The new year is upon us, and if you’re like many, you’re making resolutions. Why not resolve to improve your financial planning for your family in 2020?
If you don’t have clear financial goals, you’ll feel adrift when it comes to money. Plus, you create unnecessary anxiety when you don’t have cash set aside for emergencies and life’s milestones. It doesn’t matter if you sit down with a financial planner or call a family meeting, as long as you commit to getting your books in order.
1. Start or Add to Your Emergency Fund
Few things can derail your financial plan for your family like an emergency. However, nobody is immune to job loss or natural disaster. Having money socked away gives you the peace of mind to know you can handle the unexpected.
Ideally, you should reserve three to six months’ worth of living expenses in a liquid savings account you can access without incurring penalties. If this seems impossible, you’re not alone. One idea is to open your account at a different bank. Avoid linking it to any other accounts or a debit card. If you have to drive to a branch to withdraw funds, you’re less likely to spend them unnecessarily.
2. Evaluate Upcoming Milestones
Will your children graduate from high school in a few years? Maybe you’re renting currently, but you dream of owning your own home. Sit down and take a critical look at your current financial picture, as well as upcoming milestones.
If you hope to become a homeowner, now is the time to repair your credit and pay down debt. If you’re saving for a child’s education, investigate a 529 savings plan and prepaid tuition options. Locking in a lower rate now protects you as educational costs continue to soar.
3. Max Out Retirement Savings
Changes to the tax code mean you can take advantage of new ways to maximize your retirement savings. The amount you can squirrel away depends on whether you save through your employer or are self-employed. Many Americans don’t have nearly enough saved to retire — don’t fall into that trap. Most retirement savings vehicles accumulate on a tax-deferred basis, meaning you won’t owe money on that income until the time comes to withdraw.
4. Teach Your Kids About Money
Research tells us that children begin forming attitudes about money at a young age. Regardless of how old your children are, you can find age-appropriate activities to teach them valuable financial lessons. For example, if your children are younger, you can teach them to count correct change by playing a shopping game together.
5. Prepare for Tax Time
When the tax man cometh, don’t let yourself get caught unawares. Changes in both the IRS code and your household situation can impact whether or not you owe. If one of your children has flown the coop, you need to adjust your withholding with your employer. Otherwise, you risk keeping too little and getting stuck with a sizeable bill come April 15.
6. Draft a Mutual Goal
Other than infidelity, disputes over money make up one of the biggest causes of divorce in America. One way you can strengthen your bond is by setting a mutual goal. Maybe you want to take the honeymoon you never had. Perhaps you want to move to part-time work to spend more time with your children. Working toward a mutual goal is part of sound financial planning for your family.
7. Save Money in Small Ways
The advent of technology brought humans new ways to save on everyday purchases. You can join online coupon clubs instead of clipping the Sunday paper. You can also download a host of mobile apps to help you save money with your cellphone. Some automatically apply coupons when you scan a code, and others give you cash back on select purchases. Don’t overlook the old-fashioned change jar — you’d be amazed how much your stray coins can add up to in a year.
8. Overcome Your Fear of Investing
If you don’t invest in the stock market, you’re missing a valuable opportunity to grow your money at the pace of inflation. If you’re not ready to take the leap into buying individual stocks, consider investing in a mutual fund. These vehicles put your money in a variety of instruments for you, depending on your risk tolerance. If you’re passionate about causes from saving the planet to supporting your religious faith, you can find funds that give back.
9. Create a Residual Income Stream
You never know when illness or injury will put you or your partner out of work. If you have a residual income stream, you have peace of mind that you’ll have money coming in no matter what. If you’ve always dreamed of publishing an e-book, make this the year you complete it. You can also look into renting out a spare room or your guest house, if you have one, on sites like Airbnb.
Financial Planning for Your Family in the New Year
Give your family the gift of greater economic peace of mind this coming year. By financial planning for your family, you can achieve your goals and secure your future.