Money clearly isn’t the most important thing in life, but it’s an important aspect of helping your loved ones achieve their dreams and enjoy a secure, comfortable lifestyle. Once you’re a parent, it becomes more important than ever to have solid financial footing. Here’s how to set both yourself and your kids up for ongoing solvency, now and in the future.
What’s the worst possible thing you can imagine happening to your family? While we don’t want to live out our lives dwelling on worst-case scenarios, it’s important to have a plan established on the off-chance one of those nightmares becomes your reality. With that in mind, establish some safety nets.
Plan for Tough Times
One of your family’s safety nets should be life insurance. It’s an unfortunate truth that not all parents live to see their kids through to adulthood, and if that worst-case scenario becomes your family’s reality, it’s imperative to have coverage to help with finances. You want enough insurance to replace lost income, as well as cover debts, related bills, and so forth. Because of this, the free coverage available through most employers isn’t sufficient. However, some parents balk at adding a pricy policy.
Life insurance doesn’t have to be super expensive. You can get a term life insurance policy with locked-in payments, a guaranteed payout, and enough benefit to help your family in tough times. The word “term” refers to the fact that the policy covers you for a set period of time, rather than your entire life. It allows you to ensure you have a safety net established if something happens to you before your kids are raised and on their own. Getting a quote will help you figure out the terms and rates that are best for your situation.
Because Rainy Days Happen
We all have hiccups pop up in life, and with that in mind, you should establish an emergency fund. An emergency fund is cash set aside for rainy days, just like it sounds. By having funds ready to cover day-to-day snafus, such as a car repair or a new washing machine, you don’t need to pile on debt when there’s a bump in the road. How much you should set aside depends on your normal income, routine expenses, and so forth, so do some calculations to determine your family’s needs.
Basics Boost Security
If you don’t already have one, a basic budget is a key to keeping your family’s finances straight. A practical budget will be based on your actual income and expenses, so you should gather that information first. Total all your monthly income from all sources. Then total all your expenses. Make sure you cover every expense throughout the year, including fixed monthly bills, like your mortgage and car payment, non-monthly expenses, and flexible expenses.
The next step is to deduct your expenses from your income. As EveryDollar explains, your goal is to have a zero-sum. If you have non-dedicated income left at the end, you can put it toward debt or toward a financial goal, such as your retirement or the kids’ college fund. If you’re in the red, you’ll need to look at cutting expenses.
Cutting Costs Comfortably
Cutting expenses can feel pretty hard, but there are ways around it that are relatively painless. Generally speaking, the easiest place to cut is your flexible expenses. This would be things like eating out, entertainment, and so forth. A little creativity can go a long way here.
For instance, you might still be able to eat out, but head to restaurants where kids eat for free. If your family loves movie nights, cut the cable bill and stream your favorites. Or if things are really tight, plan fun-but-free outings, like picnics in the park, or cookouts in your own backyard. You don’t have to sacrifice the quality of life for financial security; just think outside the box.
Having kids changes everything, and your finances should reflect your priorities. If you don’t already have safety nets, put some in place, and create some solid financial guidelines. You and your loved ones can enjoy security now and in the future with a few simple, smart strategies.