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Proper Financial Management for Your Family

Introduction

When it comes to family, we are sure that you want to do all you can to improve the lives of your family members, and your family’s finances would definitely have a major part to play in that. Managing those finances properly will help keep you aware of the money flowing in and flowing out.


When it comes to family, we are sure that you want to do all you can to improve the lives of your family members, and your family’s finances would definitely have a major part to play in that. Managing those finances properly will help keep you aware of the money flowing in and flowing out.

Having all the important information at your fingertips will help you to make smarter choices when it comes to money-related matters. Moreover, you will be better positioned to access and achieve financial goals, be it for purchasing, investing or retiring.

There are 3 main components to make this financial management work:

  • Budgeting
  • Saving
  • Planning for Contingencies

Here are some pointers to help you work on these 3 components.

1. Tabulate your annual household budget

Compile all your regular transactions and other significant transactions, to give you a snapshot of your total income and expenses throughout the year. This includes your rent, bills, loan repayments and groceries. Then separate them into fixed expenses and variable expenses. For instance, your essential groceries and loan repayments would fall under the fixed expenses category, while dining out and entertainment would be variable expenses.

There are plenty of mobile apps available now that can help you keep track of your budget, while certain financial consultancy firms and banks have templates for budget planning which you could use.
Update your budget from time to time by ticking off milestones and adjusting to those achievements.

2. Create a spending and savings plan

The next step is to go through all your expenses and see which ones can be easily eliminated or at least cut down. This can be things like new clothing that you don’t really need; extra data for your phone which you could live without; how often you eat out; whether it’s cheaper to stick to your pay-TV subscription or just order pay-per-view for the programs you actually want to watch; or even everyday household expenditure.

Some would also suggest merging your financial resources into a joint bank account. The reasoning behind this is that it saves on the banking fees to keep separate accounts, as well as reduces the risk of losing track of your expenses and repayments, which in turn reduces the risk of having additional charges being incurred, such as for late payment.

You’ve got to make sure your plan is clearly defined, with the right steps for action to be taken. At the same time, the plan also has to be realistic. Perhaps plot out the changes gradually, by cutting down items on your budget one at a time, or reducing the amount spent on an item little by little.

However, you have to include some occasional extra expenditure as well. Think of it as a reward for yourself and your family for sticking to the budget, a feat that’s easier said than done. The reward can come in the form of entertainment like going for a movie or maybe just eating out somewhere slightly fancier.

3. Pay Down Your Debt

It’s always important to try pay off your debts, or at the very least avoid late payments. A tip when it comes to debts is to focus on the high-interest debts, perhaps most likely your credit card. What you can do in addition to that is contact the bank and talk to them about the possibility of lowering your interest rate.

Among the other best ways to pay down your debts is to pay more than the minimum amount required each month. This will ensure that you save up on interest and also speed up the repayment to finish before the actual full term.

4. Automate Savings

Figure out the percentage of your combined monthly household income that can be put away, based on your budget. Then create a special savings account for that money to be auto-transferred into. It would be best to choose an account with high interest rates so that the money grows even more. It’s also advisable to not have an ATM card or debit card linked to the account, to prevent you from easily accessing the money.

 If possible, set the date for the automated transfer to be on your payday itself or a day after. Instead of only saving what’s left at the end of the month, this ensures that you save the money before you even get the chance to spend your salary. Forget about that special savings account until you reach your financial goal, perhaps the deposit on a new car or a new house.

5. Set Up an Emergency Fund

Open another savings account, with high interest rates, similar to the one you use for your automated savings. However, this one should be even less accessible. The purpose of this account is to give you peace of mind, if anything unlikely should happen, as your family can continue to meet their financial obligations. In order to be prepared for the unexpected, based on your budget, you should store up at least 6 months worth of expenses.

6. Taking Up Income Protection Insurance

This type of insurance covers most of the illnesses and sicknesses that could prevent your from doing your job. It would pay out a significant percentage of your former income over a long period. Again, this would allow your family to cope with their expenses. You should note that income protection insurance is not the same as critical illness insurance or short-term income protection.

Starting a family can be stressful when the money management is not in place. Hope the above tips would be able to guide you on having a proper financial management for your family.
 

Posted by admin on 10 April 2018

Filed under: #Family