Is 2016 going to be the year you finally get all of those financial tasks crossed off your to-do list?
If you’re a parent, there are a handful of financial priorities that aren’t the most thrilling to tackle, but they’re extremely important for the financial security of your family.
Lucky for you, spending even a little time on our 5-item checklist will save you a significant headache (and fortune) in the future.
So get started and make a toast to a financially great 2016 for you and your family:
1. Create An Emergency Fund
According to a recent study, 40% of Australians say they would rely on credit cards to help cover an emergency if their checking or savings accounts couldn’t cover it. The study also revealed that 41% of respondents wouldn’t have enough cash savings to cover a $2,000 surprise expense.
But, this gamble can be avoided if you just prioritise your savings. Start small by opening a $500 savings account, and then grow it slowly to $1,000 and beyond. The ultimate goal is to have an emergency fund with 3-6 months of expenses. I know saving this amount of money can seem impossible, especially if you’re used to living paycheck to paycheck, but it’s attainable if you have a great plan in place. Remember, emergency funds help prevent the cycle of debt and can be such a comfort especially if you have young children. Start today by putting even a small amount away and adding to it over time. If you’re disciplined and save a set amount when you get your paycheck, you’ll be surprised at how fast your funds grow.
2. Write A Will
One of the most dreaded tasks on parents’ financial checklist is creating a will. This is commonly viewed as the most confusing and costly item on the list. However, there are ways you can DIY the task by purchasing forms online, especially if you don’t have too many complex factors to consider. Digital wills are becoming more popular these days overseas and we anticipate the option to reach Australia shores soon, but experts have some concerns about storing all of your vital financial and end-of-life planning documents online. A good compromise if you don’t have extensive assets would be to create a will online inexpensively (there are a number of companies that offer this) and then be sure to print out all the documents and store them in a place where your family members could find them. You could also leave them with your solicitor/attorney and make sure your family members know the name of them. Be sure to list any important passwords or other information your family should know should something happen to you.
Many people forget to create a will, and it’s important to understand that a will isn’t necessarily for you so much as it is for your survivors. Creating a will allows your wishes to be clearly stated, and it helps your children to divide your assets and take care of any outstanding debts. Essentially, the more information you provide in your will, the better off and less stressed your children will be should something happen to you.
3. Obtain Life Insurance
Buying life insurance to cover you and your spouse and protect your kids is easier than ever before thanks to the Internet. Most of the time you can compare quotes and rates online and even obtain a policy without ever leaving your house. For some reason many parents lack life insurance or have an inadequate level of coverage. But once you have children, it’s so important to make a modest monthly payment to ensure your children have the life you want them to have in case anything happens to you. The good thing about paying the premiums monthly is you can pay for your insurance through your super fund so it doesn’t hurt your pocket. Talk to Vision Wealth Group and discuss your situation and receive recommendations regarding your insurance needs.
It’s not fun to think about, but if you have someone that relies on you financially to feed and clothe them, then you need to have life insurance.
4. Start A Home Savings Fund
One thing my partner and I have prioritized is saving for our next home. There are many different ways to save for a property or and investment. One favorite is to open a home savings account, or you can open a more general savings or investment account. In a home savings account you can lock the money in so you don’t use or access it, this way you stick to your plan and only grow your money.
If you haven’t started a savings fund for your home yet, make 2016 the year to get started! A little goes a long way, especially if you are young. Remember, the power of compound interest is on your side, so the earlier you start, the better.
5. Begin A Budget
Many people know they should budget their money, but they don’t know how to start. Luckily, the process of starting a budget is relatively simple. All it takes is knowing how much money is going in and how much money is coming out of your accounts. If you simply track your money for one month, you’ll see how many categories you need. Then just remember to factor in expenses you’ll only encounter once or twice a year, like car or health insurance. Also, keep those miscellaneous and unexpected expenses like home repairs and car repairs in mind, too.
Start Tracking Your Spending
When most people hear the word budget, it has a nagging, negative connotation. However, a budget is really just a tool to track your spending and make sure you know where your money is going. Obviously, if you find that too much of your money is going to things you don’t need or can’t afford, it’s wise to cut back, but it’s the knowledge a budget brings that can make you more aware and involved in your finances than ever before.
Ultimately, the vast majority of parents have a list of financial tasks they know they should complete, but the chaos of raising children always seems to get in the way. Tackling the five financial tasks above one at a time will not only make you feel incredibly accomplished, it will also ensure your family is secure and financially safe for anything that comes your way.