A lengthy trip requires a good roadmap, yet many people start their family lives without a clear plan for achieving financial stability. That may be all right for a few years but if children are in the picture, advanced planning is essential.
As a parent, a good chunk of your time will be spent worrying about money. After all, when you have children, your income has to stretch that much further. Between saving for college and daily expenses, things can add up fast.
With that in mind, it’s wise to really hunker down and get your finances in order. Here are some ways you can start.
Know your financial health
Before anything else, it’s a good idea to start your financial planning efforts by knowing where you stand financially. Thankfully, evaluating your financial health is not at all a difficult task.
A foolproof way of doing so is to take stock of both your assets and your liabilities. Liabilities pertains to credit card debt, taxes owed, and any outstanding financial obligation. Assets refers to your income, savings, investments, and any equity in your home or other properties. To do this, you can use a simple spreadsheet with two columns, one for assets, the other for liabilities.
One such asset that’s worth a closer look is your home, which is one of the largest—if not, the largest—investment you will ever make. The fact is, it’s actually more than just a place for your family to live. As Moving.com explains, it’s also a powerful tool that you can use as collateral or sell for a profit in the future, or even just leave to your kids one day.
To get a rough idea of your home’s value, look at homes with similar features. For example, search for homes with the same number of bedrooms and bathrooms, that are on a similar-sized lot, and in the same school zone.
By knowing what you are working with financially, you will be in a better position to plan for your family’s future.
Peace of mind for a growing family
One of the best ways to alleviate your financial worries is by planning for contingencies and emergencies. You can never really predict what may or may not happen in the future for you and your family. Medical bills, car accidents, and even unexpected death can all take a toll on your finances. But there are ways to prepare for the worst.
Investing in life insurance is a good start. Securian points out that this is a real must-have for parents as it guarantees your family’s financial footing in case something untoward happens to you. Also take time to prepare legal documentation, such as guardianship, powers of attorney, and a trust, each of which might be needed if you die or become incapacitated.
Similarly, burial insurance is worth considering. Having burial insurance coverage can alleviate your family’s financial strain by not only covering the expense of funeral arrangements but also relieving other debts you might leave behind, like loans and medical bills. It’s essential to have a clear picture of what you want when the time comes. Although burial policies are lower in dollar value than standard life insurance, you can purchase an amount higher than your funeral cost, which can add a small cushion for additional needs.
Looking to the future
As a parent, you must always look to the future and plan accordingly. One day, your kids will go to college or move away, you will retire, and life will change. You need to be financially prepared for these events. Responsible financial planning entails saving as much as you can, as early as you can, and as regularly as you can. You’ll want to save for your kids’ education, your retirement, health care, and even things like home repairs and travel.
It is generally advised to explore the many ways you can put cash aside beyond regular savings. One option to consider is starting a business, which can have good income earning potential and will allow you to remain flexible with your schedule.
If you decide to go this route, consider diving into the marketing industry. A marketing business poses a greater chance of profitability than other industries. Start-up costs and operating expenses also tend to be lower.
Financial planning is one important aspect of being a responsible parent. And until your children are earning their own income, you have to protect their best interests. Having safeguards in place means your spouse and children won’t hurt financially if you were suddenly not there to support them.
It can be challenging, yes. However, the sooner you embrace it, the better able you are to ensure that your family’s financial future won’t be fraught with money worries.