For most men, becoming a parent is as easy as putting object A into slot B. Unfortunately, a father improving their personal finance is not as simple and a hell of a lot less fun. Fortunately, I am here to provide a new father’s guide to improving personal finance.
This article is meant to give a general overview and best guidance for basic personal finance as you prepare for fatherhood. Advanced techniques and opinions will be forthcoming in (many) future articles, but for now we’re just focused on the simple aspects. One intermediate finance topic I have written about already is how to prepare to pay for expenses related pregnancy and delivery, so check that out at your leisure.
My Background In Personal Finance
First, I am a homeowner, have put tens of thousands away in savings, even more money in retirement accounts, have six credit cards, no debt besides a car loan and mortgage, and currently have an 810 credit score. This is not meant to boast, it’s only to assure you that I’m not some shithead talking out of my ass—every piece of advice you will see in this article and across the site is reflected in my actual life.
However, I do take into account how blessed I am. I was raised in a middle to upper middle class family, but my luck, as far as my knowledge of personal finance, really came from the guidance I received from my parents—guidance that has since been improved upon since becoming an adult. In general, the foundational rule given to me and the basis for the new father’s guide to improving personal finance is to never buy something that you can’t afford to pay back before the next credit card statement. Obviously, that doesn’t apply to purchases like a home or car, but for 99% of items you buy.
Don’t Take The Debt
In future articles I’ll talk about how certain debt is good, but because you’re reading this right now I think it is safe to assume that you are just trying to get a basic understanding on how money works to better your future. So, for now, just consider debt a venereal disease or something else you don’t want to catch.
But not all debt is created equal. Some of it gets you tossed in jail (unpaid child support and taxes), some of it cripples your finances long-term (large amounts of credit card debt), and some of it is just plain stupid (taking out a line of credit on your home to buy a boat).
In it’s most basic form, debt makes life more expensive. It prevents you from building up savings to take care of your family, purchasing things you want and perhaps need, and being happy. Who could feel happy if they owe $20k in credit card debt? If it’s not your home, auto, or a real emergency, live within your means and say no to debt.
Know Your Money
Do you know what you currently bring home each month AND your average monthly expenses? If not, why don’t you? There is no possible way to have sustainable financial success, particularly with a new baby on the way, if you don’t understand your income and expenses.
I have two spreadsheets (more on this is a future article). One is for my monthly budget and another is a file that can tell me, with pretty good accuracy, what will be in my main checking account six months from now. I will dive into that in a later article, but suffice to say, I couldn’t have create these documents without knowing what I bring in and spend my money on.
If you don’t have a budget set up, don’t panic. Simply pull out any and all bank and credit card statements for the last three months. On a computer or notepad write out your after-tax income and, most importantly, your expenses. Start bundling your expenses into categories (i.e. rent, food, car insurance, etc.). From there, you have the groundwork that will ultimately turn into the foundation of your personal financial success!
It’s Time To Cut Back
I am a gambler by nature, so, naturally, I would be willing to bet that after you review your finances you are actually spending more than you bring in. I am confident in that because an early 2023 a survey showed that a clear majority of Americans did not have the funds to cover a $1,000 emergency.
Well, my friends, whether you have a child on the way or soaking up information, you are going to have to cut back on your spending. That’s because you will soon enter the world of childcare, diapers, bottle, clothes, binkies, etc. If someone else is taking care of your child during the day that alone will cost you hundreds of dollars each month.
You remember that computer document or notepad you were working on that showed your expenses? Look them over again and have a true heart to heart with yourself and/or your significant other to decide what you’ll either be cutting back on or eliminating completely. I’ll get you started—you can eliminate your budget on eating out for a little while because that won’t even be a realistic option time-wise for months
Say Goodbye To The Big Guys
For the first few years of adulthood I did what most people do—I opened and maintained a checking and savings account at a big bank. For me it was Chase, but it can easily be Wells Fargo, PNC, Bank of America, etc. These are large, successful companies worth billions and billions of dollars who are more than happy to store your money and pay you essentially nothing for the privilege of your business. In fact, if you don’t hit certain thresholds, you are actually losing money compared to keeping it under your mattress!
When I was 22 or 23 I opened a high-yield savings account, also know as a HYSA, at online bank. I exclusively use Ally. I get 4.25% interest rate compared to .01% at Chase. That means if you deposited $1,000 in Ally you would have $1,042.50 at year’s end instead of $1,001 by banking at Chase. Pretty big difference!
I deposit checks on my phone, get a few fee-free monthly ATM withdrawals, and a high interest rate on my money. You won’t get rich off of 4.25%, but because of the low rates at the big banks you wouldn’t even be able to pay for 20% of a cup of coffee at Starbucks!
No Time Better Than The Present
The new father’s guide to improving personal finance require a ‘no-delay’ approach to implement. Nothing drastic is going to happen overnight, but getting on the right path financially requires moving one foot in front of the other.
Don’t take on debt. Don’t buy stuff unless you can pay for it before your next credit care statement. Know everything you can possibly know about your earnings and spending habits. Figure out what you can reasonably cut back on to set yourself, and your new baby, up for success. Open a high-yield savings account to begin the process of making your money work for you.
And most importantly, don’t wait. It requires a personal commitment to improve your personal finance. You can do this!
