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Financial tips for starting a police family

The time to start thinking about your finances as they relate to your children is before they’re even born

Editor’s Note: Dwight D. Eisenhower once said, “Plans are useless, but planning is indispensible.” We’re just one month from “Tax Day” and as a financial planner who specializes in helping cops and firefighters, PoliceOne Contributor John Johnson’s days are getting very full. We wanted John to write something again this tax season, so we asked him to address some of the planning you must do as dependents start entering the equation.

Did you know that there is a hefty tax credit that may be available to many households who have a dependent child? It’s called the Child Tax Credit. The credit is worth up to $1,000 per child. One of the real benefits of this is that it’s a tax credit, not a tax deduction. Unlike a tax deduction, a tax credit reduces your tax bill dollar-for-dollar. Each qualifying child will reduce what you owe the IRS by a full $1,000. There are income limits attached to this credit, so check with your tax professional to see if you qualify.

Wait a minute, let me back up a bit. The time to start thinking about your finances as they relate to your children is well before they’re even born.

Starting — or adding to — a family is a financial challenge for most people. As with most major life decisions, planning for your little addition is key to success and happiness. If you wait until after the baby is born to ask, “How am I going to pay for this?” you could be in for a rough time. It is important that you be aware of the changes that are coming — especially the financial changes — and prepare for them.

Start planning at the beginning. Prenatal care and the delivery of your child can be quite costly. It is important to have enough money to pay for the hospital and doctor bills that are associated with having a baby. Many doctors will set up a payment plan to cover their portion of expected costs. You will also be responsible for a portion of the hospital bill. Medical insurance can be difficult to understand, so contact your benefits section and get an explanation of the expenses you’ll be responsible for.

Another thing you need to consider is the cost of daycare. Daycare costs can be very expensive. You may consider one spouse staying home with the baby, especially if one spouse if making less than $20,000 a year. Take home pay after the cost of the daycare expenses and costs of working will have about the same effect as working at home. This is a personal choice for each couple to make, but it is worth crunching the numbers to see if this works for you.

Life and disability insurance are musts for both parents. Why? Any time people are dependent on your income to pay for their living expenses you need insurance. Life insurance is intended to help pay for family living expenses until your children are 18, done with college or on their own. Disability insurance is another important form of insurance that replaces income in case a working parent is ill or injured and unable to work. Both you and your spouse need life insurance, no question about it. If you’re a stay at home parent, your life insurance wouldn’t replace an income. If you died, it could pay for necessary help like child care or a housekeeper. There’s no magic formula for how much you’ll need. Talk to a financial planner or insurance agent about what coverage would be appropriate.

If you’re on a tight budget and have trouble saving money, remember this: saving for retirement is always more important than saving for college. Why? You or your child can borrow for college. You can’t borrow for retirement. If you and your partner both work, you should try to contribute as much as you can to your department tax qualified retirement plans. Not only do you save for retirement, but you decrease your taxable income.

Remember that planning is always the most important step in making a major life decision.

Good luck, and stay safe.

John Johnson is a Sergeant with the Suffolk County Police Department in New York. John’s law enforcement career started in 1988 as a patrol officer. In 1993 he was assigned to the Community relations Section as a D.A.R.E. officer. In 1999 John was promoted to the rank of Detective and assigned to the Identification Section. After 4 years John was promoted to the rank of Sergeant and assigned patrol. John then spent more than three years in the Internal Affairs Bureau and currently serves as an assistant to the Police Commissioner. John has a diverse education background. He has a Bachelor of Science Degree in Biology and was at one time a high school biology and chemistry teacher. John has held numerous information technology certifications, and has extensive training in computer forensics. He has been in the financial services field for more than five years and owns Balanced Financial Solutions , a company dedicated to helping police, corrections, fire and ems personnel protect their family’s financial future. Contact John Johnson
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