The Family Financial Guide

If you have a family, finances are almost certainly an ongoing source of concern. And whether you have an 18-month-old starting preschool or 18-year-old twins going off to college, those concerns will only grow as your family life evolves. Fortunately, there are many strategies and techniques that might help to ensure financial confidence today and tomorrow. Some of the key steps to help guide your family's finances include:

1. Setting clear financial goals

2. Tracking your spending

3. Creating a budget

4. Saving and investing

5. Reducing or limiting debt

6. Planning for future life events

Getting started

It will take some time and effort to put your family's financial future on the right track, but if you take it one step at a time, it may be easier than you think. Set aside some time when it's convenient for you and your spouse or partner and proceed; if you run into any issues, you can't handle alone, think about speaking to a financial professional.

Start by gathering and organizing information about your household income, expenses, savings, debts, and investments. You’ll need this information to build a budget for today and a guide for the future. Then grab some paper and a pen—or open your laptop—and consider the steps below.

1. Set your financial goals - The first step in family financial management is to have a clear picture of your short- and long-term goals – whether they are as simple as saving for a summer vacation or as daunting as saving for a down payment on a home. Having this information on hand will be invaluable when you move on to creating a family budget and savings plan.

So, take a minute to think about your goals as a family moving forward. Start by asking questions about things that are important to you, such as:

• Will you send your child to a private preschool or summer camp?

• How much will you have to lay out for back-to-school clothes and supplies?

• When will you need a new car, and what might it cost?

• Are you carrying too much credit card debt and want to start paying it down?

• Are you planning to buy a home, start your own business, or pay for college tuition?

• Looking farther down the road to retirement planning, when would you like to retire, and what type of lifestyle do you want during retirement?

While nobody can predict the future, it's important to have an idea of where you're going before deciding how to get there. So, after you've identified a broad set of goals, start thinking about which ones are most important to your family and what it will take to achieve them:

1. List your goals in priority order.

2. Have a specific timeline and target cost for each goal: How much money will you have to save? And by what date?

3. Consider whether your list of goals is realistic and, if not, try to adjust it to better meet your financial situation.

Making a list of specific goals, prioritizing them – and assigning a dollar amount and timeline to each – will help you create a more realistic roadmap for achieving those goals.

2. Track family expenses and spending - Tracking monthly expenses and spending can help you to understand your spending patterns better, take more control over your spending, and, most importantly, create a workable family budget. You can do it the old-fashioned way - with pen and paper – you can use a traditional spreadsheet, or you can take advantage of several convenient online apps that help automate much of the process.

No method is perfect, and some apps may fit your life better than others. However, you choose to do it, tracking expenses and spending is essential to answering the question of how much you must spend each month and, importantly, where you might be able to trim costs if there is a shortfall between your cash flow and your total expenses.

3. Create a family budget for today and tomorrow - Family budgeting - creating a budget that covers current expenses and allows for savings towards future goals - can provide financial stability and peace of mind. There are many approaches to building a personal or family budget, but one of the simplest – and most popular is the 50/30/20 budgeting rule:

1. Calculate your monthly household income after taxes.

2. Calculate your essential expenses – rent or mortgage, food, transportation, insurance - which should comprise approximately 50% of your after-tax income. If they are more than 50%, try to adjust your spending habits.

3. Set aside 30% of your after-tax income for discretionary expenses such as dining out, streaming services, gifts and vacations. If 30% won’t cover them, think about what you might cut out.

4. If possible, allocate at least 20% of your after-tax income towards savings and debt repayment. This includes emergency funds, retirement contributions, loan repayments and saving for long-term goals such as paying for college or buying a house.

5. Keep records to help you stay within the 50/30/20 percentages.

6. Review your budget regularly and adjust it as necessary, especially if there is a significant change in your income or circumstances.

Remember, the 50/30/20 plan is a guideline, and you can modify it to suit your specific needs. The key is to establish a budget that allows you to maintain your current lifestyle and save towards a secure future.

4. Start saving and investing - One of the best ways to help improve your family's current financial confidence of your family members is to save and invest, and most financial professionals would urge you to start as soon as possible. Even if you can only afford to set aside a tiny fraction of your income, slow, steady saving, and investing can really pay off in the long run. Whether you're saving for short-term goals such as a summer vacation or an emergency fund, big purchases such as buying a home, or long-term goals such as retirement, here are some of the most popular options:

• Savings accounts: Begin by setting up a savings account specifically for your short-term goals. These accounts are low-risk and easily accessible, allowing you to deposit and withdraw money as needed.

• Investments: For longer-term goals like a home purchase or retirement, consider investing in stocks, bonds, mutual funds, or exchange-traded funds (ETFs). These investments can potentially provide higher returns, but they also carry more risk.

• Retirement accounts: For retirement, make use of tax-advantaged accounts such as 401(k)s, Individual Retirement Accounts (IRAs) and Roth IRAs. These accounts offer benefits like tax deductions, tax-free growth, and tax-free withdrawals, depending on the type of account, but access to your money is typically restricted before age 59 ½.

• Cash value life insurance: Some types of life insurance, such as whole life or universal life insurance, not only provide a death benefit but also have a cash value component that can accumulate over time. Over time, this cash value can be used as an additional source of funds and can provide additional financial confidence.

Remember, every family’s financial situation is unique, so it's important to think about your goals, risk tolerance, and time horizon when choosing your savings vehicles. Moving forward, you may want to consult a financial professional who can provide personalized guidance.

5. Manage your use of credit - Managing your use of credit – and especially high-interest credit cards – is not only an important part of managing your family finances, but it can also be the key to unlocking new financial opportunities. An established credit history, a decent credit score, and low credit card debt can make it easier to qualify for loans, mortgages and credit cards, help you secure better interest rates and insurance premiums, and even increase your chances of getting a job. Here are a few of the most common ways to build credit or improve your credit score:

• Pay bills on time, every time.

• Try to pay more than your minimum payments.

• Keep your credit use as far below your credit limit as possible.

• Maintain a diverse mix of credit accounts.

• Check credit reports for accuracy and address any errors promptly.

Good credit habits and managing credit diligently can help your family build a solid financial foundation and help ensure a confident financial future. So please give it some thought.

6. Additional steps and planning for the future - Once you start completing the steps outlined above, you’ll be well on your way to having a solid financial guide for your family. To further protect your family’s financial future, you may also want to consider:

• Life insurance whether whole life or term – can be critical protection for your family in the event of your untimely death. The death benefit can help ensure that they’ll be financially protected and able to maintain their standard of living, cover daily expenses, and fulfill many or all of their long-term financial goals. Plus, whole life and universal life insurance policies can also be used as tax-efficient cash value accumulation vehicles.

• Estate planning is not a requirement for everybody, especially if you are young and have limited assets. That said, regardless of your age, if you have a family and assets that you wish to pass on to them, estate planning is something that should be addressed sooner rather than later. By creating an estate plan, you can ensure that your family will be protected and that your assets will be distributed according to your wishes. In addition, an estate plan can help to minimize estate taxes and protect your assets from unnecessary depletion.

Guardian can help you and your family

Getting comfortable with family finances and budgeting is one of the first steps in your financial journey. And hopefully you’ll be able to use the tips above to get started on your own. But if you need guidance moving forward – on more difficult issues such as retirement planning or using life insurance to secure your family’s future - Guardian can help. To find a Guardian financial professional near you, just fill in your zip code and click below.