MONEY Taxes

What Happened When I Did My Taxes With My 10-Year-Old

What I learned about my kid—and what she learned about money—when we filled out the Form 1040 together.

This past weekend, I asked my 10-year-old daughter Lucy to help me do our family’s taxes. She read off from my W-2 and our 1099 forms as I filled in the boxes on the tax prep website we use. This meant, of course, that she got to see exactly how much her parents earn.

I expected that this was going to feel like the Big Reveal of a closely guarded secret. As I probably should have known, the numbers at first meant nothing to her. Annual incomes are an abstraction to a kid who has never written a rent check.

The real talk came a couple of days later, when Lucy and I had a chance to look over the actual 1040 I sent to the IRS, and I could show her how it all fit together. I’m glad we did that.

Before I get that to that conversation, though, a word about why I decided to do this. I was inspired in part by New York Times columnist Ron Lieber’s case for telling your children what you make. As Lieber points out, kids have a knack for figuring this out anyway. And showing them how you handle money—even when (believe me) you are far from perfect at it—can be a first step toward showing them how to be competent with it themselves.

I was also motivated by a more cranky-old-man impulse: I’ve been surprised by the number of young adults I meet who don’t know how to do their own taxes. To me, knowing how to fill out a 1040 is a just a basic life skill everyone should have by 18. I know this is more sentimental then reality-based. After all, I also put driving a stick shift in this category. And for years I’ve been farming out the hard work of my own taxes to the H&R Block website. (Thanks, AMT.)

Still, I remember that I was in the eighth grade, our teacher Sister Loretta had students fill out 1040s using mock W-2s as a math exercise. She was cracking the door on the adult world a little bit wider. Kids are always eager for those peeks, and when they get one, they seem especially open to learning. And talking.

For me and Lucy, the tax talk turned into one of the most impressively grown-up discussions we’ve ever had. She saw what we make, and I tried to put that in the context of what other Americans earn. She also saw what we pay, and so then we turned to where that money goes and what it’s used for. I tied the conversation in to a news story I read that day, about legislation in Kansas that would bar families on public assistance from spending that money on a long list things, including casinos, but also movie tickets and trips to the swimming pool. We talked about why some families need financial help, and why people have such strong opinions about that.

Lucy doesn’t need me sharing her nascent political views with the world, so I’ll just say that she surprised me (the way kids do) with her insights about what’s fair and about the choices people should have. Her ideas seemed too thought-out for her to just be parroting back what she guessed I’d like to hear. So I learned something about my daughter. And my wife and I also had a chance to articulate some of the values we are trying to pass on to our kids.

Lucy also asked a simple but very good question about our own money: “So this is how much you made, but how much do you have?” The distinction between making money and actually having any is an important one, and these days in our family we are frankly doing better on the former than the latter. Turning from our income tax forms to our savings, I was able to at least hint at some of the tricky choices her mom and I are trying to juggle.

Lucy didn’t get a “wow” moment of understanding from this, but I think I laid the groundwork for future discussions of things we have to be realistic about. Like how we’ll pay for Lucy to go to college, and where she’ll be able to go. And why (to hit on a question that’s really on her mind) she still has to share a room with her little brother.

I was able to have this conversation from a standpoint of some comfort. For a lot of parents, opening up about money means talking about losing a job, or how they’re dealing with a foreclosure, or how they’re going to buy the groceries this week. Those are much tougher things to talk about. But starting from where we are, and knowing we’ll have some ups and downs in the future, I think I’m glad that for my daughter this part of real life is already a little less mysterious.

MONEY Ask the Expert

Why You Need to Send Your Spouse a Love Letter—About Money

Investing illustration
Robert A. Di Ieso, Jr.

Q: I have accounts with various institutions and have been doing my own investing for more than 30 years. I recently married again but my wife does not get involved with my investments. What instructions should I give her about how to handle these accounts if I die first? — Anonymous

A: The sooner you can bring her into the fold, the better, says Byron Ellis, managing director for United Capital Financial Advisers in The Woodlands, Texas. And not just for the sake of your nest egg, but for the sake of your marriage.

