Having the support of family can be a person’s biggest strength. While relationships and emotional bonding are eminent cogs in leading a happy life, the absence of financial planning and financial ties among family members can often turn the situation awry. Things can further get complicated if different family members do not share the same financial ethics. Therefore, a family needs to unanimously understand what financial stability means to them.
The family financial planning is simple. It is all about sticking to a budget, making good financial choices, eliminating debt, using your paycheck optimally, and saving your money. However, it can sometimes take work for families to implement these practices in their lives. Read on to know how you can be on the same page as your family.
Also Read: Myths About Forex
Set Shared Financial Goals
Family Financial planning is not only for people of a certain age. Regardless of the medical condition, financial status, age, or profession of the family members, setting shared goals is the first step to securing a family’s future. The process helps identify ambitions and create an appropriate strategy to accomplish them.
To have a strong financial standing in the future, you need to have realistic goals that align with the other members of your family. You may be saving up for travel, but your spouse may be struggling to pay off a loan. You need to find a way to balance out your financial freedom with your spouse’s debt burden and understand how this impacts your family.
Here are some points to consider:
- Understand the family’s objectives and figure out what matters the most at a given time.
- Prioritize things that are more important to you and your family, including your children’s education, the family’s health expenses, household expenditures, debt status, etc.
- Create a realistic budget that takes all expenses into account.
- Opt for automated finances and do not merely rely on memory.
- Check on your progress to analyze if you are on the right track.
- Do not ignore short-term expenses like, spending money on material needs like a phone, clothes, etc.
Talk it out and make a common budget
The task of budgeting, when done in a balanced manner, can do wonders for a family’s financial goals and stability. Budgeting is a multipurpose process that helps in capping expenses and increasing savings. It also allows you to invest optimally. Contrary to personal finance, family finance planning needs a different approach. Sit with your family and prepare a monthly budget. The budget should include variable costs, one-time annual costs, and fixed costs.
Right from fixed monthly expenditures like internet bills, utilities, insurance, phone bills, etc. to variable costs like traveling, dining out, etc., make sure you include everything in your budget. Be mindful of taxes, policy renewals, interest payments, etc. too.
Do precise financial planning calculations
When doing calculations, you should take into account the income of all the members of the family. You may then determine the ideal way to use this income on a monthly basis. Some families follow the routine of allotting duties to each member. For example, one partner can pay the mortgage, while the other pays the insurance premium. The best practice is to come up with a realistic framework. It should not only seem good on paper but appear practical in real life as well.
A major focus for all families should also be to eliminate debt at the right time. In fact, for young or would-be parents, eliminating debt before starting a family is an eminent step in financial planning. Starting a family can skyrocket your expenses substantially and the constant burden of debt can spoil this new phase in your life. Ideally, both partners should maintain a debt-free status.
Family Financial planning for that takes into account the future generation
Planning for your children, also known as intergenerational planning, can help lock your family’s future into safer financial grounds. The decisions you make today can benefit your children in the future. If planned wisely, your estate can even be passed on to your grandchildren.
Life insurance is the first step to intergenerational planning. The cover is important for a number of reasons. It can help your family pay off debts, it can be used for your children’s education, and help provide your family with some security at a tough time in their lives.
Another important aspect of intergenerational planning is real estate. Leaving real estate to your kids can be a great measure to ensure their financial stability. You can also set up a trust to prevent inheritance tax. A financial advisor can help you chalk out the ideal plan that can benefit your children in the long run.
Avoid Leaving a monetary mess for your family
In the case of inheritance, unplanned finances can create many problems for your family. It is important for every member to have their financial assets in order. Start with ensuring that all your documents are in a safe place. Make sure you name the beneficiaries on your insurance policies, retirement accounts, and estate plans correctly. If you have been divorced, remarried, or widowed, make sure these changes reflect on your financial documents as well.
Here are simple steps to leave your secure Family Financial Planning
- Review the beneficiaries for your life insurance policies after any major life-changing event.
- Make sure you do not leave out the elders in your family.
- Always make your will with the help of a financial advisor or a will attorney.
- Safeguard the details of your financial assets. This includes your account numbers, passwords, policy numbers, policy provider details, etc.
- Get other members in your family, like your children and spouse insured.
- Check for pending debts like loans or mortgages. Enable bank accounts and other financial accounts’ access to your spouse or any other trustworthy member of the family.
To sum it up
Family financial planning should never be ignored or delayed. While taking note of prominent steps is important, there are plenty of minor details that need attention too. Maintaining your travel expenses, choosing the right tax filing status, being up-to-date with taxation rules in your state, planning for financial emergencies, and repaying minor and major debts, all make up for a great financial plan for a family. With patience, effort, and the right decisions, you can easily ensure that your family is safe and secure in the future.
Do you and your family have a shared financial plan? Read our Financial Blog to know how professional financial services can be your family’s key to financial stability.
Frequently Asked Questions About Family Financial Planning
What are the different types of financial planning?
Depending on your end goals, there are three different kinds of financial plans you might have:
Certain: This is the preparation carried out to meet a certain objective of yours. Purchasing a new car for your family, for instance.
Comprehensive: When you plan comprehensively, you attempt to accomplish every potential life objective and even take unanticipated circumstances into account. This entails attending to the demands for financial security, long-term objectives like retirement, and emergency preparation.
Legacy/Estate Transfer Planning: This pertains to making arrangements so that your family members get your estate smoothly, either during your lifetime or after your death. The goal of estate planning is to guarantee that the transfer is carried out as intended and that the recipient will experience a minimal tax impact.
What are the major steps in the financial planning process for families?
The six steps in the financial planning process are listed below.
Establish: Developing a rapport with his client is the first step in the financial planning. He should go over the services that will be offered as well as any additional guidelines and procedures that are part of the procedure.
Gathering Information: The financial advisor will gather all the specifics of your financial status at this point. To move on, you must supply all required documentation.
Analysis: At this point, the data you submitted is carefully examined. To figure out how to accomplish the objective you set, your current circumstances are evaluated.
Development of alternatives: At this point, the planner offers you a number of suggestions for achieving your objectives. This is predicated on the data that was previously analyzed.
Implementing the solutions: The financial planner will work with you to implement the recommendations once you have agreed upon them.
Review: You should regularly review the situation with your financial planner.
What is the ideal amount of money one should have before hiring a financial advisor?
It’s not a requirement to have a specific amount on hand in order to consult a financial planner. For most personal financial concerns, you can get assistance from a financial planner. Typically, you can consider hiring a financial planner if you have a steady job and have some extra cash to save.
What is the ideal age to start Financial Planning for my family?
Generally, the rule is to start as earlies as possible as it will increase the chances of getting a good return. Usually, an individual can start planning for his family once he crosses 30 years of age.
Do I need to visit any financial advisor for planning?
It depends on your requirements and how much you want to invest in financial planning. You can also read our blogs to get a good idea about financial planning, if you do not want to hire a professional.
