Financial planning is difficult when you’re single, but matters tend to get more complicated when you need to account for your partner, your kids, or both. Budgeting and making a savings plan isn’t always fun or easy, but it is necessary. Below, learn about a few steps you can take now to pave a smooth path for your family’s future.
Outline Your Goals
Everyone has life goals, so you’ll want to start by defining what these are for you as soon as possible. Perhaps you dream of owning a home, becoming debt-free, or retiring early. All of these dreams are attainable if you have a solid plan in place.
It’s easy to form a vague idea of your goals, but making them concrete is sometimes a challenge. If you don’t know where to start, Zen Habits suggests writing down ideas to help define what’s most important to you. This simple practice can be incredibly effective.
Learn How to Tackle Debt
For many families, debt is a major stumbling block on the path to success. If you’re dealing with student loans, credit card debt, personal loans, or a car loan, it can sometimes feel impossible to get out from under your payments.
There are numerous strategies for paying off debt, but the right one for you will depend on your individual situation. Forbes explains that the popular “snowball method,” which involves paying the smallest debts first regardless of interest, works great for some people.
However, you should always weigh other options to find the best one for you. Depending on the type of debt you have, it may make more sense to chip away at each debt equally or focus your attention on accounts with the highest interest rates first.
Seeking credit counseling from a reputable organization might be a good step if you don’t know where to start. In dire situations, you may also consider debt relief. However, this option can have major implications for your financial future.
Start Saving for Specific Goals
A savings plan is just as important as your plan for handling debt. One of the easiest ways to start saving is to schedule recurring deposits to your savings account from your checking account. However, you might make more progress if you set specific goals.
Setting a savings goal starts with determining how much you need and knowing when you need it. For example, you may want to have $10,000 saved up for a down payment on a home within the next five years. With this basic information, you can determine how much of your income you need to save each month.
There are many savings strategies, but for many people, following the 50/30/20 rule works well. With this approach, you spend 50 percent of your income on needs, such as food and housing, and 30 percent of your income on wants, such as entertainment or hobbies. The remaining 20 percent then goes towards savings. Don’t forget the importance of creating an emergency fund.
Achieving Your Goals
When trying to achieve a specific financial goal, it helps to research everything that’s involved in making it a reality. For example, if you want to buy a house at some point down the road, it is important to understand your financing options. Each type of mortgage has its own credit requirements, interest rates, and down payment standards.
Generally speaking, you can choose between conventional financing and federally-backed loans, such as FHA loans. Conventional loans are more flexible and offer fixed or adjustable rates, but also require you to have more money for a down payment and a better credit score. FHA loans are a good option if you have limited money for a down payment and have a poor credit score. But there are still long-term costs, like annual mortgage insurance premiums.
Financial planning is one of the best things you can do to provide for your family. Keep in mind it’s not as simple as sitting down once and making a plan for the rest of your lives. A good financial plan is revisited often to ensure it still aligns with your current and future goals.
Blog contributor: Emma Grace Brown