Protect Your Family Finances
No one can predict the future, but knowing how to protect your family finances can help you reduce worries in times if trouble. The last thing you need to worry about if a tragedy or illness strikes you or your family is money. Taking the time to be prepared in the good times of like can help us whether the bad.
Create an Emergency Fund
Something often overlooked by many is a simple emergency fund. This should be separate from any long term savings you have (such as for a home or retirement) and can be used to cover random issues that seem to pop up out of nowhere. There is no magic number you should aim for when creating you emergency fund, but most experts do recommend a store of six months wages. By having money set aside, you will know that you will be able to cover your expenses should you be faced with a sudden job loss, major illness, or other issue. Emergency funds are key to protecting your family finances.
It is also a good idea to set aside funds to cover more minor emergencies. Think along the lines of a major car repair, a broken pipe in your home, funds to cover your medical deductibles, etc. Again, there is no magic number to aim for but having a few thousand dollars set aside will give you peace of mind when something happens.
No one enjoys thinking about their death or the death of a loved one, but this should not stop you from making plans for it. Life insurance is something you need to consider purchasing for yourself and your spouse to safeguard your family finances. It is even more critical in a situation where only one partner works or earns significantly more than the other partner. Should you or your partner die, the insurance will help replace some of the lost wages, funeral costs, and other outstanding obligations such a college tuition or debt.
How much life insurance should you get? This is a matter of opinions and everyone will have a different answer. The most popular thought is to have 10 times your current salary.
Once you have purchased life insurance, be sure to occasionally evaluate the policy to check if you may need more coverage.
Watch Your Spending Even if You Don’t Need To
Spending money of frivolous things is not something only lower income people need to be mindful of. Regardless of your income, ask yourself if there are areas where you can cut back on spending will help your overall family finances. This will allow you to put those funds towards savings or for fun things like hobbies or entertainment. This, of course, is not to say that treating yourself to something special now and the is bad. Far from it! Just take a look at what you are buying and ask yourself if that money would be put to better use somewhere else.
Control Your Credit
Another way to protect your family finances is to be sure you are in control of your credit. Check your credit reports often for errors and take a peek at your credit score occasionally as well. Don’t carry large amounts of credit debt and be sure to make your monthly payments on time.
If you have large credit debt, work to get those balances down. Stress over debt is a major worry for a lot of individuals and families. In fact, some financial advisors will advocate paying off your debt before focusing on savings. This is because as you pay off the debt, you will have the ability to charge more should an emergency arise. This advice is somewhat questionable since new charges will rack up interest and cost more in the long run than being able to pay out of existing funds. We believe it is best to set some money aside while paying down your debt and then increasing the amount of money going to savings as the debt reduces.
Remember, you will always spend more than they amount you charge since interest is going to accumulate on purchases you pay off over time.
Family finances are not just a topic for the adults in the home. Include your children in financial discussions. Be upfront about your financial mistakes so they can learn from your errors. Encourage your children to save money and to spend it wisely as they earn it. This applies to even the smallest child. There is no reason to wait until your child has their first job to start talking about money.
For spouses, be sure you are both on the same page with your spending and saving goals. Have open discussions about about handling bills and where cutbacks are needed if you have to. You should never be afraid to talk to your partner about money. Even if only one of you handles all the money, knowing where you stand is something you both should be aware of.
Keep up With Maintenance and Repairs
An often overlooked way to protect your family finances is to keep up with general maintenance and repairs. For example, it will cost you less in the long run to keep up with your car oil changes than to replace the engine because you never checked the oil levels. Another example would be in the realm of general repairs. If you notice a small roof leak, better to get the roof patched than wait until the leak causes part of the ceiling to collapse.
Keeping up with routine maintenance on your vehicles, appliances, and home and taking care of smaller repairs before they become larger problems will reduce the chance of a major emergency and costly expenses.