6 Steps for Family Financial Planning
The process of creating a financial plan can be simple. However, personal and family financial planning does take careful consideration and strategic decision-making based on your current financial situation and your goals for the future.
How to make a financial plan for your family
If you need help creating a financial plan from scratch, we put together a quick family financial guide below that you can use to get started. Remember that before making decisions that can affect your family's finances, you should consult a trusted financial advisor.
1. Create family finance goals
The foundation of a solid financial plan lies in goal setting. Before you can start constructing your plan, you first need to determine precisely what you want to plan for. Your family finance goals will depend on both your current financial situation and the upcoming events in your life.
For example, perhaps your kids are entering high school, and you want to start saving money to help them pay for college tuition. Or, maybe you've maxed out a few credit cards and want to work toward paying off the debt. Take some time to figure out what goals you want to accomplish.
2. Track your spending
Most Americans don't track their spending, which can prove detrimental when it comes to financial planning. If you don't already know how much money you're spending and on what, start tracking your family's finances to determine where your money is going.
There are many ways to track your spending, whether through a DIY spreadsheet, a mobile app, or a digital tool that your bank provides. It's a good idea to monitor your spending closely for at least a few months to get a good sense of how much you're spending.
3. Make a budget
Budgeting is a crucial aspect of financial planning. If you want to get your finances in order and save money for future expenses, you may need to limit your spending in certain areas. Even if you don't need to make significant sacrifices, adhering to a budget can prevent you from overspending across the board.
You can use a free family budget planner online or make your own budget tracker on paper to create a family budget. You should also choose your preferred budgeting method, such as the simple budget 50-20-30 rule. Consistency is the most important aspect of budgeting. You need to stick to your budget, review your spending every month, and make adjustments when necessary.
4. Open an emergency fund
Financial experts recommend keeping an emergency fund with cash that's easily accessible if something unexpected happens, such as losing your job. As you begin saving money through budgeting, it's a good idea to set some of that money aside in an emergency fund.
One way to contribute to your emergency fund is to make small contributions from your savings account on a weekly or monthly basis. With every $50 or $100 contribution, your emergency fund will consistently grow over time without needing to deposit thousands of dollars in one lump sum.
5. Save money and invest for the future
Family financial planning is about saving money and developing lasting, healthy spending habits. Once you begin saving consistently, start investing that money so that it can work for you. While it's important to have liquid funds available, money that sits in a basic savings account isn't growing as much as it could.
If you're new to investing, consider speaking with a family financial services counselor who can help you develop a strategy. There are dozens of ways to invest your money, whether it's through stocks, index funds, mutual funds, ETFs, cryptocurrency, real estate, or another avenue.
Good investments can also help you reach your financial goals more quickly.
6. Get life insurance to protect your loved ones
As part of your family's financial plan, consider purchasing a life insurance policy, which will help financially protect your spouse and young children if you pass away.
If you're weighing whether it's better to rely on life insurance or savings to support your loved ones, know that having both is most beneficial.
Through Ethos, you can purchase term life insurance online with no medical exam required (just answer a few health questions). Our policies are underwritten by some of the biggest names in life insurance.
When you're ready to start, you can check your price and complete the application in less than 10 minutes. It's easy to purchase a policy online, and most applicants can get same-day coverage.
The information and content provided herein is for informational purposes only, and it is not to be considered legal, tax, investment, or financial advice, recommendation, or endorsement. You should consult with an attorney or other professional to determine what may be best for your individual needs.