How Does Family Financial Planning Differ?
Everyone knows that life changes after you marry, especially after living alone. It’s likely that you were already living on a tight budget. Now you have a new in-house member. It is also possible that your spouse might be a lower income earner. The calculation you formulate to tackle the situation is planning. Both spouses have contributed something to formulate this plan, but since, this planning is more an immediate remedy with no long-term value, it cannot be termed as family financial planning.
Planning is simple, but family financial planning is notable. If we take an original scene, a married couple in their mid-30s with kids is the one who needs a proper family financial planning. The couple has anywhere from 15-20 years left to earn. Their kids will also seek admissions to university and the couple will also needs to a retirement plan. Not to forget, there will be diseases, unfortunate events, and other situations that are bound to eat up the savings. They can never save enough to save the struggle, that is why family financial planning is so important.
How To Plan
Starting a conversation is the primary, and most important, part of family financial planning. The first step is to discuss the financial situation with your house members, including kids. It’s helpful to teach them the value of money in their early years, to set them up to be good planners as they grow. If it’s a joint family, draw a chart and list everyone’s earning with their share of family expenses. Scrutinize this data every quarter, make such examinations a play and set a goal – say, the greatest contributor gets to be the house captain and everyone must obey him, this will positively motivate the entire house.
For distant future expenses like owning a house/farm or college fee for your children, get SIP (Systematic Investment Plan) or mutual fund plans. Also, do not forget to avail a retirement/pension plan, which will also provide you tax rebate under 401(k). Consider health risks too, keep this fact in mind that you and your spouse will age, and there will be a time when you’ll become incapable. Plan for an assistance, this could be a top-up investment over the existing retirement plan. It’s better to invest in health care plans which lapse each year with no value left than to keep on depositing a set of saving for health care.
Create an excel sheet and list all the assets, liability and account number on one page. Share this data with your family. This will keep things centralized when you’re unavailable. This will also give an exact picture on the go about the balance sheet of the entire family.
How will you react when life will throw a curveball, get on the practical side and apply life insurance plans for eligible members in the family, it’s not always the case that the oldest member will die first. I know, no one wants to talk about it, but we have to face it. An uninsured death of an earning member can collapse a whole family financial situation.
Consult with a financial professional, if possible. Those who are expert in real estate, fiduciary management, and tax planning. Plenty of investment options can be available with a better guidance.