The 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.
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!
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.
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.
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.
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.
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
The Heavy Purse Store is now open! My new downloadable Money Club Workbooks—based on age or level of expertise—are now on sale. Each workbook provides five targeted lessons to help you grow Money Smart Kids. Please check them out in The Heavy Purse Store.
SHANNON RYAN, CFP®
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.
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!
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
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.
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