I was recently reading this book with my son. It’s a story about seven blind mice who go off one at a time to investigate a strange new object near their home.

The first six mice explore only a small part of the object and quickly return to let the others know what the object is. But, they all come up with different answers and argue about who’s right.

Finally, the seventh mouse spends time to explore the entire object and returns to tell the others that it is an elephant. Each of the mice are then able to see how the small piece of the object they explored was actually part of an elephant. 

At the end of the book, the author shares “The Mouse Moral: Knowing in part may make a fine tale, but wisdom comes from seeing the whole”. 

I couldn’t help but think how this statement is true in our financial lives as well. Financial decisions often come with a ripple effect, and understanding how they impact your entire financial picture can help you make the best decisions for you and your family.

These are some of the common financial decisions and life events faced by young families and some things you may want to think through to understand the full impact.

Starting a New Job

• Benefits – How do your benefits compare to your previous employer? Are there tax savings available by using an HSA or a dependent care FSA? Check out this article for a more complete list of things to consider. And if you are venturing into self-employment, make sure you understand your retirement savings options.
• Tax withholdings – Bonuses and equity compensation typically have taxes withheld at the supplemental rate of 22% – regardless of what tax bracket you will actually be in. Take this into consideration when deciding how much to have withheld.
• Equity compensation – Are you going to be receiving equity compensation for the first time? Make sure you understand the tax impact of the type of award you’re receiving. And have a strategy to ensure you don’t have too much of your human and financial capital tied up in your company.

Having a Child

• Insurance – Be sure to check with your employer to learn the requirements for adding your child to your health insurance plan. And with someone now fully depending on your income – you should have some type of life and disability insurance in place.
• Estate planning – This is not just a process for wealthy people with lots of assets to pass down. If you have young kids – you need to make it a priority.
• College savings – It’s never too early to start saving for college. Here’s what you should consider before starting.

Purchasing a House

• Taxes – Are you upgrading to a more expensive house with more mortgage interest? Will this allow you to itemize your deductions? If so, this may open up more tax planning opportunities to think about.
• Budget – A new house comes with more expenses than just a mortgage. Make sure you’re thinking about furniture, outdoor equipment, and property taxes. This is a great time to revisit your spending and make sure you know what you can truly afford.

A New Savings Goal

• How to Save/Invest – Maybe you’ve decided to save for a new house, a car, college, or a vacation home. Investing or saving for these different goals require different types of accounts and different investment vehicles. Think about the time horizon of your goal and how much flexibility you have – you can be more aggressive if the goal is flexible.
• Emergency Savings – Make sure you aren’t neglecting your emergency savings and if you do deplete your cash reserves, have a plan to build them back up.

Remember, “wisdom comes from seeing the whole”. Making decisions after you’ve considered all of the potential impacts to your financial life can give you peace of mind in whatever action you end up taking. 

Joe Calvetti is a CPA and the founder of Still River Financial Planning, a comprehensive, fee-only financial planning firm that specializes in working with young families and professionals. Click here to learn more about how we work with clients.

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Disclaimer: The information provided above is for educational purposes only and should not be considered financial, legal, or tax advice. You should consult with a professional for advice specific to your situation.