Managing household finances for yourself can be challenging, let alone if you are doing it along with raising a family and having a demanding career simultaneously. The truth is many people don’t pay enough attention to their finances during the time in their lives where their earning potential is the highest. Effectively managing finances during this time of life is an important step in having lasting success and financial health. This article will provide some key tips to financial security while raising a family.
There are countless ways to have financial security and success. Here are a few especially important ones to keep in mind while raising a family.
Financial Planner/Advisor. If you and your spouse/partner are both working and raising a family it might make sense to hire an experienced Financial Planner/Advisor who can help create a program to meet both short and long-term financial goals, manage/advise on investments and other accounts and keep their eye on the ball when you are not available to do so.
1. Good credit score. Credit scores are an important part of your financial health. Good scores can open the door to many savings and benefits, including access to loans and credit cards with the most advantageous terms and to large purchases such as a house.
2. Having a good debt to credit ratio helps your credit score and should not be overlooked.
3. Save, for you & your family. With so many things to remember about your family and children, it is also easy to forget about yourself. Consider taking advantage of any employer-matching 401k contributions, which is “free money,” and set up automatic withdrawal of your retirement contributions to eliminate the mental hurdle of saving each month. Prioritizing your own retirement now will prepare you for the future and reduces the possibility that your child will need to support you later in life. If you don’t participate in a 401K, make sure to put away a set amount on a monthly basis, ideally in some type of interest-bearing account.
4. 529 Savings Plans. Investments grow tax-free and can be withdrawn tax-free for educational expenses like tuition, room and board, and required textbooks. These plans have historically been used to pay for college-related expenses; however, now they can also be used for qualified expenses earlier in your child’s life, such as private K-12 education. Unlike retirement and other investment accounts, 529 plans are operated by each state, which makes searching for the best option fairly easy; if your state offers a tax deduction for contributing, you’ll likely get the most bang for your buck by contributing to its plan but you are free to choose any plan you would like so it’s worth comparing options.
5. Timely bill paying. Seems like common sense, but this is something that gets overlooked a lot and is an important part of taking control of your financial life. Knowing when your bills are due and making a habit of paying them by the deadline can reduce your stress, save you money, boost your credit score and enable you to get lower-interest credit in the future.
6. Create, adjust and hold to a budget. Having a household budget is critical for financial security as your family grows. With new children come new expenses. It will be helpful to understand what costs will be a temporary hit and what recurring costs will influence your budget in the long term. Online budgeting apps such as Mint or Personal Capital can help make this exercise as painless as possible.
7. Build an emergency fund. Unemployment is stressful, but especially so when your family is growing. Creating an emergency fund that will cover 6-12 months of living expenses in the event of a layoff or change in employment is helpful. It can provide a comfortable cushion for a parent while searching for a new job, and should be calculated based on the family budget. An emergency fund is especially important if your family relies on a single family member’s income.
8. Estate Plan. As a parent of a young child or children, the number one reason why you need an estate plan — specifically a will — is to name who will take care of your child or children if both you and the other parent pass away. If you don’t, the court will appoint a guardian.
The tips listed above, if followed, do not guarantee financial security, but they are a good place to start. The importance of being financially healthy while raising a family cannot be underestimated. There will always be a need for more money as diapers, toys, and summer camp gets replaced with car insurance payments and college tuition. Creating a solid and secure foundation early on helps set the stage for an easier and less stressful time later. After all, you want to be able to enjoy this time as well.
Thank you to Jackie Melinger from My Personal Bookkeeper for these great tips. Please contact me if you would like to learn more ([email protected])
Being financially secure while raising a family is easier said than done, and many families struggle with it. The experienced team at My Personal Bookkeeper can help customize a plan that fits your family’s needs in order to stay on top of these necessary tasks. Visit My Personal Bookkeeper at https://www.mypersonalbookkeeper.com/ to learn more about our services and how we can help you find peace of mind when it comes to your financial and household security and organization.