First, consider consolidating your accounts. “A lot of people think having money at different firms is a great way to diversify, and that’s just not true,” says Ellis. Simplifying has advantages for you today, and will make things easier for your heirs down the road.

Next, use this concern about these accounts as a jumping off point for a bigger discussion about money. “People think differently about money, and that can lead to other issues,” adds Ellis.

If you haven’t already, make a date with your wife to talk about everything from how you’d like to handle day-to-day finances to your overall philosophy about spending and saving. Does she have assets of her own? How confident is she about managing money? What motivated you to save as you did?

Once you understand where each of you is coming from, you can talk about how you want to handle things going forward. For example, do you want to continue managing your money separately? What are your near-term and longer-term goals?

Regardless of what comes out of the conversation, you should by all means leave your wife some instructions – for your investments and the rest of your estate. In addition to making sure your will is up to date – that is key – write your wife what Ellis calls a love letter, and ask her to do the same.

This letter should outline your instructions and include all the information you think she should have if you pass away: a list of accounts and account numbers; user names and passwords; your insurance policies; important contacts and phone numbers; an inventory of other assets or items you’ve hidden. Obviously, you’ll need to put this letter in a safe place, such as a safety deposit box, and let your wife know where you keep it.

Finally, make a point of updating the letter once a year; some information will change, and so too may your wishes.

MONEY Love and Money

A 3-Step Plan for Avoiding Money Arguments

black and white chess pieces on top of stack of money on chessboard
Hitoshi Michael—iStock

It's normal for couples to have disagreements about money. Here's a guide to overcoming them.

The last really big money fight my wife and I had was about a vacation. Yes, after 23 years of marriage, the very thing that was meant to bring joy to our lives was causing each of us to seriously question whether we had married the right person.

Since I’ve spent my entire career helping people with their finances, you might think that I would be a good person to talk to about money. Unfortunately, this wasn’t true for my wife.

But is it any surprise that a big decision with significant financial implications can lead to a heated conversation? After all, how you spend money is deeply personal, because it is an expression of what you value.

So how can people make the best decisions together when they come to those decisions with different values?

This question is more complex than it seems, because seldom are big decisions simply economic and intellectual. They usually have emotional implications. And three major obstacles get in the way of making sound money choices: One, we are all biased in our perspective about money. Two, we feel like we are right even if the facts disagree with us. And three, deferring a discussion about money with a loved one can frustrate us, leading to an explosion over a seemingly small issue.

Here’s a three-step plan to help you the next time you and someone close to you have to make a big money decision:

1. Know your biases.

I am a protector. I grew up in Zimbabwe, Africa, in an environment of scarcity and need. I worked from age 11 to have money. My wife grew up in Los Angeles with a very different life, one with financial stability. She is a giver and a pleasure seeker. I want money to give me security; she wants money to share with family and to enjoy life. I concentrate on the cost of things; she thinks more about the enjoyment something can bring. There’s no right or wrong way to view money, but it definitely affects how we think and feel about financial choices. When it came to our vacation, she wanted it to be longer than I felt was prudent. We both felt strongly about our perspectives. Knowing what biases we each bring to a financial decision helps us to take a more balanced approach. My firm’s Money Mind Analyzer tool can help you and your partner understand your money personalities.

2. Look for a compromise rather than a choice.

When it comes to money conversations, we often decide a firm choice has to be made. What we are really making, however, is a tradeoff between different preferences. Emotions are natural when it comes to big decisions, but they can lead to real lasting frustration. Why? Because they often end with one person convincing the other to “see it my way.” But the best answer is often a compromise of perspectives. I tend to be the more outspoken person, and that simply wasn’t fair to my wife. She was rightly frustrated at not having her voice or opinions heard. So look for the middle ground where you can both win a little.

