As you think about your goals for your family, you might consider that you could do even better if you had a financial plan in place. The good news is that there are several things that you can do right now to make a solid financial plan. If you’re not sure where to get started, check out this step-by-step guide that can help ensure your family has a stable financial future.
Set financial goals
Setting clear financial goals for your family is vital. However, it’s not always easy to set up a budget and stick to it for the long term. People don’t usually plan on unexpected expenses or life changes like getting new jobs, retiring, or having another baby. But don’t let that keep you from having tough conversations about what your family should prioritize for its financial future.
There are many financial goals that may make sense for your family, such as saving money in an emergency fund, paying off debt, or building up retirement savings. You’ll need to sit down with your partner or other family members to decide which goal should be a priority.
Pay off high-interest debt
High-interest debt can be a detriment to a family’s financial stability. With a high-interest-rate loan or credit card, it can be challenging to pay off the debt promptly, especially if you’re only making the minimum payments.
The key is figuring out what the best payoff strategy is for you and your family. You can choose from multiple options, including the snowball strategy, where each extra payment goes towards the smallest balance first, or the avalanche, where the largest balance gets paid off first. If you’ve got a lot of student loan debt, consider using a loan payoff calculator to help you determine a realistic strategy that gets you out from under your debt.
Whichever strategy you choose will depend on your personal goals and preferences regarding what feels achievable for you and your family.
Create a spending plan
A spending plan is a strategy for using your money in a more organized and intentional way. You can think of it as a budget, but the main focus of a spending plan is to clarify how money is flowing in and out of your life. This helps you identify where you can make adjustments for financial success and then create a budget that works for you and your family.
Start by listing out the essential expenses for your family like your mortgage, education bills, utilities, etc. Once the necessities are accounted for, begin adding extracurricular activities, hobbies, and other self-care-related expenses that keep your family happy. Keep an eye on how money gets spent in your family to see if there are blind spots you might be missing. “Money leaks” can cause your family to come up short at the end of the month, so make sure everyone knows why money needs to be tracked and how it affects everyone’s goals.
Save for retirement in the right accounts
If you haven’t begun saving for retirement, there’s no better time to start. If your employer has a 401k match or pension plan, enroll in it and start allocating an amount of money towards it regularly. The better prepared you are for retirement, the more options your family will have in terms of lifestyle when you’re ready to retire.
Open an investment account
In addition to retirement accounts, you should also have some sort of investment account to make your money work for you. You can speak with a financial planner to set this up, or simply head to one of the more prominent investment brokerages and set up an account yourself. Thanks to the internet, many brokerages have no fees or minimum balances. Setting up a small account for your kids is an excellent way for them to learn how the stock market works and may give them a better understanding of how they can manage their finances once they hit adulthood.
Keep updating the plan
Your financial plan should be considered a living document that must be regularly updated as new life events come into play. Consider updating it when you have new goals like moving to a new home, saving for your kid’s college tuition, planning a family vacation, or retirement. The more attention you give the plan, the better off you’ll be protecting yourself from unforeseen expenses or financial emergencies.
The bottom line
Hopefully, this guide has given you an idea of the different financial planning questions you need to ask yourself, your partner, and your family. By considering these questions, you can determine what your family’s financial plan should entail and how it will fit into your overall life plan.