Financial Tips for Parents Who Need to Get Things in Order
Guest Post by Sarah Bailey
Through TheWidow.net, Sara Bailey shares her unexpected and ongoing journey of losing her husband and learning to be the best parent (and person) she can be while nurturing her grief.
Parenting comes with its fair share of challenges, and sorting finances can be a major one. Thankfully, you can get things under control with the right approach. Let’s look at the fundamental areas that you need to tend to in order to make sure you’re on stable financial footing.
Acknowledge Where You Are
It’s not possible to have a good financial plan if you haven’t established where you’re starting. When you’re assessing your financial health, you should take your assets and liabilities into consideration. In a nutshell, assets are things you own outright, and liabilities are things you owe on. While you can have a number of different assets, they all count towards determining your net worth.
Since you and your partner will be doing this together, it might save on time if you both create your lists separately. If you don’t have accurate figures for some things in your possession, like your car, then online resources could be helpful. You can also use tools to keep track of your information and clarify your situation.
Establish Your Savings
Having a clear picture of your current finances will show you what you need to adjust. In many cases, parents may find that they’re not saving enough. This should include an emergency fund as well as long-term savings.
Dough Roller explains what goes into planning your emergency fund. While it’s usually recommended that you have three to six months’ worth of income set aside for emergencies, you have to also factor in paying down your debts.
It’s recommended that you try to maintain some balance when you’re starting out and check out accounts that give you a good rate of interest. You’ll also need long-term savings in place so you can take care of future expenses. This would include things like your retirement as well as your kids’ college funds.
Set Realistic Goals
When you’re dealing with financial stability and looking ahead, it makes sense to keep your goals at a level that’s in line with your cash flow. Being realistic also helps you avoid the frustration that can come with not being able to accomplish a goal you’ve set for yourself. For example, to prepare for owning a home, you should research what homes in your target area have sold for as well as all the costs associated with buying a home.
It’s especially important that you save towards your down payment. According to Redfin, the amount you put down can be as low as 3% if you’re taking an FHA loan, but 20% is more conventional. Bear in mind that if you pay less than 20%, you’ll also need private mortgage insurance (PMI).
Look to the Future
Apart from amassing funds for retirement and college education, the right life insurance policy can ensure costs associated with unpaid bills or funeral expenses don’t have to come out of your savings.
Of course, the benefits you receive are dependent on the type of policy you have. For example, a term life insurance policy can be used to cover a number of costs as it’s only valid for a set number of years. A whole life insurance policy, on the other hand, remains in effect until you have passed away. In that case, the funds will most likely be used for expenses incurred by a funeral.
It’s important for both parents to be insured and for you to have sufficient coverage, so make sure you know what goes into determining how much you buy and what your premiums are.
When it comes to financial planning as a parent, it isn’t helpful to become stressed out about what you could have already done. Instead, focus on where you are now and how you can get to where you want to be. Make sure you set realistic goals that can be accomplished within your budget and set time frame.