3. Have a disciplined process.

One of the best pieces of advice I have ever been given is to have scheduled meetings with my spouse to discuss life and our choices. Having the right mindset can change everything. We have a weekly meeting now with a list of things we need to jointly decide. We have rules, like staying calm and hearing each other’s perspective. We also use a checklist whenever we have a big decision to make. Ready to start holding regular meetings to discuss important financial matters? You can use a checklist our firm has developed to help people come to an agreement about a big decision.

There is no magic to living a great financial life. It’s all about your choices and how you make them. If you are on the voyage with someone else, then finding a positive way to decide together will make your life meaningfully better.

After that big fight about that family vacation, my wife and I decided that we had to find a different way. We still have different perspectives and passionate disagreements, but we usually find a middle ground where we each feel heard and both our needs are considered. One of the side benefits is that our three daughters get to see how we make financial choices — something neither of us got to see our parents do.

By the way, the vacation to Italy was great, and a little longer than I would have planned. I am eternally grateful to my wife for those extra few days I had fought against staying for.

———-

Joe Duran, CFA, is CEO and founder of United Capital. He believes that the only way to improve people’s lives is to design a disciplined process that offers investors a true understanding about how the choices they make affect their financial lives. Duran is a three-time author; his latest book is The Money Code: Improve Your Entire Financial Life Right Now.

MONEY Kids and Money

Trouble Talking to Kids About Money? Try This Book Instead

parents trying to talk to teenage daughter
Getty Images/Altrendo

A new book hopes to impart important money lessons in just a few words and pictures

Talking to your kids about money is never easy. We have so many financial taboos and insecurities that many parents would rather skip it—just like their parents likely did with them. If that sounds like you, maybe a new easy-to-digest money guide written for teens can be part of your answer.

As a parent, you have to do something. Kids today will come of age and ultimately retire in a vastly less secure financial world. Their keys to long-term success will have little to do with the traditional pensions and Social Security benefits that may be a big part of your own retirement calculus. For them, saving early and building their own safety net is the only sure solution.

Most parents get that. After all, adults have seen first-hand the long-running switch from defined benefit to defined contribution plans that took flight in the 1980s. Yet only in the last 15 years have we really begun to grasp how much this change has undermined retirement security. Now, more parents are having the money talk with their kids. Still, many say they find it easier to talk about sex or drugs than finances.

The big challenge of our day, as it relates to the financial security of young people, is getting them thinking about their financial future now while they have 40 or 50 years to let their savings compound. But saving is only one piece of the puzzle. Young people need to protect their identity and their credit score—two relatively recent considerations. Many of them are also committed to making a difference through giving, which is an uplifting trait of younger generations. Yet they are prone to scams and don’t know how to vet a charity.

In OMG: The Official Money Guide for Teenagers, authors Susan and Michael Beacham tackle these and other basics in a breezy, colorful, cleverly illustrated booklet meant to hold a teen’s attention. The whole thing can be read in an hour. I’m not convinced the YouTube generation will latch on to any written material on this subject. And while the authors do a nice job of keeping things simple, they just can’t avoid eye-glazing terms like “liquidity” and “principal.”

But they make a solid effort to hold a teen’s interest through a handful of “awkward money moments,” which illustrate how poor money management can lead to embarrassing outcomes like their debit card being declined in front of friends or having to wear last year’s team uniform because they spent all their money at the mall. “Kids are very social and money is a big part of that social experience,” says Susan Beacham. “No teen wants to feel awkward, which is why we chose this word. If they read nothing else but these segments they will be ahead of the game.”

The Beachams are co-founders of Money Savvy Generation, a youth financial education website. They have a long history in personal finance and created the Money Savvy Pig, a bank with separate compartments for saving, spending, donating, and investing. In OMG, they tackle budgets, saving, investing, plastic, identity theft, giving, and insurance.

A new money guide for young people seems to pop up every few years. So it’s not like this hasn’t been tried before. Earlier titles include Money Sense for Kids from Barron’s and The Everything Kids Money Book by Brette McWhorter Sember. But most often this subject is geared at parents, offering ways to teach their kids about money. Dave Ramsey’s Smart Money Smart Kids came out last spring and due out early next year is The Opposite of Spoiled: Raising Kids Who are Grounded, Generous and Smart About Money from New York Times personal finance columnist Ron Lieber.

