Starting a family is an exciting phase but also an expensive adventure. It is estimated that raising a child for 18 years costs an average of $280,000. With the ever-increasing cost of living and inflation, you should start securing your family’s financial future before it’s too late.
According to recent studies in the United States, 70% of Americans suffer from financial stress. You can escape this stress by planning to protect your family’s long-term financial prosperity with a few simple tricks. Here’s what you need to know:
1. See Wills and Trusts
Estate planning can help protect your family’s financial future after your death. Most people prefer to write a will, but you can create a living trust because it provides more security than a will and can be effective in your life. Also, unlike wills, trusts don’t go through probate, and give beneficiaries after you more control over your assets.
However, there are different types of trust. For example, you might consider creating a qualified terminable interest property (QTIP) trust. Setting up QTIP estate planning means securing your spouse’s future for their lifetime. QTIP trusts work as irrevocable marital trusts, and your significant other receives the income generated by your estate. However, like a marital trust, a QTIP trust allows you to decide who receives that income after your spouse dies.
2. Create an effective budget
If you want to protect your family’s financial future, focus on creating a budget and sticking to it. Create an effective budget taking into account family income and monthly expenses. Doing this should help you find a drain on your household expenses so you can stop spending money unnecessarily.
To create your budget, set financial goals, track your income and expenses and eliminate all unnecessary expenses. Also involve all family members in the process and make sure everyone sticks to it.
3. Cut all unnecessary expenses
Research shows that about 40% of Americans overspend. This includes spending nearly $1,500 a month on unnecessary and other avoidable purchases. Cutting most unnecessary expenses will help you save a lot of money for your family’s future. For example, an average family eats out 4 to 5 times a week. Instead, you can try to eat once a week and start cooking at home. Likewise, avoid impulse buying, take advantage of discounts and don’t pay unnecessary subscriptions.
Cutting your expenses will help you save more and put that money to better use in the future.
4. Be current on maintenance
A family spends $3,000 to $4,000 a year on maintenance and repair of household appliances and gadgets. This helps to increase their usefulness. So, repair furniture sooner rather than later, and you won’t need to spend thousands of dollars to replace them. Take good care of your vehicle, check your home HVAC system for any problems, and invest in gutter cleaning, chimney sweeping, and other essential home maintenance.
5. Create an emergency fund
More than half of Americans don’t even have $5,000 to fall back on in an emergency. You can protect your family’s financial future by creating an emergency fund and adding more money over time.
How much should you put in this emergency fund? Calculate how much you need for your monthly expenses and multiply by six. For example, if your monthly living expenses are $5,000, it’s smart to save $30,000 for bad days. Keep these savings in a separate account and avoid unnecessary spending.
6. Control your family expenses
Keeping track of your family’s income and expenses is essential to budgeting. When you start budgeting, your family can save enough for emergencies and secure their financial future.
You should keep track of all sources of income, such as salary, bonuses, dividends from stocks, and any family member’s income from a side business. Then you have to divide your expenses into two types: fixed and variable expenses. Fixed expenses include mortgage or credit card payments, non-deductible expenses, and variable expenses that are easily deductible, such as clothing, food, hobbies, etc.
7. Get life insurance policies
Although a family’s financial security is an overlooked aspect, life insurance policies protect a family’s financial interests from risk. This risk can range from serious illnesses to any unexpected accident. Adding another layer of financial security, a life insurance policy can help your family cover funeral expenses, unpaid debts, and living expenses. You can talk to an insurance professional to find out what insurance plan is best for your family.
8. Pay off debt
Unpaid debt can ruin your family’s financial stability and future plans. Because of this, you should plan to pay late. Paying off what you owe can improve your credit score, which can be very helpful if you need to take out another loan in the future. Here are some simple tips on how to pay off debt.
- Write a list of all your debts
- Reduce your expenses to free up some money
- Talk to a credit counselor about debt settlement
- Start by paying off the debt with the highest interest rate or repay the smallest amount first
- Use automatic payment methods to pay debts on time
- Consolidate high-interest debt into a low-interest loan or credit card
9. Get some financial advice
About 57% of American adults are financially literate. If you are part of this group of people, contact a licensed financial advisor to find the right path to financial security in this economy. A financial advisor can look at your income and expenses to suggest how you can accelerate your journey to financial stability. The consultant can recommend various methods to do all of the above and much more.
Life is unpredictable; At any moment, you can get into a pickle and risk your family’s future. So it’s never too late to take matters into your own hands. Following the above tips will ensure that there is always something in the pot for a rainy day. Get started now!