Fundamental Financial Planning for Parents
Financial planning for parents is essential at every level. If you want to be confident that you have things under control, Dan Rhoads advises that you take a look at your current situation and see what needs to be changed. This way, you’ll develop the financial security for which your future self will be thankful.
Make Sure Your Budget is Accurate
If you’re like some people, you may have a general monthly budget that you keep in your head or scribbled in a book somewhere. That’s a good start, but that’s not enough to maintain good financial footing. According to Payoff, a successful budget starts with knowing your expenses down to the last cent. This should include not only recurring monthly payments but also sporadic ones, like car insurance payments and registration fees. Make sure you account for your savings and debt payoffs as well. It can be difficult to get everything to come together on paper if you have a lot of information to juggle. In that case, consider using top-notch budgeting software that will bring everything together for you. Some programs even offer tracking features so you can see how much you’re saving or how much of your debt you’ve repaid.
Plan for Emergencies
When you’re dealing with financial planning, you can’t neglect your emergency fund. Traditionally, it’s advised that you have between three and six times your monthly income set aside for emergencies. Since that may seem overwhelming at first, Better Money Habits suggests tackling manageable saving tasks instead of focusing on the grand total. Even if it’s a small amount, it’s important to start saving and it’s recommended that you use automatic transfers so you have no excuses. If you’re looking for ways to save so you can build your cushion faster, consider using discounts when you’re shopping. It can also be helpful to buy things second-hand as long as it’s safe to do that, and focus on reusing items whenever you can. You can also look into getting a life insurance plan that has cash value accumulation, which can be used in emergencies and to help pay for your child's college education.
Plan for the Future
As you’re putting your financial plan into action, make sure you’re thinking about your future as well. This is where estate planning comes into play. When you have a plan in place, it will ensure that your assets are handled as you wish and any children under 18 have an appointed guardian. Another must-have is life insurance, as the funds from the policy will cover expenses generated by your passing or if you’re incapacitated. Term life insurance, in particular, can be very helpful as it guarantees a set death benefit after a certain amount of time. The good thing about these policies is that they tend to be fairly inexpensive, especially for those in good health. The funds from a term life policy can be used to cover things like unpaid bills, lost income, and funeral expenses. You may also consider looking into life insurance with living benefits, which means that you would receive the death benefit before your passing if you become chronically or critically ill.
Re-Invest In Your Future by Heading Back to School
Although the idea of going back to school might be scary, there are numerous benefits to seeking out higher education to establish a better future for your family. For example, an MBA can be an extremely useful tool to help you achieve that sort of stability that we all crave. Not only can you increase your earning potential with an MBA but you can also gain invaluable experience that will serve you throughout your life. This expanded skill set will have a direct impact on leadership ability and business knowledge that can lead to an increase in overall career prospects. Regardless of what degree you choose, know that there are numerous ways to advance your career through online programs that cater to working professionals.
Balance College and Retirement Savings
Everyone wonders if they have enough money saved for retirement, and as a parent, you also have to think about the cost of a college education. Based on recent estimates, a public college education can cost as much as $230,176 in 2035. It’s tough to definitively say what your retirement needs will be when you get to that age, but a cost of living calculator can give you an idea.This means you need to find a way to balance saving for your kid’s college at the same time as your retirement. Depending on your personal circumstances, you can choose to stagger your savings or save for each at the same time. Whichever route you choose, make sure you do your research so you’ll end up with a strategy that works for you.Financial planning for parents can be equally important and challenging. That doesn’t mean it’s impossible though. If you have an accurate budget and a detailed plan for the future, your ideal financial future will be within your grasp.
The views expressed herein reflect the views of Dan Rhoads as of the date referenced. These views may change as conditions change. The views expressed herein are not intended and should not be construed as investment advice and they do not address any individual’s specific situation.
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