Financially Real

How To Build a Strong Financial Foundation for Your Family

How To Build a Strong Financial Foundation for Your Family | www.TheHeavyPurse.comThe majority of my blog posts focus on parents teaching their kids about money, after all that is my mission! But today, I’d like to focus on making sure you have crossed every “t” and dotted every “i” when it comes to your finances. As important as it is to teach our children how to handle money, we also need to make sure our financial house is in order, so we can take care of ourselves and our family today and tomorrow.

5 Steps to a Strong Financial Foundation for Your Family

These are a few things you want to have in place for yourself and your family. And don’t forget — your kids are always observing what you do. Seeing you make your family’s financial well-being a priority is a good lesson for them to observe, so don’t keep it a secret either!

Follow a Household Budget

Not everyone loves to budget, but knowing how you use your money is important. Plus you want to be confident that you’re spending your hard-earned money on the things that truly matter. For some people, a double latte from Starbucks is an acceptable and planned expense. While others will be shocked to realize they spent $700 on coffee but couldn’t afford to take a vacation. A budget lets you see where you’re spending your money and make changes, especially if you are living beyond your means. There are plenty of tools to help you put together your budget, including my budget worksheet.

Success Tip: I would start by tracking ALL your expenses and being very detailed until you have a clear picture on how you spend your money. Once you have a handle on your budget, you can decide how detailed you want to be ongoing—just be sure to continue following a budget.

Establish an Emergency Fund

There are very few guarantees in life with the exception of life, death, taxes and that things will break or get lost. Or someone may lose a job, get injured or become ill. Your emergency fund protects you from the unexpected without having to use your credit cards or dip into money intended for other goals. Ideally, you should have an emergency fund that covers 3-6 months of expenses. Those who are self-employed (or just starting a business) may wish to have up to a year’s worth of expenses since your income may fluctuate greatly and you may need to use your emergency fund to offset regular monthly expenses during slow periods.

Success Tip: If you have significant debt that you are paying down, it can be hard seeing money sitting in a savings account, earning mere pennies. I would still recommend having an emergency fund. Many times I have seen people raid their emergency fund, then have to use their credit card when emergencies arise. It can be very demoralizing when that happens.

Have Adequate Life, Disability and Long-Term Care Insurance Coverage

We readily accept that we need car insurance and homeowners or renters insurance. Some of us will even insure family heirlooms or other collectibles. Yet we quibble when it comes time to insure our lives. The car you drive; the home you live in—who earned the money for those things? YOU did. What happens to your family if you are not there to provide for them? What happens if you do live a long and happy life but require additional care towards the end of your life? Do you forsake the legacy you intended for your kids, grandkids and organizations you wanted to support and use that money for your care instead? Or do you make sure you have proper insurance coverage now.

Insurance is a topic that makes many people uncomfortable because they don’t like confronting their mortality. I can’t pretend that I enjoy it either, but I do enjoy knowing that in the event something happens to me—my family is going to be fine financially and can still live the great life we planned.

Update Your Will or Estate Plan and Beneficiary Forms

This is another topic that makes some people uncomfortable. I’m not going to go into great detail explaining the differences between a Will or an Estate Plan as that deserves it’s own post, but the purpose behind both is to direct the distribution of your assets after your death. With a Will you can also designate a guardian of a minor child, letting you determine who will care for your child(ren), not the courts. You should also annually review all your beneficiary forms to make sure they are up-to-date as there is a natural tendency to fill them out, then forget about them.

Success Tip: Depending on the complexities of your estate, it may make sense to work with an estate planning attorney, rather than attempt to do it yourself.

Create Goals and Invest Wisely

We all have a finite amount of money, and I want to make sure I’m using it wisely and hope you feel the same way. Having goals that I truly care about and am motivated to achieve is what helps me make smart money decisions every day. I may desire a new purse or gadget, but when I weigh it against achieving my goal to go on vacation with my daughters, I know which one matters more to me. Now I can walk away without feel deprived. Give your money purpose through goals, then use those goals to help you invest wisely. You need to know what you want to achieve in order to figure out how much money you need and your best investment options.

Success Tip: While you don’t need to have Warren Buffett’s investment knowledge to become an investor, you still need to do your homework prior to investing. You want to make smart decisions that support your long-term goals, rather than emotional decisions based on how the market is performing that day. You may also choose to work with a financial advisor who can help you determine an investment strategy and create a financial plan to help achieve your goals.

