A recent report from the US Department of Agriculture surveyed thousands of parents and found that the average amount of money that’s required to raise a child is over $233,000 a year. This number can change depending on where you live, but regardless taking care of your family requires wise financial management. Here are six tips to live a financially stress-free life while supporting your family.
1. Track your budget
Budgeting gets a bad rap. It’s not a punishment, but rather a tool you can use to achieve larger financial goals. Tracking where your money goes is a critical part of gaining financial awareness, which changes behavior and molds good habits.
Sit down on a regular basis to look at where your money is going. You’ll gauge how you’re succeeding on financial goals you want to accomplish, which can help you trim unnecessary expenses. Discussing budgetary details with your partner can also help you make informed financial decisions that are based on needs.
2. Fight lifestyle creep
When you start making more money, it’s tempting to spend your money with less restriction. Lifestyle creep is a slow, silent assassin that can destroy your financial ambitions and goals. You can still give your child an excellent and fulfilling life without having to spend progressively more money.
Saving money now can help you give your family more in the long-term. An antidote to lifestyle creep is simply living below your means. Estimate your income conservatively and focus on what is truly necessary when you spend money.
3. Plan life events
When you are first thinking about financial planning, set out a list of normal life events that your child will probably experience and add up the total of that amount. This number might seem daunting, but you have time to reach this goal. The fact that you’re thinking about financial planning is already a good sign that you’ll be prepared.
4. Tackle small debts
Lots of needs and desires can vie for your attention, including those of your family. Building financial security for your family requires learning good habits now and sticking to them. Taking care of small loans or debts now can free up extra money in future months, improve your credit score and increase your confidence to pay down other loans.
5. Save a specific percent of your monthly income
Incomes change, expenses vary, and life throws every family curve balls from time to time. Making a goal to save a specific percent each month will help you plan for the future. Saving a specific percentage of your income gives you a baseline for your budgetary goals. This can help you avoid lifestyle creep, but more importantly, gives you a chance to teach your child good financial habits by example.
6. Assess your assets
Review your assets, both current and expected, then use that information to account for increases and decreases in spending. In order to do this, you’ll need to start by finding out the value of your major assets like your home, cars, and investments. Think about how these values might change over the future. If calculating your assets proves to be difficult, consult a financial planner to help you figure this out. It doesn’t take a fortune to hire a financial planner; it may only take a couple of visits. Just discuss your assets and life goals to help you start a plan for your family.
Financial planning isn’t something you do just once. It’s a living set of plans and ideas that becomes a lifestyle. How you choose to spend money now will have a tremendous impact on the lifestyle and opportunities that you offer your child in the future. When your kid gets into college, you’ll be glad you started good habits a long time ago.
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