One of life’s greatest stressors is feeling like finances are out of our control. Staying on top of your financial state can not only improve your mental and physical happiness but raise your overall happiness, too. If you feel stuck or are unsure where to start, here is what you need to know to get your finances into a healthy state.
Build a Budget
If you’ve never built a budget before, this may seem overwhelming. However, it doesn’t need to be. Start by figuring out your monthly net income, or the money you have left over after all your bills have been paid. Consider how much you spend on food each month, and any other necessities. Now, determine what you will do with the leftover cash each month. How much can be devoted to savings? How much will you use for having a bit of relaxation?
Try to consistently build up your funds by putting at least 20 percent of each paycheck into one of your savings accounts. If one of you is staying at home, try to figure out ways you can cut corners to make up for the lost income. This time with your children is invaluable, but you still need to be practical and do what you can to prepare for the future.
Keep On Saving
Considering your savings, you have many more expenses as parents. You’ll want multiple savings accounts, one of which should be an emergency fund specifically for loss of employment. Try to put enough away to cover several months of expenses to account for the time it takes to get a new job. This fund is also important to cover for other emergencies. You may need to replace a major appliance or repair a vehicle. Heaven forbid, you may need to cover emergency medical expenses. While bills should be paid first and never put off, you absolutely need to invest in your future security.
Plan Your Estate
No one wants to consider the possibility of passing away, but your children and partner need to be taken care of in all eventualities. At the bare minimum, you need to write a will that allows for guardianship of your children should something happen to both parents. Consider setting up a trust for your child, so they can avoid being caught up in probate court. Probate court not only makes your finances public, but it could cost your child a sizable percentage of their inheritance. A trust can avoid this altogether. Be sure to appoint a financial guardian as well, if this will differ from the person you leave in charge of your little ones.
Starting a College Fund
It’s never too early to start planning for college for your children. With costs continually on the rise, you want to give your child their best bet at getting a good education, if that’s what they decide to do. Look into a 529 savings account, which is specifically for educational purposes. Typically, when these accounts are used for education, you can avoid paying any tax, especially on interest made. These accounts can be transferred between children, which can be useful. If one child is able to secure a scholarship, or something similar, then you can take the savings you have for them, and give them to your next child, to offer them a head start for their own educational endeavors.
It may seem overwhelming but start with small steps. Establish your new budget, see what you can put aside in savings and form a will. We want to give our children the best chance at having a good life and financial security is a big part of that.