In a nod to how tough it can be to get teens to read a book about money, Beacham suggests a parent or grandparent ask them to read OMG, and offer them an incentive like a gift card after completing the chapter on “ways to pay” or a cash bonus after reading the chapter on budgets and setting one up. “Make reading the book a bit like a treasure hunt,” she says. That just might make having the money talk easier too.

 

 

 

MONEY family money

This Company Will Give You $500 If You Have a Baby Today. Wait, What?

141017_FF_BabyMoney
Mike Kemp—Getty Images

It's no joke. As part of its rebranding campaign, investment firm Voya will give money to the newest of new parents.

Lucky for you if you’re in labor right now.

A company called Voya Financial has announced that it will give every baby born today—Monday, Oct. 20, 2014—500 bucks.

The promotion, timed to coincide with National Save for Retirement Week, is part of a marketing campaign to alert the public that the business that once was the U.S. division of ING is now a separate public company with a new name.

Get out the castor oil and order in Indian if you’ve already hit 40 weeks, because the offer is only available to those who exit the womb before midnight tonight—though soon-to-be-sleep-deprived new parents have until December 19 to register a child.

Voya estimates that it may have to kick in as much as $5 million, since there are about 10,000 babies born every day in the U.S.

While the company has promised that families will not have to sit through a marketing pitch to get the money, and that the baby’s information would be kept private, this special delivery still comes with a catch.

The money is automatically invested into Voya’s Global Target Payment Fund, which according to Morningstar has above-average costs and below-average performance.

Regarding the fees, Voya’s Chief Marketing Officer Ann Glover says that the funds Morningstar uses as comparison are not apples to apples. In any case, Glover says families are free to sell out of the fund if they so choose. “Of course, we would hope people would hold on to the investment,” she adds.

But hey, money is money, so if you’re due, you may as well take what you’re due.

And for those mamas and papas whose progenies aren’t quite ready to make their debuts? While you won’t get money from Voya, you may have other opportunities to get big bucks for your little one.

Start by checking in with your employer to see whether the company helps with college savings. A growing number do. Unum, for example, offers its workers with newborns $500 towards a college savings account.(Our Money 101 can help you find the best 529 college savings plan.)

Also, in several communities around the country, charitable or government programs seed savings accounts for kids. For example, residents of northern St. Louis County in Missouri can get $500 through the 24:1 Promise Accounts. Babies born in Connecticut get $100, plus $150 in matching funds by age four, thanks to the CHET Baby Scholars program.

“This is gaining significant momentum nationwide,” says Colleen Quint, who heads one of the nation’s most generous free savings program, the Harold Alfond College Challenge. Started by the founder of Dexter Shoes, the charity gives every resident newborn in Maine a $500 college savings account.

In fact, Mainers can get the most free money for their children according to a survey of such programs by the Corporate for Enterprise Development, which has gathered details on at least 29 free childrens’ savings programs.

Besides the $500 college savings account, a state agency will match 50¢ for every $1 parents contribute each year up to $100 a year and $1,000 over a child’s lifetime. So Mainers can, in theory at least, get up to $1,500 in free college savings money on top of any additional freebies they can get from companies.

That should be more than enough to buy a chemistry textbook in 2032.

MONEY family money

Money Fears Keep Women in Abusive Relationships. Here’s How to Change That.

140909_FF_WhyIStayed
Vernon Ogrodnek—AP Ray Rice with his wife, Janay Palmer.

Domestic abuse victims have opened their hearts to share #WhyIStayed stories on Twitter—and many cited financial dependence among their reasons. These 8 key steps can help break the cycle.

“Why did she stay?”

That was the question many people asked online Monday after they saw the graphic video of Baltimore Ravens running back Ray Rice punching his then-fiancée, Janay Palmer, in an elevator. The media event inspired Palmer’s fellow victims of domestic abuse to come out—through the Twitter hashtag #WhyIStayed—to explain why leaving isn’t that easy.