Shannon

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September 23, 2013  •  52 Comments  •  Financially Real

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  1. Monday, September 23rd, 2013
    All great tips!! I'm currently working on our family will. It's tedious work, but it needs to happen.
    • Monday, September 23rd, 2013
      Thanks, Taynia! Glad to hear you're working on your will. It's not necessarily fun, but it's definitely something that you need. :)
  2. Monday, September 23rd, 2013
    Such simple but important advice here Shannon. Not the most fun or exciting topics in the world, but these are really the bedrocks of financial security, especially important for anyone with a family to support.
    • Monday, September 23rd, 2013
      Thanks, Matt! We like to complicate things, but building a strong financial foundation is so important and really not difficult to do. It takes some time, but it's worth it.
  3. Monday, September 23rd, 2013
    Really good advice. All these help you monitor your expenses, see where your money goes and making sure you're protected in case of an emergency. Being careful with the money and knowing how to save can really make a huge difference in a family.
    • Monday, September 23rd, 2013
      Thanks! So many people don't really know how they spend their money. They think they do, but once they start tracking it, they are often amazed how much money they waste. I like knowing that my money is going towards the things we truly want and the security of knowing that I built a solid foundation for my family.
  4. Monday, September 23rd, 2013
    I agree about being adequately insured. During my years in the mortuary industry, I witnessed countless families suffer because they weren't adequately insured. Life insurance is cheap....buy it!
    • Monday, September 23rd, 2013
      I can only imagine the heartache you and Greg saw. Life insurance is important and yet often overlooked. Like you, I have witnessed the impact adequate life insurance has on a family when they unthinkable happens. We may hope that we live long, healthy lives but I like knowing that I am prepared if life has other plans for me.
  5. Monday, September 23rd, 2013
    Great article Shannon! These are all such vital things to work towards and have, especially as you start to have a growing family. I'll second Holly, having worked in life insurance for five years I saw too many people pay the price for having a loved one not be insured adequately. It's so important to have and generally very reasonable to purchase.
    • Monday, September 23rd, 2013
      Unfortunately, too many people think they don't need it. In an ideal world, they wouldn't, but that's not real life. I've seen how not having insurance can impact a family and their long-term financial well-being too. It's very sad to witness, especially knowing that it could have been avoided.
  6. Jake @ Ca$h Funny
    Monday, September 23rd, 2013
    These are awesome tips for building a solid foundation. I've been fortunate enough to do most of these, but I need to work on the insurance and will part. I don't have any kids yet, so it's not as pressing as it would be for a parent, but I still need to get it figured out sooner rather than later.
    • Monday, September 23rd, 2013
      Thanks, Jake! It's good that you're in the process of building a solid foundation for you and your wife and your future children. :)
  7. Monday, September 23rd, 2013
    Excellent tips Shannon! One of the things I have been procrastinating on is getting our Wills done. We have our beneficiary information in order on our life insurance and on our bank accounts and investments, but we need to do our wills. Our stuff is quite simple, and if we passed without wills, the way the courts would administer our estate would be the same as what will be in our wills, all except for our pets. We do not have children to be concerned about but we are cat people, and I although I have spoken to the person that I would want to take care of them, we need to put a will together that designates a small trust for them to cover their expenses.
    • Monday, September 23rd, 2013
      Thanks, Sicorra! Pets are family too and it's great that you're planning to make sure they are taken care if something happens to you and your husband.
  8. Monday, September 23rd, 2013
    Great tips Shannon! Getting a will done, is something I still need to do :(
    • Monday, September 23rd, 2013
      Thanks, Mackenzie! I definitely encourage you to get your will done, especially so you can name a guardian for your daughter. :)
  9. Monday, September 23rd, 2013
    Excellent post, Shannon! I followed these steps myself. We've now been recording our expenses for over a year and it's really a great way to see where we are spending our money. Additionally we are building up our emergency fund so we can sleep better at night and not work on increasing blog income until all hours of the night - okay I might still be guilty of that and not sure any size emergency fund would help ;) Life insurance is next on the list!
    • Monday, September 23rd, 2013
      Thanks, DC! It's great that you and your wife are building a strong financial foundation together. An emergency fund is so important and should help you sleep better. Knowing you, even when you're emergency fund is where you want, you're still going to look for ways to increase your blog income! :)
  10. Monday, September 23rd, 2013
    Gets me thinking about how I need to create a living will. Not just for financial reasons, but also for the somewhat morbid details of what I would like to happen to my body after death or in the case I can't make a decision myself.

    When I set up my 401(k) plan I also designated that in the case of my death my little sister would be my benefactor. I've also told my parents how to access my money (luckily they can be trusted) so if they were to outlive me, and I wasn't married, they could use my money to cover expenses and my sister would inherit anything left over. I'm not sure why, but it doesn't disturb me to speak practically about these matters. Perhaps because my parents always did?

