Guest blogger, Brittany Fisher from Financially Well, lays out the first steps to set financial goals.
How to Create a Solid Foundation for Your Family’s Future
What are your goals for the future, and how are you taking care of those who depend on you? We all want what’s best for our loved ones, but solid financial footing doesn’t typically happen without planning and forethought. Read on for practical advice so you can set your family up for security and success.
Think about the unthinkable
Parents naturally dream of watching their kids grow up, and seeing them through all the big transitions into adulthood. However, it’s crucial to make plans in case you pass away before those dreams come to be.
One recommendation is to discuss your situation with an estate planning attorney. These professionals can advise families on important matters and ensure they make plans meeting legal criteria in their state. Nolo points out it’s a chance to establish key personal preferences, such as who will raise your children if you aren’t able, and how assets will be distributed if tragedy should occur.
Along those same lines, you should purchase life insurance to benefit your family, which could be used for things like housing or medical expenses if your family must go on without your income. A term policy is a smart choice in many circumstances, and this guide can help you determine what would be best for you.
One other aspect worth considering is pre-planning your funeral. With the median price for a funeral coming in around $8,508, pre-planning or even a final expense policy can protect your loved ones from a financial hardship. For the young and healthy, this could seem like a premature decision. But the benefits of putting final wishes in place now ensure your spouse is less burdened in the event of your death.
Generate basic guidelines
In order to achieve your financial goals, it’s necessary to start with a well-marked path. If you haven’t already done so, creating basic guidelines for your current spending is the best place to start on setting up for your family’s future. That means establishing a realistic budget and sticking to it.
Begin by adding up your monthly take home pay, and then list your expenditures. Don’t forget periodic expenses, like annual vet visits, vehicle registrations, and so forth, as well as variable items, such as clothing and groceries. Deduct your expenses from your income, and aim for a zero balance. If you come out ahead, start putting more into savings. If you’re shy of balancing out, you need to reduce spending. Usually the easiest place to cut is your variable expenses.
Never too young to start
When your family is young, retirement is something that might not be at the forefront of your mind. However, the sooner you start planning, the better off you will be when that day finally comes along. With that in mind, investigate your options.
One of the best retirement savings plans is 401(k) matching. Plans vary widely, but basically your employer offers a retirement plan in which they match your contribution up to a set amount, putting funds toward your retirement for you. You can use an online calculator to ensure you make the most of the opportunity. There are some other good options as well, such as a Roth IRA or a SEP IRA for those who are self-employed. If you aren’t sure what’s best for your circumstances, a financial advisor can help you sort details.
Your children’s education
As parents, when you’re considering your children’s future, you want to be in a position to encourage them to pursue their goals. With that in mind, starting college savings accounts can provide peace of mind both now and down the road, when your kids are ready to start making their life decisions.
There are two basic types of college savings plans, a 529 plan and a custodial account called an UTMA or UGMA. NerdWallet recommends a 529 plan due to its tax advantages and because it’s specifically for college, and you can use this handy chart to find out what is available where you live. On the flip side, custodial education accounts are without restriction, and can be applied to any number of purchases once your child is of age.
It’s more than reassuring knowing your family has a solid financial plan. Establish a safety net in the event you pass away, create a realistic budget, and start savings plans for your retirement and your kids’ education. Thanks to your good preparation, you can rest assured your family is protected from financial hardship later in life.