One of the major themes running through those tweets is financial dependence.

Many victims who tweeted their stories said they feared they’d be homeless or living in poverty if they left. Some said they’d be without any income or health insurance. Others expressed that their partners exerted economic control to prevent them from leaving: keeping them from getting jobs, running up debt on their credit cards, restricting access to money.

Even when victims of domestic abuse do leave their partners, ruined credit scores, erratic employment histories, legal issues, or debt threaten their future employment and financial security—which then leads many of them right back to their abusers, experts say.

“Economic self-sufficiency is frequently the difference between violence and safety for many victims,” states the National Coalition Against Domestic Violence.

One in four women experience partner violence, according to the coalition. If you are one of those victims, or know someone who is, make sure financial planning is part of the exit strategy. The advice outlined below can help people get ready financially to go—so that more can share their stories at #WhyILeft.

Understand where you stand

If you don’t handle the family’s money, you may not be aware of the state of your entire financial situation. Try to get a sense of what you and your spouse own and owe, and in whose name those assets and debts reside.

Unfortunately, this info may not be easy to get. “Some victims are scared to even inquire about these accounts for fear of violence or verbal abuse,” says Brent Neiser, senior director for the National Endowment of Financial Education, which has created a free book to help domestic abuse victims called Hope & Power for Your Personal Finances: A Rebuilding Guide Following Domestic Violence.

Also, by trying to acquire account information, you may accidentally flag your intentions to your spouse. So you’ll need to be careful. “Find a safe place where you can write down information as you come across it, like noting which bank the statements are coming from and any bank account numbers you find,” says Neiser. “You may have to go into a branch and inquire in person about accounts.”

If you’re looking online for information, be sure to use a private browser window so that your searches are not saved in the cache for your partner to see.

Gather key documents

Try to make copies of any important financial or personal documents—bank statements, birth certificates, marriage certificates, ownership documents for shared assets. Store these with friends or family or in a safe place at home.

When you do leave, take these copies and, if possible, all original documents that list your Social Security number and passwords.

You’ll want to have all your personal data with you to help re-establish yourself and keep your abuser from being able to commit ID theft. If your partner knows your information, or if you weren’t able to take all your records with you and fear your partner may seek financial revenge, consider changing your Social Security number, says Neiser.

Check your credit

Request a free copy of your credit report from one of the three major credit bureaus via annualcreditreport.com.

Look at the document to make sure that your partner did not open any lines of credit in your name that you don’t know about. If there is any fraudulent or incorrect information in the report, dispute the error with the credit bureaus.

Change your passwords

Pick new personal identification numbers (PINs) and passwords on all accounts just before you leave—maybe as soon as a few hours before if you’re afraid of your spouse finding out—or as soon as possible afterward. Don’t forget about your email and benefit plans, says Neiser.

Avoid using personal details that your partner could guess in your password, so as to keep the person from running up bills in your name or draining your accounts.

Establish solo accounts

If you don’t already have one, set up a personal checking and savings account for yourself as soon as you can before you go. Make sure the account is listed only in your name and that statements from the account are sent to a secure mailing address or email address so that your abuser cannot access the account or have knowledge of your finances.

Squirrel away whatever money you can without your spouse noticing—maybe a part of whatever allowance you receive or, if you work, as much of your paycheck as you think you can get away with. You want to have a cushion when you leave.

Get your direct deposit set up so that the first paycheck after your planned departure date will go to your personal account.

Protect yourself from debt

Try to pay off any balances on joint credit cards so that it will be easier to close the account and prevent an abuser from racking up debt.

If you’re unable to pay off what’s owed, call your credit issuer and request that your name be removed from the account. This won’t protect you from any existing debt, but it may help protect you from having to pay for anything charged after you leave the abuser.

Take your share

Assuming you have access to joint bank accounts, you will want to make a withdrawal of 50% of the balances and put that in your personal account, says divorce attorney Emily Doskow.

