Two becomes three – and everything changes

By Jason Laming, Financial Advisor

Saturday 20^th February 2016 4:21 am. That is the moment my life changed forever. Bleary-eyed, a crushed hand and you couldn’t have taken the smile off my face. My wife had just given birth to the most beautiful little girl and suddenly two becomes three and everything changes. It might be a cliché, but I wasn’t really ready for it.

There are many things we needed to work out and learn: how to feed, change and bathe her. How to keep her warm, make her laugh and importantly, how to get her to stop crying and go to sleep. Mostly, how do we get her to sleep… so we can too! And to be honest, it was how my wife could get some sleep. My wife has been amazing; she just keeps finding more energy to keep going.

Everyone has advice to share about how to deal with newborn babies and everyone wants to give you that advice. What no one tells you about though, in any meaningful way, is how a child changes your financial world. I knew about the obvious cost of setting up a nursery and extra shopping like nappies and that my wife’s income would stop, but beyond this no one talks about ‘the rest’.

It’s easy to forget ‘the rest’ when you are just worried if your child is still breathing because you haven’t seen them move on the monitor for a few hours and you have to sneak in and listen. But ‘the rest’ is important, very important.

The ‘rest’ covers the other things that keep me awake at night:

• My wife and daughter are now entirely reliant on me going to work, what happens if I get sick or injured… or die?
• What happens when my wife’s maternity pay ends?
• What if I don’t earn enough money to pay for everything?
• What if either of them get sick and we can’t afford the treatment?

I’m sure every parent has had these feelings and sometimes it’s hard to put into words what the problem is and how to deal with it. Well this is how.

Having a sole breadwinner

As the sole breadwinner, the most important asset our family has is my income. This needs to be protected and I have done this by taking out Income Protection so we will still receive an ongoing income if I get sick or injured and can’t work. Along with this, I have taken out Life Insurance so my family is looked after financially if I die. I have taken out Total and Permanent Disability Insurance to look after me and my family if I can never work ever again. And I have taken out Trauma insurance so we have choices if I suffer a serious injury or illness. Financially, we will be looked after if anything happens to me.

But, what if something happens to my wife? Will I stop work to look after her and my daughter or could I pay for carers for them? It was important to understand what this would mean for us financially. To deal with this we have also taken out insurance for my wife and that makes me feel much more financially secure.

My wife is still receiving maternity pay at half pay which is softening the impact of her not working, but going from two incomes to one is a big change to our lifestyle. We have had to rationalise and prioritise our spending to prepare for this. Doing this before our second income stops is going to make things much easier than trying to adjust all at once. Even better would have been to live off one income before our daughter was born and saved that money for her future. Alas, we all live and learn.

Finally, and what has turned out to be the most difficult decision: who would look after our daughter if we both die? We had to think carefully about who to entrust this to.  Who is in the right stage of life, has the right financial position and capability to look after our daughter, if not us? Is it a brother or sister who may not want children yet and are establishing themselves financially? Or parents who are looking at retiring soon? And what about their ability to manage the large sum of life insurance they would be looking after for our daughters benefit? This is a big decision – we are taking our time to get this right.

There are other aspects we are working through too. What school do we want our daughter to go to, how much will this cost and do we need to prepare for that? Do we need to spend money securing our yard so she can play outside without us worrying she will run onto the street?

I have heard the worry never ends and I can believe that now. At least for some worries, I can sleep easier now and for others, we have a plan we are working towards.

At Blueprint Wealth we offer financial advice that is right for you, no matter what stage of life you are at. Contact us to set up a plan that is right for you.

Jason Laming, Authorised Representative of Blueprint Planning Pty Ltd (ABN 78 097 264 554), trading as Blueprint Wealth; Authorised Representative and Credit Representative of AMP Financial Planning Pty Ltd, Australian Financial Services Licensee and Australian Credit Licensee.

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