Lately, amongst our clientele, we have been experiencing a bit of a boom … a baby boom no less. As I type this blog the day after a very interesting 2019 trade deadline day, I am smiling as I read the news of yet another baby coming to one of our client families. There are obviously a lot of things to consider and a lot of things on your minds with this happy news … that ever growing list of things to do such as; arrange or build a nursery, plan for the day of arrival, especially if that day comes during the season or playoffs; or that list of things to buy; car seats, strollers, cribs, etc. I recently read an interesting stat that, on average, American parents spend over $230,000 per child from birth until age 17, not including college. As factors like cost of living and inflation keep rising, we could expect that number to rise as oppose to drop over time. We have come up with a list of 5 areas we encourage you to consider before the happy bundle, or bundles as it were, arrives.
Watch your Debt
It goes without saying that a whole new category of expenses will be introduced in the form of diapers, formula, etc. The idea of Cash Flow and budgeting has been introduced in previous blogs, and it certainly pays sense to pay attention to the Playbook that is a major focus of the Pro’s Process. Working with Chris and the team in preparation for baby takes on a renewed focus.
Do you have Emergency Funds?
Needless to say, having children will make your normally comfortable life and routine more unpredictable. Again, recalling our Playbook, one of the important pieces of the budget planning is making sure there are funds available for any number of unforeseen circumstances that can crop up once you start having kids. Remembering how pro athletes are so very different then perhaps many of your non-hockey friends or family having children, your uneven annual income flow does make it important to plan for the months when you won’t be earning a regular paycheck. Current thought centres around three to six months living expenses in an emergency fund, but that number will differ on your individual circumstances and the plan you have made with Chris.
Planning for the Future
In the new copy of the Pro’s Process, released earlier this year, Chris highlights some interesting ways how pro athletes differ from the non-sport earning population. Average earning power is much shorter and the dollars much higher, making “retirement planning” look a lot different for our clients; with lifetime earnings between $5 and $15 million, 70-90% of which will be earned before the age of 35. Your pension is also markedly different from that of your non-athlete friends. With the NHL pension currently set to start paying in your 60’s, having some money available for the interim period makes good sense.
Life Insurance and Estate Planning
You didn’t think we would get through a whole article without me talking about Estate Planning, did you? While any kind of loss is heart-breaking, the loss of a parent can be devastating; especially to a young household with little children. New parents would be wise to think about the following in anticipation of that new bundle of joy: Properly drafted and signed Will with guardianship and possibly a trust for the minor child Durable Powers of Attorney Medical and Health Care Directives for both parents
Typically, the earning power of our clients is skewed toward the player. It is important therefore to have adequate insurance to replace that rather sizeable income. However, it is also important to have sufficient insurance on the stay-at-home spouse as there would be a considerable amount of expenses for replacing things like childcare and other significant expenses usually contributed by the stay-at-home spouse. Again, part of the Pro’s Process is attention to all aspects of the Playbook, which certainly highlight both of these key parts.
While it is a bit strange to think of this new, tiny little one as a college or university student, many of the couples I speak with do want to make some kind of provision for this facet of life for their children. While we do tend to address this piece with our Will planning, there is good thought to address this in your overall planning for baby at this time. Another interesting stat I came across states that, as of the first quarter of 2018, Americans owed $1.5 trillion in student loans; no small number. Given the fact that most governments offer incentive programs for parents who chose to invest in this type of savings, it may make sense for you and Chris to discuss if it makes sense in your situation.
All in all, you will be focusing on so many things before your new family addition arrives; and hopefully I have been able to demonstrate above that it is not all about being financially prepared. By going through the Pro’s Process with Chris, paying attention to all aspects of our Playbook, you will be ready on a good many fronts … the rest will be up to you.