Family And Finances: Three Simple Steps To Financial Security

Are you ready to start planning for a family? If you said yes, then it’s time to talk about financial planning. If you already have a child and haven’t started planning yet, it’s ok! We are sharing three simple steps on how to get your finances in order starting today.

According to the United States Department of Agriculture, it costs $233,610 to raise a child from birth to the age of 17. That number increases $17,500 each year! The study, which was released in February of 2020, is based on the most recent data from 2015 and by the way, this number does not include college expenses. It’s safe to say that it can be expensive raising a child. 

Don’t let those numbers get you nervous because we are going to guide you on three simple steps that will get you on the path to financial security.  

Step 1: Cut Down On Your Credit Card Debt

Credit cards can be convenient, but if you have a balance in the thousands of dollars, there’s a good chance you are paying quite a bit in interest fees. The first step is to work on not using your credit cards for purchases and the second step is paying them down until you get to a zero balance.  

We aren’t going to sugar coat this for you, if you have $3,000.00 in your savings account and $4,500 in credit card debt, you have a net worth of -$1,500.00. The first thing to do is try to get your balance on the lowest interest rate you can. Many cards offer a zero interest rate on balances that are transferred to their card for a certain period of time. If you have access to this, then transfer the balance over. Start making payments on the card with the highest interest rate. Once that one is paid off, go to the next, and then the next, until you’ve eliminated your credit card debt.

Step 2: Create A Budget

You need to have a budget while you are working on controlling your spending and paying off your debt. 

• Determine what your net income is. This is what you are actually taking home each pay, after taxes, social security and any other expenses that are taken out of your paycheck. 

• Track your spending. When we say “spending”, we mean everything that you are spending your money on. You might be surprised to see how quickly that cup of coffee every morning adds up! 

• Determine your fixed and variable expenses. Fixed expenses are those expenses that you know are going to stay the same month after month. Examples of fixed expenses are your mortgage, car payment, and insurance. Variable expenses are expenses that may fluctuate. Examples of variable expenses are groceries, car maintenance, and clothing. 

• Set a goal on what you want to achieve.

• Plan on how you will achieve your goal. Usually this means adjusting some of your spending habits so that you can focus on paying down the debt or putting additional money into a savings account or investment. 

One question that is often asked is, how much money should I have saved. The answer for this varies from person to person, however at a minimum, you should have no less than $1,000.00 in an emergency fund with a goal of having 3-6 months of expenses in your savings. These expenses include both fixed and variable expenses.

Step 3: Get Life Insurance

If you’re wondering if life insurance is worth it, the answer is YES! If your family is depending on you for financial support, then you want to make sure they are taken care of if something happens to you. The recommended amount of life insurance is 6-8X your gross income, however there are also resources who recommend 10-12X is best. 

Properly managing your investments, expenses and making the right financial decisions takes time, skill and effort. If you’re having trouble getting started, then reach out to a financial advisor to help you get set up with a strategy so that you and your family can have the financial security you deserve.