Money is a huge part of everyone’s life, and managing it only gets more important when you start a family. Fortunately, there are plenty of ways you can make your money more manageable. Here are a few tips from 1st & Main Investment Advisors for parents looking to take control of their financial situation.
Look Toward the Future
One of the most important steps for securing your finances is to consider your financial future. There are many big things that come down the line for all of us eventually, and it’s important to be prepared for those costs. For example, it’s vital to have life insurance when you have a family. If you don’t, your loved ones will be saddled with the cost of your funeral and other end-of-life expenses, which can be wildly expensive. Moreover, they will be left without your income and may have trouble making ends meet in your absence.
By taking time to plan your estate, you give your family security in the event of your passing. Money from a life insurance policy can go toward end-of-life costs, but it can also cover bills, living expenses, and even college tuition. You can also use savings accounts, such as retirement or education funds, to prepare for your family’s future. By setting aside a portion of your income to ready your family for expenses down the road, you save yourself from future stress and anxiety.
As you look out a few months or years from now, you may be considering purchasing a new or larger home. Saving now will pay off when it comes time to get a home loan, not just with the down payment but for paying points on the mortgage. According to Rate.com, paying points on a mortgage means “to pay a fee directly to the lender at closing in order to secure a more favorable interest rate. Also known as ‘buying the down the rate,’ paying points on a mortgage can ultimately lead to lower mortgage payments month to month.”
Understand the Present
You cannot know how much you can afford to save, however, before you know what you need to spend today. That’s why it’s important to have a thorough understanding of your family’s current financial situation. Start by tracking your spending for a few months. Don’t try to make changes immediately; you can’t fix anything until you know where you’re starting.
Once you have a sense for what you spend, you can start to distinguish between necessary expenses and areas where you have some flexibility. For example, many monthly expenses such as electric bills or rent can only be reduced so much, if at all. Others, such as how much you spend at restaurants, have a lot more wiggle room. Figure out what areas you can cut back on, and use that information to spend more mindfully and intentionally.
Find What Works for You
Remember: Not everyone’s mind functions the same way, and it may take some trial and error to figure out the best money-tracking system for you. Some people function best using a digital budget they can access on their phone and computer. Others do best by physically writing things down, so the information stays cemented in their minds. You can even use a method such as envelope budgeting, where you put actual cash into categorized envelopes (groceries, entertainment, gas) and only use that cash for those expenditures.
Pass Tools on to Your Kids
Financial planning can also be a great way to give them the tools to thrive their whole lives long. Make sure to keep your kids informed and involved in your budgeting process. Involving them in age-appropriate ways is a better technique. CNN Money notes that this gives them a foundation in money management — something they’re unfortunately not likely to develop at school. This way, they’ll be able to take on their adult lives empowered with an understanding of how to manage their own money.
Taking control of your finances isn’t always easy, but we feel it’s an absolute must for parents. Not only can it provide stability and financial confidence, it may also secure their futures in many ways. Focus on taking the necessary steps to make your money work for you.