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Ask the Experts: September 2020

A lot of people don’t feel comfortable talking about money. In some cases, it’s because they’re worried about making a mistake or saying something wrong. In other cases, people may feel like financial matters are a private topic that should only be mentioned with those with who you are extremely close. Some may even feel like it’s rude to talk about money, budgets, and savings.

However, when you talk about money and when you ask questions and share information, you learn more. Discussing money matters and talking about budgets can help you understand concepts you weren’t aware of or learn new strategies you may not have considered. Discussing finances helps you better understand money and how to manage it.

That’s why our team answers financial questions each and every month. We want to provide answers for people who have money and budgeting questions and help them get a better handle on their own financial situation.

If you have a question for our team, ask us online on FacebookTwitter or through our website.

The questions here have been condensed or rewritten for clarity and simplicity.

How Do My Partner and I Know When We Can Afford to Have a Baby?

Having a baby is a big life change and a big financial commitment. There are many aspects to consider both emotionally and financially. The first thing to note is that there’s no “set amount” that you should have before you decide to have a child. Every situation is different and every family will have their own unique circumstances.

One thing you’ll want to make sure you have is an emergency fund. Life is unpredictable, especially when you have a child. Most experts recommend having at least three-to-six months of expenses put aside in your emergency fund, but the amount that’s right for you will depend on your situation. Put some money aside every month and grow your emergency fund over time.

You’ll also need to make sure that your family will be able to support itself on the income you expect to have after the baby arrives. If one or both of you is planning to take some time off work to care for the baby, this will most likely decrease your family income.

Figure out how much you expect to earn in the months (or years, depending on the situation) that will follow the arrival of the baby. If you’re going to get parental benefits from the government or your employer, find out how much you will receive. If it’s less than you’re earning now, you’ll want to create a budget that allows you to afford your expenses without going into debt. If you can’t make it balance, you may want to take some more time to save up before you have a child. You can then use your savings to supplement your income after the baby arrives.

Finally, though you should certainly prepare financially before you have a baby, don’t give yourself added stress and anxiety trying to make your situation “perfect.” You can still save money after you have a child as well. Kids don’t need to have absolutely everything, and very young children don’t really ask for much other than food and love. Don’t fall into the trap of thinking you need to have every article of clothing, type of toy, and new gadget that’s available.

Should I Close the Credit Cards I’m No Longer Using?

Closing old credit cards can hurt your credit score. That’s because your credit history is a big part of your credit report. If you have had a credit card for a long time, especially if it’s one that you have repaid on time, this indicates to lenders that you can be responsible with credit.

Closing a credit card also reduces the amount of credit you have available, which can also potentially hurt your credit score. That’s because most lenders want to see people using about 30% of the credit they have available. For example, if you have two credit cards that each have $5000 limits, you have $10,000 of available credit. If you have a balance of $3000 on one card and owe nothing on the other card, you’re using $3000 of the available $10,000, which equals 30%. However, if you close the card with the zero balance, you’re now using $3000 of an available $5000, or 60%, and that could be a potential issue in the eyes of the credit bureaus.

However, keeping a card open can also cause problems. Not only could you be tempted to spend more if you have more credit available, but you could also open yourself up to identity theft or fraud.

The reality is that you’ll need to decide what is more important to you: keeping your credit score the way it is or removing the temptation to spend. If you decide to keep the card, you may want to not carry it around with you and delete it from any online shopping sites. This will make it much less likely that you’ll use it unnecessarily.