Family financial management can be challenging, especially when there are so many competing demands on your income. However, with careful planning and budgeting, it is possible to effectively manage your finances and achieve your financial goals. In this article, we’ll provide strategies to help you and your spouse learn how to manage household finances more effectively.
Create a family budget.
The first step in managing your finances is to do a little family budgeting. A family budget is a plan that outlines your combined income and expenses and helps you to see where your money is going.
Start with a list.
To create a budget, start by making a list of all your sources of income, including salaries, bonuses, and any other income you may have. Next, make a list of all your expenses, including rent or mortgage payments, utility bills, groceries, and other household expenses.
Now that you have created your list, it will be easier to get a sense of how much of your income you are spending each month on your various expenses.
Prioritize your expenses.
Before you decide what purchases you can or can’t start eliminating, it is important to prioritize your expenses. Start by prioritizing your essential expenses, such as rent or mortgage payments, utility bills, and groceries. Next, prioritize your debt payments and any other expenses that are necessary for your family's well-being, such as healthcare expenses. One of the most common family budgeting techniques is to use the 50/30/20 rule. The idea is to divide your income into three spending categories—50% on needs, 30% on wants, and 20% on savings. Once you have prioritized your essential expenses, you can allocate funds for your “wants,” such as entertainment or vacations.
Reduce unnecessary expenses.
Reducing unnecessary expenses is an important part of money management in the home and will help you stick to your family budget. One way to do this is to review your monthly expenses and identify areas where you can cut back. For example, you may be able to save money by canceling subscription services or by reducing your cable bill.
Likewise, if you find that you are spending more on groceries than you had budgeted for them, you may need to cut back on other expenses to stay within your budget. You can also save money by being mindful of your spending habits. For example, you may want to consider packing your lunch instead of eating out or using coupons when grocery shopping. It is important to be realistic about what you can afford with your household finances and to make sure that you are not overspending in areas that are not essential.
Save for emergencies.
One way toprepare for emergenciesis to start saving money in an emergency fund. Emergencies can happen at any time, and having a savings plan in place can help you to avoid financial hardship when they do.
Tobuild your emergency fund, start by setting a savings goal and contributing a fixed amount each month. You may also want to consider setting up an automatic transfer from your checking account to your savings account to make saving easier. A good rule of thumb is that you should have at least three to six months' worth of living expenses saved at any given time. As with your budget, themost important part is sticking to this goal. A little each month can add up to a lot over time.
Communicate with your family.
Effective communication is essential for managing family finances. It is important to involve your family in the budgeting process and to make sure that everyone is on the same page. This can prevent misunderstandings and ensure that everyone is working together toward common financial goals.
In addition to involving your family in the budgeting process, it is also important to have regular conversations about your family's overall finances. Do you have awill and estate plan? Do you have a relative who needs long-term care? How do you want toset your children up for financial independence? If you need help with family wealth strategies, don’t be afraid to reach out to a financial professional.
Family and finances checklist:
- Do you have an updated will?
- Are there family heirlooms you would like to give to specific family members? Is it specified in your will?
- Do you have guardians for minor children?
- Do you have a durable power of attorney?
- Do you have a living will and/or a medical power of attorney?
- Are your life insurance, pension, IRA, and annuity beneficiary designations current?
- Are all of your important documents in one place, such as a safe deposit box? Are designated family members' names on the signature card?
- Do you have an available list of important information, and will your family know how to access it?
- Do you need to contact your attorney to update your will, or do you need to contact your New York Life agent to review your life insurance and other financial concerns?
Seek professional help.
Managing family finances can be challenging, and it may be helpful to seek professional help. Financial professionals can provide guidance on budgeting, investing,mortgage protectionthrough life insurance, estate planning, and other financial matters. They can also help you create a customized financial strategy that is tailored to your family's unique needs. The sooner you start, the sooner you will be on your way to managing your family’s finances.
