Taking care of your family’s finances may not be the most exciting task in the world, but it is an important one. After all, it can have a huge impact on the family’s overall prosperity, not just today, but for many years to come.
While getting a grip on the family’s finances may seem a little overwhelming, it becomes much more manageable when you break it down into smaller chunks. In this post, we’ll run through a few key steps that need to be checked — and once you have, you’ll have much greater peace of mind that your family’s financial legacy has been taken care of.
Set a Budget
There are only a few people on the planet — and we really mean only a few — who don’t have to worry about budgeting. Even professional athletes, who are paid millions of dollars a year, need to budget.
Your budget will be specific to your family and its needs. The main thing is to have a grip on your outgoings and incomings and make sure that they’re aligned. This step alone can help to prevent a wide range of financial-related problems, and it doesn’t take that long, either. In fact, you can create a budget in a matter of hours. And once that’s done? You’ll just need to stick to it.
Educate Your Children
When we talk about family finances, we tend to talk specifically about the parents and how they manage money. After all, they’re the only ones who really have a say in how the finances are managed. Yet, that statement is really only true for today. If the kids have poor financial literacy, then it’ll be more likely that eventually, it will come back to bite the family in one way or another.
Having open conversations about money — such as how earning, saving, and spending influence financial well-being — can do wonders, and you really don’t have to wait too long before you begin talking about these issues with your children. It’s best to just normalise these conversations from when they’re young. Over time, they’ll naturally develop a solid understanding of what a healthy relationship with money looks like.
Saving Plans
Putting money away from the future — be it for your child’s education or otherwise — is essential. The problem is that actually doing it is difficult. It can take a fair amount of discipline to save the required amount of money. While many people save, they often only save the bare minimum. As with most things, you’ll get out what you put in, so it’s best to look at ways to ramp up your savings.
One effective way to increase your savings is to use one of the many automatic roundup saving apps available. That’ll direct a set amount to your savings each week, and you’ll also have the option to ‘roundup’ every card transaction to the nearest dollar, with the difference going into your savings. Turn on this feature and then simply forget about the app. In a year or so, you’ll likely find that you’ve managed to save thousands without even really trying.
Set Up An Emergency Fund
Your savings will contribute to your long-term financial health. But it’s also wise to set up an emergency fund that you can use to manage unexpected costs, such as unemployment or major house or car repairs. Without an emergency fund, you’d have to dip into — or even obliterate — your savings account, which will put your financial health in jeopardy.
Try to have around 3 – 6 months’ worth of expenses in your emergency fund, and remember that the account should be easily accessible (same/next-day withdrawals).
Investing
You can see why people shy away from investing, but the fact is that it’s one of the smartest financial decisions you can make. And while there are no guarantees, there are some investments, such as investing in the S&P 500, that are generally considered stable. These investments won’t make you rich overnight — be wary of any investment that says it will — but can deliver a handsome return on your investment when left for several decades. In other words: putting your money there now might just pay off when it comes to your retirement.
Work with Experts
It’s important to have a grip on your finances but keep in mind that unless you have specific expertise, it’s likely that you’ll need to draw on the help of financial experts to boost your financial health. Working with an estate planning lawyer can give you peace of mind that your family’s financial future is secure while working with a financial advisor can make managing your investments and making other finance-related decisions more straightforward. As a general rule, if it’s a complex aspect of personal finances that you don’t understand well, then it’s worthwhile speaking to an expert.
Avoiding Poor Financial Decisions
There are plenty of things that families can do to push their financial health in the right direction. But the things that they don’t do are arguably just as influential. If you’re repeatedly making financial errors, then it’s possible that they’ll undo the good work that you’ve been doing.
There’s no shortage of poor financial habits that can hold a family back. It could be impulse spending, taking on debt, or simply overspending as a way to keep up the Joneses. It’s worthwhile taking a look at your financial habits and identifying any of your weak points. Remember, saving $500 a month just by getting a grip on your poor financial habits is as good as getting a $500 pay rise.
Take It Seriously
Finally, perhaps the best advice for pushing your family towards a healthy financial future is to simply take it seriously. As we said at the beginning of the article, handling your finances isn’t the most exciting thing on the planet, but it can make a difference to your quality of life. If you take a considered approach, set savings goals, and all-around manage your finances correctly, then you’ll reap the benefits in the future.
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