    All of these tips were great! I'm working to build a second e-fund so my current one can be used as a future down payment on a home and to buy a car when I eventually leave NYC.
    • Tuesday, September 24th, 2013
      It's great that your parents talked to you about money so you know how to take care of your financial needs and feel confident sharing with them the details of your financial situation too. These things aren't always the most fun but necessary and gives me and my family peace of mind.
  11. Monday, September 23rd, 2013
    I agree with everyone else...this is a great post Shannon!

    We haven't gotten around to our Will and final resting arrangments, I guess because it's such a scary thought having to "activate" them but I also know what a burden that can be on our kids...so I've got to get going.

    As far as investing goes...we're leaning towards CDs. I figured we'd start small and get comfortable with the whole investing thing. :)

    Thanks for putting these tips together for us Shannon. Have a great week!
    • Tuesday, September 24th, 2013
      Thanks, Corina! It isn't always easy thinking about what happens when we're not here but there is definitely peace of mind in knowing that you've taken care of everything. You have a great week too!
  12. Monday, September 23rd, 2013
    Disability insurance is so overlooked. I use to belong to a business group with an insurance salesman. He used to say how people went nuts to add auto glass to their insurance policy but often skipped disability. The odds are pretty high that you will have at least a short term disability at some point in your life. It's not fun to think about, but unless you have a huge emergency fund, I think this is a very important thing to have for your family's well being.
    • Tuesday, September 24th, 2013
      So true, Kim! I've seen it happen too. People don't think about short-term disability and how high the probability is of experiencing one. It's far better to be protected and ready for whatever life throws at you.
  13. Tuesday, September 24th, 2013
    All wonderful tips, and SO important for your children to see you following these as well. A great way to make sure they're set with good skills and a plan in hand for the day when they head out on their own. Must do stuff here, Shannon. Thank you as usual for showing us how to do money right. :-)
    • Tuesday, September 24th, 2013
      Very true, Laurie. Kids watch what we do and seeing us make sure our family is financially secure is definitely noted. If we explain to them the things we do to keep our family safe, then they understand why they need to do it too.
  14. Tuesday, September 24th, 2013
    The importance of the emergency fund is something that she be taught in schools.. It is so essential to maintaining a healthy financial situation, and yet it is not especially well known outside of the finance geek community (i use that term as a compliment).
    • Tuesday, September 24th, 2013
      I am definitely proud to be a part of the finance geek community! LOL! Emergency funds are so important and are sadly overlooked by many. The one thing I know for sure is things will happen and your emergency fund can be a lifesaver.
  15. Tuesday, September 24th, 2013
    Excellent tips, Shannon! Whenever my parents went on trips, they'd always inform me of their wills and insurance information which tended to leave an "icky" feeling. Now, I'm grateful that they constantly informed me, since it's in your loved ones best interests to know (and motivated me to look at my own plans and will, as well).
    • Tuesday, September 24th, 2013
      It's great that your parents kept you informed, even though I understand how that can feel "icky". We never want anything to happen to our loved ones or imagine ourselves not being there for our families. But having those things lined up and loved ones know what your wishes are is important too.
  16. Wednesday, September 25th, 2013
    I'm trying to have a savings for my daughter's future. I always tell her how to spend wisely and never buy unnecessary things. I do have a cellphone application that tracks my expenses. Thanks for this great post Shannon!
    • Thursday, September 26th, 2013
      That's fantastic that you are already talking to your daughter about money and spending it wisely. It's so important to do so and demonstrate how to do that to your children. Apps can really make our lives easier (except when they are being a huge distraction, of course!)
  17. Wednesday, September 25th, 2013
    Wonderful tips Shannon and something I know not everyone does.

    As you probably know, I lost my best friend of 17 years at the end of July and he had just celebrated his birthday four days prior. He was only 44 years old and he didn't have a will. I've told him so many times to get that in place but like a lot of people do, they blow me off. Some of the things I know he would have wanted to happen didn't because he didn't have his wishes in writing. Not only did I lose him but I know he would not have been happy with the way his things were handled. People think they're invincible but trust me, they're not.

    The long-term care is another one. My sister-in-law's Mom never put that in place. Out of the 11 children in her family, six had Alzheimer's and she was always scared she would too. So instead of preparing for her future she did nothing and sure enough the early onset of Alzheimer's appeared. She had nothing in place so my brother had to get everything out of her name and move her in with them until they could no longer care for her. So many people don't understand what a burden that is on the family. She passed away this past April.

