It’s hard to go from handling your money as a single person to handling money as a couple. When you add children to the mix, it gets even tougher – birthday parties, karate lessons, family vacations…
All the things we want our children to have can put a pinch on the family budget.
If you have a young family, you need to be smart about your finances to make sure your family is taken care of.
Here are six common mistakes young working families make when it comes to money. How many apply to you?
1. Too Much Debt – Most people see debt as a way of life. However, if you want your children to have a sound future, do whatever you can to avoid carrying excess debt. Pay off those credit card balances as quickly as possible, or at least make sure that if you do use debt, you are still living within your means.
2. No Budget – “Who can afford to budget?” The real question is who can afford not to. A budget is nothing more than a smart plan for how you spend your money. It’s too easy to go on binge shopping sprees or pick up that little something extra at the grocery store that you really don’t need. Budgets help curb impulse buying and be honest with yourselves, most young couples underestimate their expenses by 20%.
3. No Retirement Savings – Retirement may seem like it’s a lifetime away when you’re raising your children, but it will be upon you before you know it. First, get out of debt and save some money for emergencies. Then do everything you can to put money away for retirement. If your employer matches your 401(k) contributions, you need to contribute as much as possible. Forget about saving for a new car until you’ve maxed out your 401(k) contribution.
4. No Insurance – As young parents, a term life insurance policy is probably all you need. Term life is less expensive than whole life insurance. Talk to a reputable insurance agent about the best policy for your family.
5. Not Saving for Education – The cost of a college education has gone through the roof. Some estimates are that in 18 years, ‘a four year private college education will cost more than $300,000.’
After you’ve put money away in an emergency fund, cleared your debt and maxed out your 401(k), your next savings goal should be your children’s education fund.
6. No Emergency Savings – By now we’ve mentioned emergency savings several times. That’s because so many young couples don’t think about planning for emergencies. It’s tough to put extra money away “just in case” when you’re raising a family. Every penny seems to be spoken for. But you need to try and have 3 to 6 months’ salary set aside for emergencies. Put a little away every time you possibly can. Don’t let the numbers daunt you. Just set it aside in an account and leave it there. With today’s job market, having those emergency funds can be a life line and is more important than ever.
You may be thinking that right now it’s all you can do to just take care of your children but planning ahead for your family’s welfare is the greatest gift you will ever give them.
We can help you plan.
Call us to schedule your Family Wealth Planning Session today 244-3905.
Image Credit: Obenauf Law Group