9 Ways Parents Need to Have a Financial Plan

Financial planning can be difficult, especially when you have a child who can’t yet provide for themselves. Still, you need to learn to plan effectively so your dollars can better your future rather than slip through your fingers. You can start your family financial planning by looking at these options to grow your savings and net worth over time.

1. Save Up for a Home

A home builds generational wealth. It gives you something to pass on to loved ones after your death so they can have a safety net to sell or a place to stay. Buying a home can help you build equity, which can improve your financial stability and increase the overall value of your assets. You have a home for your family to consider “theirs,” and you’ll always have a place for them to return to. It’s also an excellent way to spend your money by investing in yourself instead of paying rent.

2. Work on Your Credit

If you have an excellent credit score, you can do several things much more easily. To achieve certain financial goals, you may need a higher credit score than you currently have. You can work on building your credit over time by using credit cards and managing your debt wisely. It might take a while to learn the ropes, but you’ll eventually get the hang of credit cards and their many rewards you can benefit from, all while building a better future.

3. Write a Will

You’re likely far from the point of needing it, but when you have kids, creating a living will is one of the best choices you can make. Your will can detail everything from health care and end-of-life care wishes to the division of your estate to easily settle any disputes between family members. As soon as you have assets, consider making a living will to ensure the people you love can be protected if something happens to you.

4. Find New Investments

Investments can help your wealth grow over time. While investment comes with an inherent risk, you’ll still likely see your money increase over time. With options like real estate investment, you’ll only see your money increase exponentially as the prices of land and housing increase. If you want to diversify more in the stock market, investing in index funds, which contain several stocks, is a great way to dabble in many things at once. You just have to find opportunities that align with your future goals and current finances.

5. Pay Down Your Highest Debts

One easy way to save money is to stop paying monthly debt payments by eliminating them. It’s far easier said than done, but if you have the right financial plan, you can contribute more of your paycheck toward high-interest debt that keeps you trapped. That way, you’ll eventually get to free up more of your money instead of just paying interest payments.

You might use one of two methods to pay down your debt:

• Snowball Method: Pay off your debts from the lowest to the highest balance.
• Avalanche Method: Pay off your debts from highest interest to lowest interest.

If you want to eliminate your debt, the avalanche method might be the most aggressive way to get rid of your debts. Since you likely took on debts while you were in your 20s and getting started on your financial journey, you should pay them off now that you feel a little more stable in your career. By paying off even just your debts with the highest interest, you’ll free up more money to contribute to other areas.

6. Save for Your Child’s Future

Many people start a college fund for their children, but you don’t know if your child will pursue college. Instead, create a general savings fund for them that they can decide what to do with once they’re old enough. This fund could go toward college, starting a business, buying a home, getting married and so much more. By saving for their future, you’re investing in your child and helping make the world an easier place for them to jump into once they’re an adult.

7. Move Up in Your Career

If your finances are somewhat stable, the next thing you need to focus on is securing a promotion or a raise at work. Focus on building skills that could propel you up the ladder or further on your progression path. These skills should ensure that you’re an asset to your team and a competitive player who would add value to any workplace.

One of the greatest things you can learn is when to walk away from something because it no longer serves you. You must explore other options if a job isn’t treating you well or paying you what you’re worth. As a parent, you need to be paid your value to take care of your family. Improving your self-esteem will help you evaluate your value accurately, so practice affirmations and learn to say no to situations that don’t serve you.

8. Work Toward Retirement

Retirement is the end goal for everyone. If you haven’t prioritized your retirement savings, you need to think about when you want to retire and how much you need to save to be comfortable after you leave your job. When you have a certain financial goal in mind, you may be more likely to achieve it rather than if you were just saving to save. When you have somewhere to put your money, you have a way to quantify the difference your savings will make.

9. Build an Emergency Fund

Less than half of Americans have enough in their emergency fund to cover three months’ expenses, which is the recommended amount to keep you afloat while you improve your situation. You should start thinking about what your family would do in an emergency. Decrease some of the pressure on yourself by building up an emergency fund, which you can use to get out of difficult situations. Once you deplete some of it, build it back up.

Prioritize Your Finances in Every Season of Life

Life changes frequently, and before you know it, you’ll be in the next stage of life. The important thing is that you don’t lose sight of the present while saving money for the future. Try to live in the now by making current decisions that will improve your future. Transform your relationship with money by planning, no matter how difficult it may feel right now. Your future will be worth it.