Getting your finances under control is just one of the many responsibilities of being a parent. People in debt commonly experience depression and anxiety as a result of chronic stress and sleepless nights. As a result, staying on top of your financials can improve your physical and emotional health, helping to raise your family's overall happiness. Here’s how to get started with financial planning so your children to grow up in a healthy and happy home.
Set Some Financial Goals
Having a financial plan involves knowing where you are and where you want to be. First, it’s important to assign motivations to your financial goals, so you can stick to savings plans. For example, you may be motivated to set up an emergency fund so that your family is protected from hardship if you lose your job. Or, maybe you want to pay off credit card debt so your income can go toward your child's college savings instead of monthly payments. Then, decide on a general timeline for completing each of these goals. This can help you stay on track by preventing overspending and encourage you to save whenever possible.
Save Enough Cash for Emergencies
Everyone should have an emergency fund. But, having a safety net of money is even more important for parents. What will happen to your family if you are suddenly unable to work? Can you afford a large medical bill? Would unexpected expense throw you into debt? An emergency fund should cover the basic living expenses for your family for at least six months. To help you build up an emergency fund quickly, try selling old items, taking on extra work opportunities outside of your regular job and making cuts to your budget. Then, once you’ve got enough saved up, you can return to your regular earning and spending habits.
Keep Track of Your Spending Habits
Keeping on top of your financials involves being aware of how much you are spending in different areas. Forbes recommends making a budget for each store you frequently shop at, such as your local grocery store or department store. This is easier than tracking specific spending categories. Smartphone apps can help you connect various bank accounts and automatic bills so you can view your finances wherever you are. It can also be helpful to set up a separate spending account where you keep any extra income you can use for fun activities and entertainment.
Avoid Common Financial Mistakes
Many parents get lost in the stress of caring for a new baby and therefore end up avoiding financial planning altogether. Don't make quick decisions or put off important issues because you’re busy. For example, people often forget about the importance of life insurance and disability insurance. These policies can protect the well-being of your family if anything happens to you or your partner.
Also, saving for college should start as early as possible so these funds can grow before your child enters college. But, don't prioritize your child's education over your own retirement savings. It's easier for you and your child to find alternate solutions to school funding than it is for your child to support you while you age. Finally, too many parents overspend on their new babies. Try to look for hand-me-downs and secondhand baby supplies instead of buying new, luxury items.
Start Thinking Long-Term
Long-term financial planning will help you avoid making unwise financial decisions based on short-term obligations and fear. According to The Balance, getting out of debt is one of the best things you can do for your financial health. Although in the short-term, you'll lose more money paying off all your debts than making your minimum monthly payments, you’ll save tons of money in the long-term that you can put toward savings for the future.
Another thing to consider is whether your home is too expensive for your budget. You can figure this out by using a home cost calculator. If your home is not within your budget, it may be time to downsize.
Becoming a new parent means making some serious changes to your budget and your regular spending habits. Suddenly, you have another life to support and their future to protect. Get your financials in order now so you can avoid stress and sleep well knowing your family will be financially secure no matter what ha