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As a parent, you want your children to be happy. You want them to have a good life now and a good life in the future. You may also want to set aside something for your child’s future. All of this requires making a financial plan for your family.
Keys to Making a Financial Plan for Your Family
Children require money. And they continue to need money after they have moved out of your home. This means that parents need to set financial goals for themselves and their children.
The financial goals you set for your family will differ from those set by others. Not every child wants to go to a university. Not all children are going to get married as adults. But all children will need a place to live when they become adults.
Your financial situation may not allow you to buy a new house for your child. However, could you give them $10,000 that they can use as a deposit on a home? It is not as unrealistic as it may seem.
Make Big Problems Small by Breaking Them Down into Steps
First, set the goal. It could be $10,000 as a deposit for your child’s first house. The next question is, how long do you have? The earlier you start, the easier it will be.
For example, assume that you are able to get an annual interest rate of five percent on the money you save. This means that you will need to put aside $35 each month for 19 years and 10 months to have $10,000 to give your child as a down payment on a home.
Setting aside $10,000 seems like an insurmountable challenge. However, setting aside $35 a month is easy.
Know Where Your Money Goes
Financial planning is not simply increasing the amount of money you make. It is also knowing where the money you make goes. This helps you get a handle on your family’s spending as you work toward certain goals.
Whether you use a simple spreadsheet or a complicated budging app, tracking your spending is a must. This means recording all sources of income and all expenses. This will give you an accurate picture of your cash flow. Looking at this will help you understand what adjustments you will need to make if you are going to reach your savings goals.
Spending can be divided into two sections. These are essential and nonessential. This will help you identify any obvious ways to save money. You will also be able to quickly see how much your family spends on things that are unnecessary. You likely won’t be able to remove all unnecessary spending from the budget, but you might cut it back to a point where you will have more to save or invest for the future.
Just think about how much more you could help your child out in the future if you could up that monthly savings from $35 to $50. Just $15 more a month now means thousands of dollars extra for your child. This is money that could be saved by not going out to eat one time.
Tackle Debt
Putting $35 to $50 aside can seem overwhelming if you are drowning in debt. If you have a ton of debt and do not know how to pay it off, you are not alone. Debt consolidation has helped many people get a grip on their debt and move forward. Consolidation will mean that you will have just one payment a month.
If you have multiple debts that you are trying to pay off, you are racking up interest on each debt. However, after your debts have been consolidated, you are just paying interest on one loan. It is possible that consolidating your debt can improve your credit rating since you will be paying all of your monthly payments through that one loan.
Once you have tackled your debt, take the money that you are spending on debt and devote that to savings. It feels so much better putting money aside for savings than it does spending that same money on debt.
Financial planning for your family is not something that happens overnight. It takes time and effort. However, you will see positive results now and in the future.
