Whether you are single and supporting aged parents or married with children, it is essential to have your finances in order and planned for unforeseeable circumstances. Whether its health insurance for the family or children’s education fund or your retirement plan, there is a great peace of mind that comes with knowing that your family is secure and taken care of.
There are one main concerns of any individual that they face in their later life; how do I ensure that my money doesn’t run out. That’s why it’s important to do family financial planning and yourself earlier in life so that you’re not faced with such a situation later in life.
The following are a few points to keep in mind when you start planning your finances for your family, if you already haven’t:
- The best way to manage money effectively is through planning. Managing your monthly income helps you understand how much money to set aside for each requirement.
- Identify and articulate your goals. Make it clear to yourself what you want to put money into l
- One must keep an eye on one’s expenditure. Tax planning, budgeting must be done to keep a check on the cash flow. In a family, a lot of unexpected expenses can arise. Make sure you have sufficient funds and are ready for any circumstance that may arise.
- Getting a good coverage health insurance plan should be No.1 priority while doing family financial planning. Knowing you have provided you family with the best, it will provide a peace of mind too.
- Family financial planning doesn’t only involve saving, but also making the right investments. For example, if you have a young child and want to save for his tuition fees later in life, it would be wise to invest a sum of money in a plan with low risk and high returns. Thus you get a larger sum as compared to just accumulating money in a savings account.
- While putting money away for the future, make sure you have a complete understating of the various funds and investment plans you are putting your money in. Invest wisely keeping your risk appetite and time frame in mind.
- If you are thinking of expanding your family, then it’s important to keep sufficient funds for the immediate future rather than bind them in fixed deposits and such funds that have a long time period.
- Liquidity should be a major factor to consider while investing. It’s good to have some assets in high liquidity, thus if the need arises, they money can be utilized in emergency situations.
- Develop a good relationship with your financial advisor. Your financial advisor plays a critical role in reaching your financial goals.
- If you’ve invested in equities, be aware of what’s happening on the stock market. Don’t be negligent and end up losing your savings.
Some of the different tools one can choose to secure assets and finances are medical directives, life and health insurance, savings and retirement accounts, wills, trusts, and even financial products like mutual funds, fixed deposits, etc.
There are certain steps one can take to increasing chances of preserving your finances.
- Carefully evaluate and manage any risks that may be associated with the chosen financial plans.
- Regularly review the plans and documents.
- Think of long term goals and focus on them rather than short term goals.
- Avoid chasing after financial fads and stick to time tested methods.
- Don’t be an overachiever and aim for something that is not in your grasp. Live within your means.
- Pay off whatever debt is there as quickly as possible.
Another aspect to keep in mind while doing financial planning for young families is to consult fellow family members before taking big decisions. If you are unmarried and living with your parents, make sure one or both parents are part of the decision making process. Having so many years of experience, they would know best how to manage households and distribute finances for various things like education, insurance, etc.
If you are married, take your spouse’s opinion before investing a large chunk of money somewhere. Both partners have equal say in the planning of the family’s money and both should be involved in making decisions.
If you are alone in the decision making process, make sure your family has trust in your investments. They must be aware and in agreement with the financial decisions taken by the head of the family. If they’re not convinced, make sure you elaborate on the payoffs of your decision. Make them aware of the compromise and sacrifice involved in realizing these goals.
Start doing financial planning for your family as early as you can. The earlier you start, better the returns.