If you live in one of the nine “community property” states—in which whatever is earned or acquired during marriage is split 50/50 in a divorce—you are legally entitled to half. The rest of the states attempt to split property fairly based on what each person brings in and other factors, meaning it can be 50/50 or not. But even if the court finds you aren’t entitled to half, the worst consequence is that you have to pay some of the money back.

To protect yourself, take screenshot of account at the date at which you do it showing the amount before and after.

Making this withdrawal is the last thing you should do before you leave, as this will definitely alert a spouse to your plans to go. But you do want to make sure you get this money before your partner can drain the account.

Ask for help

Need help finding a place to live or a job, recovering your money, or handling the trauma of abuse? The National Coalition Against Domestic Violence has a coalition in each state that can help you find resources in your area.

Also, as you begin rebuilding, you might consider taking Allstate’s free financial empowerment and career empowerment courses, which have helped more than 400,000 domestic abuse victims become financially independent.

Above all, remember that you are not alone. “Talk with people who are more advanced in their recovery and getting re-established,” says Neiser. “Ask them to share the smart, insightful techniques they’ve used. Many people working at these shelters and advocacy groups are victims themselves.”

A previous version of this article referred to Janay Palmer as the wife of Ray Rice at the time of the incident. The couple later married but at the time she was his fiancée.

MONEY 101:
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MONEY Kids & Money

The Most and Least Expensive Cities to Raise a Child

Where you choose to raise your child can have a huge impact on your parenting costs. Here are the cities that will run up your spending the most—and the least.

Having a child today will set you back close to a quarter million dollars by the time your offspring reaches 18, an annual study released Monday by the U.S. Department of Agriculture found. A middle-income family can expect to shell out on average $245,340 (or $304,480, when adjusted for projected inflation), with the biggest chunk of the budget going to housing, followed by child care costs.

Of course, your bottom line could be very different depending on where you live. According to data from personal finance website NerdWallet, child-rearing costs can vary by more than $340,000, based on local housing market prices and the cost of daycare (which exceeds the cost of college in 31 states).

Families living in cities in more rural areas can expect to pay the least to raise a child to adulthood, but those living in the urban Northwest and on the West Coast should expect to pay far above the average.

Here are the cities where you’ll pay the most and the least to rear your child.

Most Expensive Cities to Raise A Child

Rank City Cost of raising a child
1 New York (Manhattan), NY $540,514
2 Honolulu, HI $429,635
3 San Francisco, CA $402,112
4 New York (Brooklyn), NY $400,951
5 Hilo, HI $369,559
6 San Jose, CA $363,807
7 Orange County, CA $353,081
8 Washington, DC $342,552
9 Oakland, CA $337,477
10 Fairbanks, AK $334,562

Least Expensive Cities to Raise a Child

Rank City Cost of raising a child
1 Norman, OK $199,298
2 Harlingen, TX $199,694
3 Ashland, OH $206,793
4 Salina, KS $207,525
5 Pueblo, CO $208,155
6 Memphis, TN $208,322
7 Temple, TX $208,593
8 Richmond, IN $209,522
9 Jackson, MS $211,309
10 Hattiesburg, MS $211,451

 

Related: Why the $245,000 Cost of Raising a Child Shouldn’t Stop You From Having One

MONEY

What It Costs to Raise a Child

Baby drinking milk bottle filled with cash
Mike Kemp—Getty Images

Parents will spend nearly a quarter of a million dollars to raise a child born today to age 18. The good news: The cost isn't going up as much as in years past.

A middle-income family can expect to pay $245,340 to raise one child up to age 18, according to an annual study released today by the U.S. Department of Agriculture. When adjusted for anticipated annual inflation of 2.4% though, the total in 2032 dollars will look more like $304,480.

The cost to raise a child, excluding pregnancy and college expenses, increased by only 1.8% over last year’s estimates, representing the smallest price jump since the financial crisis.

Middle-income parents shelled out between $12,800 and $14,970 last year on their child, depending on the child’s age. But wealthier families spent more than twice what middle-income parents do, reaching $407,820 to rear a child for 18 years.

