Becoming a parent comes with immense responsibility. One area which many parents push to one side is finances, but stability and security here play a crucial role in laying the foundation for family life. If you’ve never given it much thought, here are a few essential steps to managing your family finances more effectively.
Whether you’re in a marriage, relationship, civil partnership or taking things on alone, you need transparency when it comes to your finances. Burying your head in the sand or hiding bad money habits from your partner is never a good way to go about things.
By reviewing your situation, identifying strengths and weaknesses, and encouraging honest, open communication about money, you can lay a strong foundation for family finances.
Establish clear financial goals
It’s always worth setting clear financial goals at the start of any family journey. Sit down with your spouse or partner and discuss short-term and long-term objectives, whether it be boosting your credit score, owning your own home, moving to a new area or funding family adventures.
A clear direction makes it so much easier to plan the road ahead and ultimately stick to that plan. You’ll also be able to prioritise more effectively and allocate resources with greater accuracy.
Create realistic budgets
The best money habit you can develop is budgeting – it’s the cornerstone of any financial planning. Track your income and expenses to identify spending patterns and areas where you can make better use of your money.
With better insight into how you’re using your income, you can designate the appropriate funds to certain areas depending on your priorities. Ideally, you want disposable income left to save or invest after all your fixed costs, such as mortgage/rent payments, utilities and other bills, have been accounted for.
Debt isn’t always a bad thing, but you should be looking to minimise any high-interest debts such as credit card balances and quick personal loans. Focus on repaying these before you start saving because it will cost you more money the longer your debts are unpaid.
If you can’t clear existing debts then try to consolidate or get lower interest rates. Clearing debt does wonders in freeing up cash to save and invest in the things that matter to you and your family.
Create an emergency fund
Life is unpredictable, and unexpected expenses can arise at any time. An emergency fund gives you a financial safety cushion to ensure these occurrences don’t derail your financial plans completely.
Aim to have as much as you can afford, ideally three to six months of funds, put away in a separate account for a time when it’s needed.
Save and invest wisely
With your finances under control, you can start to think about saving and investing for the future. This should come back to your financial goals, whether you want to own your own home or fund your children’s education. Different families will have different goals and needs, so choose what matters most to you.