After you have kids it can feel like exactly the wrong time to try to get financially stable. There are so many new demands, money-wise. However, that's all the more reason to find a strategy that will allow you to establish the security that your family needs. Small kids have smallish financial needs, while big kids have big financial needs! The years truly pass by so very quickly, so coming up with a plan when your kids are still babies is the best possible thing to do. Okay, take a deep breath, and lets consider the options.
Pay Off Your Debts
Debts are one of the biggest contributors to financial instability. After all, when you owe someone else, whatever money you have really isn't your own. This is the kind of thing that creates the situation where you get paid and the money is gone from your account almost immediately because you need to pay various people or companies. It can be hard to pay off debt if you don't have a strategy, and the first step of that strategy should be reducing what you owe and what you're paying. You may be able to take this step with your existing student loans if you can refinance them into a new loan. That new loan may have a better payment plan that will help you financially strategize the best way to pay off all your debts sooner rather than later.
Make a Budget
Making a budget can be an important step even when you don't have debt to pay off, but when you do, it becomes particularly important. Tracking your spending over several months can give you a look at where your money is going, a look that is often surprising to some people. You may find that you are spending a lot more money on a hobby, fast food, impulse buys online or at the grocery store, and much more. This can really help you get a handle on your spending even if you aren't someone for whom tracking where every penny is going is ever going to work. A few months' tracking to give you a baseline sense of what you're spending will be enormously valuable in making the budget even if you find it isn't practical to keep it up.
Have Emergency Savings
Most people don't have money on hand to weather unanticipated expenses, such as out of pocket medical expenses, home repairs, or car repairs. This can mean putting all of those expenses on credit cards, with big interest rates, or it can mean more serious consequences if the money simply isn't there for a necessity, whether it's fixing a roof or taking care of a medical issue. There are also big life events that can be financially devastating, such as divorce or job loss. Emergency savings that could cover three to six months’ worth of basic expenses can help cushion against these events. This can take time for many people, so you can set an initial goal of $500 or $1000 and build from there. Even a small cushion can be a big help. Be sure that you put this money in an account that you can access easily without penalties, such as a high-interest savings or money market account.
Think About College Costs
For many parents, how to pay for college is a crucial part of their financial planning. There are many different ways to do this, such as starting a tax-advantaged savings account or borrowing against a retirement fund. The latter is often advised against simply because jeopardizing your own retirement is not going to help your children in the long run. Saving toward the costs may be a better solution.
Make Money a Family Affair
This is perhaps the most important step. Too often, one person in the family holds the financial reins and the rest simply ask for things or money as needed. This can leave one spouse ignorant about family financial matters and can mean raising children who don't understand money or how to make and save it. One person in the relationship may have zero interest in finances, but at minimum, they need to know how much is coming in and going out. As for kids, you should involve them early in discussion about money so that it is a comfortable and ongoing topic with them. This can start with cutting out coupons and observing prices while grocery shopping and can advance to helping your child open a bank account and put allowance and other money earned away in savings, discussing investments, having a credit card they can use and more.
Wishing you all the very best in your journey to financial stability!
