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Basics of Financial Management for New Families

Starting a family is among the major milestones in life. It brings about a plethora of changes, adjustments, and compromises. It’s not always happy, but it’s not always sad either. You might feel you’re not ready, but in truth, no one is. You just have to face it when it’s there, and it’ll make the whole situation easier if you had the foresight to prepare.

Your finances take a different form at this point; what used to be yours isn’t yours alone anymore. You have your family to share it with: a spouse, a child, and even a pet. Even though there’s a popular saying that goes “money can’t buy happiness,” ultimately, money is important. It feeds your family and gives you access to the necessities in life. Money problems within the family can lead to bigger problems, eventually leading to needing a lawyer for divorce or filing for bankruptcy.

Your finances will directly impact the lives of the members of your family. As such, you have to take responsibility and keep it in good shape. How can you make sure that your family stays in good financial standing?

Set up Your Finances

The first thing you should do before anything is to set up your finances. What does this mean? It means making sure you have the necessary accounts and paperwork in check. Many people have bank accounts, credit cards, loans, mortgages, but they’re all disjointed and in disarray.

Organizing your finances means having an organized flow of how to budget your money, knowing what goes where, and how much you have left. This is the first step to developing a good financial sense, as this will allow you to see if you’re making more or earning less. There are many free and easy to use software that allows you to track your finances across multiple accounts, making bookkeeping relatively easy and hassle-free. It’s also a good idea to utilize any online user interface most financial accounts have, making everything more convenient and easier to manage.

Live Below Your Means

While the phrase ‘living below your means’ may incite negative images, it really shouldn’t. We have a negative perception of this idea due to a culture of excess that has proliferated, but the phrase takes an empowering stance when it comes to finances.

One can interpret this as you controlling your money, and not letting money control you. When you live under your means, you avoid overspending to the point of going to the red. And isn’t this something good? That you are financially responsible enough to live within your current financial limitation? And by having set up your finances, you can be very specific with how much you need to spend to live. Knowing your monthly budget would then enable you to set a budget cap, making sure you’d have savings by the end of the month.

Learn to Invest

selling property

Your salary alone will not be enough to ensure a brighter future. As salaries tend to be relatively fixed, it’s easy to work your way around and budget it. However, looking at it from a long-term perspective, it can limit your financial mobility in the future.

This is where investing comes in. Investing protects your money from inflation and grows it faster than a savings account could. It allows you to let your money work, while you’re working hard to earn- offering considerable returns after some time. It also helps with your retirement fund, ensuring that you have something to support you in your old age. Investing also helps you achieve your financial goals, as you can control how long your money stays as an investment.

However, like many things, investing takes time. You also need to put in the effort of learning. But it’s going to be worth it, and it will benefit you and your whole family. This is one of those decisions best done early in your professional life than later, so start considering now.

Have an Emergency Fund

We don’t know what can happen tomorrow. There are some situations we simply can’t predict, and an emergency fund will help you deal with that. Especially if you’re in debt, preparing an emergency fund will help you from having to borrow more. Whether it be a health emergency, or a suddenly needing something repaired, an emergency fund will make sure you’re ‘future proof’ to some degree.

A common way of calculating your emergency fund is to set aside three to six months worth of monthly expenses. While this is just as ballpark figure and it’s entirely up to you and your circumstances, it’s in your best interest to make a relatively large emergency fund to cover whatever it is that can happen.

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