our net income to our emergency fund due the arrival of the baby. This figure was arrived at by using a rough estimation of the added cost of the baby’s essentials to our own essentials. Of course everyone has a different interpretation of “essentials”, but I am still wondering if this amount is enough?
I will certainly find out how close my estimates have been after a couple of months of tracking the expenses in our new catgories…What do you think of my estimates?