Seven important tips to help you plan your family finances
When’s the last time you had a family discussion about your finances? Or even considered your full financial picture? Here are seven tips to help you get started.
Amid the growing needs of every family, financial planning often falls at the bottom of the priority list. Although financial discussions are something every couple starts thinking about as soon as they settle down, in reality, no one sits down with their family and has a detailed discussion.
But, it’s never too late to start strategising and monitoring monetary planning for achieving long-term goals. Here are seven great tips for beginning your family financial management and turning your dreams into reality.
1) Set financial goals
The first step to making a successful family plan is setting realistic financial goals. Every family has different needs depending on the number of members and your lifestyle.
It is important to have common goals among the working adults in the house and talk to each other about them to understand everyone’s expectations.
Start the difficult conversations by discussing with every member what goals must be prioritised. It can be retirement planning, college preparations, real estate planning, or exploring investment options. This way, once everyone is clear of what needs to be done, financial planning will become easier!
2) Build a family budget
Being one of the most important elements, planning a budget eases the money decisions. But while you are at it, ensure that the entire family participates in the process. It brings other aspects of financial planning into the light. For example, debt repayment and long-term investments start to fall into place. (You can read how one woman paid off her $30,000 debt here.)
When you discuss the budget with each member, you can understand the underlying differences and communicate with each other. If you don’t know where to start from, you can begin by listing your monthly income and spending. From here, you can dive deeper, like think about investing or savings.
One of the major benefits of holding the financial talk with the entire family is that your kids can learn its importance from an early age. They’ll realise the cost of living and learn to save before they start spending. Once they reach their teen years, encourage them to participate in discussions by conversing about their financial goals.
3) Settle your current debts
Repaying EMIs and loans before starting your journey to great financial planning is important because the interest you’ll pay will ultimately eliminate the benefits gained from any savings you make.
4) Create an emergency fund
Once you repay all your debts, focus on creating an emergency fund. Emergency funds are cash accounts meant to be easily accessible for major unexpected financial assistance like medical costs, or repairs.
Build an emergency fund and use them only when absolutely needed. They are a great safety net to rely on when you fall short of cash and need immediate monetary assistance.
5) Get FinTech savvy
Sometimes, no matter how solid our financial strategies are, we tend to go overboard with our needs. It might be an unexpected electronic purchase or a short unplanned, and necessary trip.
Whatever the reason is, it’s not advisable to take out from your emergency fund now and then to aid these needs. Keep those for larger requirements.
Today, as the financial sector continues evolving, many companies develop models that can aid your small, unplanned situations. They include online purchase loans for shopping. This loan acts like an e-voucher for online shopping sites where you can make quick purchases through EMIs.
Other than that, there are flexi personal loans for month-end cash crunch or last-minute out-of-budget gift plans and personal loans for miscellaneous uses like marriage expenses, credit card EMIs, or travel plans. Plan on taking these loans for your unexpected small purchases, so you don’t have to touch your emergency funds!
6) Consider saving or investing for the long term
To grow your money long-term, you can even explore the options of a high-interest savings account or make investments.
The cash savings account is best for regular savers because minimum monthly deposits are required. However, during inflation, if the interest rates don’t keep up, the spending power of your money is reduced with time.
In contrast to this, making investments are better in the long term. However, even that comes with risks. Research before you plan on saving or investing your money.
7) Start retirement planning
Every family plan is incomplete without proper and realistic retirement planning. If you are starting to plan out, begin by researching all the resources you or your partner has.
What are your available options? Today there are so many retirement schemes going on. Explore them and decide which one seems to be more practical for you. Here are five tips to help you boost your retirement savings.
It’s important to make financial plans for your family
Family financial management is more about your family than it is about yourself! Before you begin, keep your family members in mind — for example, their financial goals, needs, and current spending.
Since a family financial plan is a big deal and done for the long-term betterment, make sure the whole family sits together to plan it. Discuss with your spouse and other members and include them in the plan. Be open to adjusting your budget and goals to understand better what everyone thinks.
Tanvi Kaushik specializes in Content Marketing and works with the Digital Team at KreditBee – India’s fastest personal loan platform where self-employed and salaried professionals can get personal loans in just a few minutes.
Photo by Daiga Ellaby