When it comes to financial planning, the work is never really done. As soon as you think you've locked down a great strategy, BAM! Your life changes. That's why it's important to never rest on your laurels. Think ahead and stay willing to adjust your finances as your family grows or as you transition to different phases of life. Here are a few smart tips for financial family planning and avoiding serious mistakes.
Why Financial Family Planning?
Whether you have a family of two or twelve, being a part of a family just makes finances more complicated. Therefore, you need to plan carefully for each stage of life and family development, including:
Marriage - As a newlywed, your finances are now legally combined with your partner's. As such, anything that either of you does will directly impact the other person's financial health. It's important to sit down and have an honest discussion about your goals and concerns and to set a budget that you're both comfortable with. This is also a good time to write a will or living trust and set up life insurance policies.
Parenthood - Welcoming a child into the family is incredibly exciting but makes finances more challenging. You'll need to consider monthly budget items for caring for your baby. The budget will need to be updated regularly as your child and their needs evolve. Many parents like to start college funds early, and this needs to be accounted for. This is also a critical time to update your will or living trust to include your dependents.
Retirement - Families need to have a solid plan for the future. You can create or adjust your retirement savings strategy anytime. It's prudent to stay current with a trusted financial advisor to regularly assess your retirement fund and ensure that you're on the right track.
What mistakes should I avoid?
Establishing a financial plan for your family is crucial, but it will only work to your benefit if you're smart about the process. Here are a few common mistakes that you should take care to avoid:
Never reassessing anything - Because life is constantly changing, your financial strategy will probably need to be updated here and there. Go in for regular evaluations (we recommend at least annually) to make sure your goals still make sense and that you're on target to reach them.
Trying to force it - Most parents want to be able to fund their kids' college educations. If you start early and obtain good advice, this is frequently doable - but not always. If you're struggling with a reduced quality of life or putting your retirement fund on hold in order to put enough money aside for college, it's time to ease off the gas.
Going it alone - Because there are so many moving parts to family financial planning, it's never wise to go it alone. Seeking out the input of a trusted financial advisor can mean the difference between failure and success.
Need help creating a strategy for your family's financial future? Talk to a Rally advisor today.