Imagine being that one family that all the neighbors think is so lucky. You know the one – every other weekend in the summer they pack up the car and head to the beach house. And despite the fact that one of their children is in college and another close behind, the parents never seem to be worried about money. You’re pretty sure you’re in the same ballpark salary-wise, so how do they do it?
While not every family has the same story, one of the secrets to financial success is setting a budget (that can include fun weekend get-aways) while planning long-term. Here are five tips to consider when it comes to managing family finances:
1. Live on less than you make
Instead of budgeting based on total income, create a budget that uses less than your bi-weekly or monthly paycheck. Include savings in your budget, and leave the excess alone. This adds an extra level of breathing room for those rainy-day moments (or if that rainy day proves that your roof is in need of repair). By budgeting this way, you’ll be prepared to live on less than what you make, which could prove especially beneficial if a member of your family unexpectedly loses his job or suffers an injury.
While you’re thinking about the budget, don’t forget to rope in vacation planning. While the extra money set aside might not lead to a shiny new beach house, it can lead to some memorable weekends away that your whole family will enjoy.
2. Plan ahead for major expenses
If you have kids, you’ve probably given at least some thought to paying for college. But what about weddings? First vehicles? Or even braces? These expenses add up and can really strain your family budget if you’re not prepared. If you’re starting a family, take the time long before your bundle – or bundles – of joy come due to decide if and how you will fund each major expense down the road. Then build that savings into your financial plan.
If you already have kids, consider the unexpected costs and make a financial back-up plan just in case.
3. Have a hustle
A side hustle that is. Whether you’re 10 years into a secure job or you stay at home with the kids while your honey heads to work, opportunities are nearly endless when it comes to increasing your income, especially in the gig economy. Leveraging your hobbies and talents for a little extra cash will give you some wiggle room and allow you to build up a nest egg. And supplemental income will also ensure that you aren’t dependent on any one stream of income. Set up websites for local businesses, sell your handmade crafts online or market yourself as a consultant in your area of expertise.
Having that extra cash – even if just a small amount – can make a big difference when it comes to your family’s finances. It’s up to you on whether to stash it away in a college fund or splurge on a monthly family movie night at the theater. Find a balance that works best for you and your loved ones.
4. Dig out of debt
Whether you’re paying off a department store credit card or still paying off those pesky student loans, any type of debt is a downer. The interest you pay each month is extra money you can’t save for that family vacation your lucky neighbor takes each year.
If your family is living comfortably now and is looking to expand on savings for the future, consider paying off debt ahead of schedule. Some folks even pay double principal on their mortgage to reduce the lifespan of their loans and ultimately save money by avoiding additional interest payments.
This kind of financial decision can really add up, especially if you’re thinking about saving more for retirement.
5. Protect your family’s future
Purchasing life insurance is one of the simplest and most powerful ways to set your family up for financial success. You may have a job you love that pays enough to allow your significant other to stay home and your kids to attend the best schools in the area. But if the unthinkable happens, and your family can no longer rely on you to provide for them, they could see everything about their current lifestyle change. Consider your options for life insurance and do your research to decide the plan that’s best for your family.
Being that family that has their finances all figured out may seem difficult at first, but by taking a few simple steps – like establishing a budget that strikes the right balance between fun and savings – you can set your family down the path of financial success. Ultimately, as a parent, you want to see your kids succeed – and part of that success is building a foundation for them to embark on their own financial journeys.
If you’re looking for a little guidance on how to get started, reach out to us. We’re happy to help you weigh the options.