Family Financial Planning: What Questions Should You Ask Yourself?

It’s never too early or too late to set your family on the financial planning path. Whether you are expecting your first child (or preparing to see your teen off to college), effective financial planning can be immensely beneficial. If you want to kickstart your own financial family plan, start by asking yourself the following four questions.

Where Is Our Money Going?

Before you can start creating a family financial plan, you need to be aware of where your money is going. Start by reviewing previous credit and debit card statements and make a note of miscellaneous cash withdrawals. You might consider using a spreadsheet or a notepad to categorize spending into separate areas (bills, groceries, debt payments, housing, entertainment, clothing, etc). Many families take advantage of online budgeting calculators to help keep track of spending.

You should also consider how much you owe on various lines of credit. While you may be making the minimum debt payments, you could be paying outrageous amounts of interest and never really getting ahead. If you are paying interest, then this needs to be factored into your family’s monthly expense budget. Once you have an idea of where your money is going, you have established the first component of your family budget. 

What Money Is Coming In? 

It is just as important to know what money is coming in as it is to know how much is being spent. Start by calculating your household income (the amount of annual gross income coming into your home). Make use of online income calculators to help determine where, when, and why your funds are coming in. What you earn in a week or a month is the biggest contributing factor in determining your spending and saving patterns. You might find that over the course of a few pay periods, you spend more than you make, which will not only leave you unable to save but will lead you deeper and deeper into debt. One way to look at your spending is to consider what you had to trade in terms of your time and effort to earn the money for this or that purchase. Weighing these costs can often lead you to reconsider some of those less-than-necessary, and even frivolous, purchases. 

What Assets Do We Have?

Part of knowing how much you have is knowing how much your assets are worth. A few common household assets include housing and land; stock and bonds; saving accounts such as RRSPs and TFSAs; vehicles and other machinery/equipment; and art, jewelry, and other collectibles. For many Americans, their most significant asset is their house.

Knowing the value of your home opens up a number of doors for you with regards to financial planning. Keeping a close eye on the market value of your house can play a role in determining if and when to sell your home. Additionally, home equity can be used to help open a loan or line of credit for renovations or unexpected expenses. To determine the market value of your home, consider contacting a home appraiser in your city. If you’re getting ready to sell, a real estate agent can help you set an asking price based on his/her knowledge of current housing trends. 

What are Our Financial Goals? 

Every family has a few big-picture goals they would like to see come to fruition. These goals may include a much-needed vacation, being debt-free, paying for college tuition, or completely owning a home. Other positive financial goals include building an emergency fund and planning for early retirement. Having a clear picture of what you and your family want makes it easier to both create and follow a financial plan. If you do not have something to work toward, you may forget why you are making sacrifices in your spending patterns. 

Financial planning for you and your family doesn’t have to be scary. In fact, financial planning can help you and your children identify and work toward common family goals. By answering the questions above, you have already prepared yourself to develop your own personalized financial plan. Now, get out there and start saving!

Guest Post By: Sara Bailey | TheWidow.net