Housing remains the largest expense of any parent’s budget at 30%, unchanged from 2012, followed by child care/education (18%), and then food (16%). More affluent families spent a larger percentage of their funds on childcare costs, while those in middle or lower income households tend to spend more on food.

The amount spent also varied by region, driven largely by the cost of housing. Those living in the urban south could expect to spend $230,610 on their child, but those living in rural areas could expect to spend far less—$193,590. Families living in the urban northwest can expect to pay the most at $282,480.

Related:
Why the Cost of Raising a Child Shouldn’t Stop You From Having a Baby

MONEY Ask the Expert

How to Tell if You Can Afford to Have a Baby

Pregnancy test with dollar sign
Sarina Finkelstein (photo illustration)—William Andrew/Getty Images

Q: “I’m a 38-year-old female, who has been focused on paying down student loans, currently at about $58,000 (my initial amount was $98,000). Minimum monthly payments are about $650, but I pay about $1,000 a month. I’ve paid down my loans by living very modestly, and at the expense of saving for retirement or planning a family. But now I’m afraid that if I don’t start having children now, I won’t be able to. Can I afford to start a family?” ‑ S.C., Brooklyn, N.Y.

A: “Having a child is an exciting but scary step, and money can be a big part of that worry,” says financial planner Matt Becker, father of two and founder of the blog Mom and Dad Money. “I wouldn’t dive in without considering the financial consequences, but I also wouldn’t let them scare you off.”

Considering the average cost for a middle-income couple to raise a child for 18 years comes in at just under a quarter of a million dollars, excluding college costs, according to the U.S. Department of Agriculture, you may never feel like having a baby is in the budget. But keep in mind that four million babies are born in the U.S. each year, and most of their parents adjust just fine to the new costs.

Even with your student loan debt, starting a family should be do-able for you, says Becker. You’ll just need to make room for in your budget for baby.

First step, get a handle on how you are currently allocating your income. (Mint.com can help you track your spending.) Then consider how your income might change after the baby, says San Diego financial planner Andrew Russell, who’s also a dad of two. For example, will you or your partner stay home part time or full time? Will you take any unpaid parental leave?

Once you know what your post-baby income will look like, get a rough estimate of the new expenses you will be footing, both one-time (like maternity clothes, hospital costs, car seat, crib) and ongoing (childcare, food and diapers). Becker recommends using Babycenter’s child cost calculator.

You’ll also want to factor in the cost of basic protections like life and disability insurance, which can help ensure your child will still be provided for if a parent dies prematurely or is seriously injured. “These will add to your monthly budget, but are well worth the cost for the financial security they provide,” says Becker.

With your big student loan payments, you may find through this exercise that your future expenses with baby exceed your income. So what next? See if you qualify for any loan forgiveness programs. Also, look for any fat in your budget to cut out—particularly recurring expenses that require a one-time effort to change like switching to a cheaper cell phone plan, cutting cable, or moving to an area with less expensive rents.

“Obviously this is a big life goal with a certain time frame, and if there is not that much room to cut back on spending, then you need to minimize the amount you pay back on loans,” says Russell, who adds that it’s okay for you to dial back to the minimum payment. “The debt is too large for you to take a good chunk out of it in the next few years, so you’re going to have to move forward with it.”

While the lower payment will add to your interest over time, the federal tax deduction on student loan interest—if you qualify—will offset some of the cost. Plus, every time you and/or your partner receive pay raises and bonuses, you can funnel that additional income toward the debt.

Once you’ve figured out your post-baby budget, start living on it—even before you get pregnant, Becker advises. And put the money you would be spending into a savings account. Besides helping you see if you can handle the budget, “this helps you build up a savings cushion that will relieve a lot of the financial anxiety that can come with a growing family,” says Becker. You will need to plump that cushion before the baby’s arrival anyway: With the general rule being to have cash reserves equaling six months of living expenses, you’ll need to make sure your emergency fund now reflects all the new costs you’ll be covering.

Related:

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