6 Must Do Financial Tips For Young Families
Managing your finances can seem daunting when you are married, have a new family, and nurturing a career all at the same time. But with appropriate prioritizing and planning, the following tasks will help you sleep easier knowing you are doing what you can to keep your financial security on track.
Create an Emergency Fund
And here it is again - another reminder to create an emergency fund. This should be priority number 1 in your plan, followed by a debt repayment plan. If both you and your significant other are working, it is a great idea to ensure that you save at least three to six months of your salaries. If you are the only one working, save up to a year’s worth of your salary. Remember, this won't happen overnight so be patient.
This way if one of you loses your job or require emergency money for a large-scale home repair or emergency pet visit, you will have these funds to fall back on instead of scrambling to find the money.
Create A Financial Plan
Creating a budget based on your financial goals and how much you can afford to invest and save after you pay your bills and expenses. Check out my previous blog, Financial Plans 101, to learn how to create a plan. It may also be a good idea to get professional assistance from a financial advisor like myself. In effect we can act as a disinterested third party helping you strategize and prioritize your goals. We can take the emotions and impulse buying out of the equation, if needed.
Pay Your Debts
If you have a debt such as credit card or student loans your financial plan should include a payment strategy. Don't just throw money at your debt hoping to pay it down. Whether you do it yourself or with a financial advisor such as myself, come up with a strategy. The most basic strategy starts with the highest interest rate. Pay those off first while making the minimum payments on the lower interest rate cards. You really can't achieve financial freedom and security if you a debt monkey on your back.
Start A Retirement Plan
The sooner you open a retirement account and begin putting money aside, the more you will have ready for your future. This all comes down to the power of compounding. There can be a noticeable difference if you start with say $1000 a year at age 29 versus starting at age 39.
However, there are limitations to what plan you can contribute to and how much. For more information on the types of plans don't hesitate to give me a call.
Start A College Fund
College can be expensive, even with loans and scholarships. It doesn't hurt to start a fund and contribute from the day your child is born. It doesn't have to be just you or your spouse making the contribution. If a grandparent or family friend asks what to get as a gift for your child during the holidays or birthday ask them to contribute to your child's educational future by contributing to the 529 Plan.
As always there are maximum limits that can be contributed to a 529 plan each year. Keep that in mind when you or a family member contributes.
Get Life Insurance
Life insurance is a great way to ensure that you are protecting your family’s financial future. This is especially true if you have a mortgage to pay, young children or only one of you is working.
If you are unsure if you need life insurance or how much you truly need please give me a call. Together we can do a life insurance needs analysis to determine the amount of coverage you truly need.