If you’re your family’s primary breadwinner, your position entails two main responsibilities. The first one is obvious; providing support to your spouse, children, and parents. The second one is ensuring you will be able to leave them with enough money to stay afloat after you pass away. While no one likes to think about their death, it is, unfortunately, a matter that needs a great degree of forethought.
The simple truth is that the future is unpredictable, and while the hope is that you live a long and healthy life, there is always the risk of disease, an accident, etc. You need to ensure you have taken the needed steps to ensure your loved ones’ financial safety. This guide will provide the tips that you can follow to create that safety net.
Know how to divide your assets
Money can become an emotional topic, but you need to use a disinterested approach to your expenses and assets to properly plan a solid fiscal plan. By creating a strong foundation for your planning, you will be able to make smarter decisions, such as whether you wish for the money to be saved in a trust or set aside for your will.
Contrary to popular belief, good future-proofing for your family isn’t simply about leaving them enough money in your will to get by. A trust is a worthwhile option for alternative saving methods. If you’re uncertain, you can talk to a legal expert or accountant about the differences between a trust vs will and divide your assets accordingly. While there is some overlap between the two approaches, a trust has one major benefit. It allows you to avoid the probate process that includes court-supervised proceedings needed to authenticate your will. Depending on how many assets you have, how many beneficiaries there are, and the ownership of the assets, it might be simpler and faster for your loved ones to receive their inheritance through a trust. Speaking to a professional and evaluating your assets is the best way to understand what course of action is right for you.
Objectively plan for the future
The first step is figuring out your current cash flow; that is to say, knowing how much money is coming in and how much money is going out. You will have stable sources of incoming cash, such as your income. You might also be making dividends on any shares you own or get quarterly bonuses at your workplace. For any money you can rely on, add it to one side of the ledger.
On the other side, you need to list down your expenses. These expenses can be consistent or variable. For example, rent is a consistent expense, and you can even account for how inflation might affect it in the long run. Variable expenses are more difficult to calculate. These can range from simple, non-discretionary expenses, such as entertainment, or necessary expenses, such as the weekly grocery shopping. By taking stock of these expenses, you would be able to pinpoint the exact places where you can cut costs. Whether this occurs by decreasing the number of times you eat out or letting go of a number of subscription services, it would allow you to save money in the long- and short-term. It can be quite tempting to live for the moment. You worked hard to earn that money, and you want to be able to enjoy it. For some people, that can mean regular date nights or yearly vacations or just having an expensive hobby. But the steadiness of a bright financial future will help you sleep easier at night.
At the end of the day, you’re not just living to enjoy your life, but making sure the loved ones you leave behind can continue to enjoy theirs. This doesn’t mean you need to completely cut yourself off from the good things, just that you need to approach them with a greater sense of moderation.
Understand how kids affect finances
This can be considered an extension of planning for the future, but with a focus on family management. You can divide this aspect of planning into three sections. The first is for when you’re expecting a child. It goes without saying that the procedure will be expensive, as you may be paying a great deal in medical bills. Moreover, you might want to have some emergency funds in case of any complications during labor. On top of this, you will be going on parental leave and must adjust your expenses accordingly. It would also help to talk to other parents and figure out which expenses you can expect and how to best tackle them.
Secondly, you need to plan for after the baby is born. There will be several incoming expenditures and no income increase to offset them. This includes consistent costs, such as baby formula, check-ups with the doctor, and diapers. For the time being, you would need to cut back considerably on your unnecessary costs to ensure your savings are not tapped.
Finally, there is variability in your expenses as your child grows. The first few years would include a lot of clothes, of course, so it might be smart to ask friends and family for any hand-me-downs. As the child grows older, you would be helping pay for their hobbies, health products, and more. You can’t predict many of these expenses, so you might be re-evaluating every year. For example, you might find that you need to afford braces for your kid one year or that they’re struggling in a high school class and you need to pay for a private tutor. It is no easy task, but as long as you keep detailed notes of your expenses and keep your end goal in mind, you should be able to maintain your savings.
Conclusion
Financial planning is no easy task, and it is more than okay to ask for help where you need it. This help could be contacting a professional to manage your assets through a trust or asking your parents to babysit your kids while you return to work after a paternal leave and need to readjust to a working routine. The important thing is to take time to understand your incurred expenses and expected income, and set a clear goal for how much money you want to save over the years. Your plan’s specifics can be adjusted to your circumstances as they change over the years, but having a goal makes sure that you’re heading in the right direction.