    Like losing my best friend and my sister-in-law's Mom, they don't understand what it does to those left behind. Have some consideration for your family because it's hard enough to lose them but to have to deal with all of this after the fact is just heart wrenching.

    Sorry, these just really hit home for me and they are SO important to put in order while you are here. Think of your family for goodness sakes.

    ~Adrienne
    • Thursday, September 26th, 2013
      Thank you Adrienne for stopping by and sharing your stories. I do remember the untimely passing of your best friend this past summer. And I'm so sorry to hear that he did not have a will in place. We do think we are invincible and have plenty of time to deal with that "stuff" later. But time keeps zipping right along and we don't always have the time we think we will have either. For me, there is so much peace of mind knowing that not only is my family going to be taken care of financially should something happen to me or my husband, but also knowing that my wishes will be respected and followed. I've seen how even close-knit families can turn ugly when it comes time to split belongings, etc when there is no will to follow. It's such a simple step that can make it just a little bit easier for your grieving family.
  18. Wednesday, September 25th, 2013
    Great post Shannon! I follow a household budget and have a tiny emergency fund - I don't have a will though and I'm not at a stage where I can invest. Wills make me feel a bit freaked out but I can see the benefits around guardianship should the worst happen.
    • Thursday, September 26th, 2013
      Thanks, Hayley, I know you're working diligently at eliminating your debt but I am glad that you still have a small emergency fund. As your debt disappears, you can then build it up. Talk of wills and death freak most people out, so you are definitely not alone in feeling that way. But honestly, once you start working it, it's far easier than you think and it will actually give you great peace of mind to know loved ones will be taken care of and your wishes respected.
  19. Wednesday, September 25th, 2013
    Love the steps you've outlined Shannon! It's funny how the estate plan and the wills tend to slip our minds. Then we realize we haven't updated them in several years. We try to make it a point to look at ours yearly just to make sure we don't need to do any changes.
    • Thursday, September 26th, 2013
      Thanks, Brian! Great point - once you have your will and estate plan - you need to review them annually to make sure you don't have changes. It's not one and done because life continues to change and so may your will. :)
  20. Thursday, September 26th, 2013
    People are far more likely to suffer a disability and lose income for a period of time, than they are to die early. Your paycheck is needed to cover most expenses, yet that is the last thing people think about insuring.

    Many of your readers may be taking time from work when they have children. They may not be aware that their recovery from childbirth could be insured. That fact alone should be enough incentive to buy a policy.
    • Thursday, September 26th, 2013
      Very true, Kevin. People tend to think worse case scenario, which often scares them into doing nothing, when it can actually be something relatively simple (and recoverable) that can prevent you from working for a short period of time. Insurance is so often overlooked and considered to be unneeded, until it is needed.
  21. Thursday, September 26th, 2013
    Great solid advice! Insurance is one of those things that's far too easy to ignore. We had put it off for years, but adequate insurance is so important to have. You never know! A will is something we've talked about, even recently with new child, but haven't done anything yet. Maybe I'll add that as a to-do for this year. Sometimes we just look at the sticker price today, and keep putting it off, but we also know it can quickly become something way more expensive tomorrow.
    • Friday, September 27th, 2013
      Thanks, Anthony! I certainly encourage you to add a will to your to-do list for the year. Ensuring that your wishes are followed and designating guardians for your children are definitely worth the cost and peace of mind it will give you and your wife.
  22. Thursday, September 26th, 2013
    Great and incredibly sensible goals Shannon!
    • Friday, September 27th, 2013
      Thanks, Tonya!
  23. Friday, September 27th, 2013
    These are not only great tips to do FOR your family but as a great example to your children of financial responsibility. I am book marking this page so I can add a couple to my future financial goals.
    Thank you!
    Karla Twomey
    latest blog post – Teaching kids about money! BONUS: 5 awesome resources for you and your kids! http://nomorecreditcards.com/?p=2809
    • Friday, September 27th, 2013
      You're welcome, Karla! It's definitely a great way to teach your kids how to set-up a strong financial foundation and the reason why it's so important. Seeing parents do these things has a lot of power over kids.
  24. Sunday, September 29th, 2013
    Thank you Shannon. It is really advisable to build a good financial foundation for our families. An emergency fund is a good suggestion although this may not be easy to achieve initially. A household budget is also important in this effort.
  25. Saturday, May 23rd, 2015
    You should also annually review all your beneficiary forms to make sure they are up-to-date as there is a natural tendency to fill them out, then forget about them.
  26. Tuesday, May 26th, 2015
    Once you have a handle on your budget, you can decide how detailed you want to be ongoing—just be sure to continue following a budget.
Shannon Ryan SHANNON RYAN, CFP®
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan
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