Spend less, save more—a New Year’s resolution that is easily in many parent’s top five goals for the upcoming year, and rightfully so. Investments are important for families, from buying a house and buying a car, to building a savings fund. But, when it comes to thinking about long-term needs—is it on the top of the list?
Here are five steps from local professionals to help you build funds for the future this year.
Create a family budget
It’s that word — budget. Many dread the thought of crunching numbers and being confined to certain spending amounts, but it’s a great base to start.
“Every household will have a different view on budget,” explained Josh Campbell, Sales Manager and Business Partner for the Campbell Group. “Start by writing down everything you spend and track a 30- to 60-day record and look at where your money is going.”
From there, find what you are able to cut. Diapers, groceries, gas—those are necessities, and so is coffee. But, instead of spending $4 per day on a caramel macchiato, try limiting the café visits to once each week.
“We call it the Ramen Noodle Budget,” said Aric Lopez, Business Partner for the Campbell Group. “We’re going to control spending to get to where you want.”
Ready to get started? Check out our tips on creating a family budget.
Stick to your budget
Seriously, that word just sticks around. But in all reality, keeping to your budget will help you reach your common goal. Is your goal to buy a new house? How about putting money into retirement? Delegating money to certain pockets will help you get there faster.
“Most people are just flying through their day just trying to survive,” said Josh. “But, you can correlate what you spend on your income.”
Josh explained that his family of four has cut their grocery bill down by just shopping for the things they need on a weekly basis. “Milk keeps going up, but when we aren’t stocking our pantry of things we aren’t going to use, it keeps the costs down.”
Once your costs are down and stable, it frees up a little bit of extra cash to fund your next step.
Build an emergency fund
To put it simply, you don’t know what’s going to happen in life. Being prepared for the unknown is a comfort your wallet will thank you for.
Backed by financial guru Dave Ramsey, the number one priority when dealing with finances is to have an emergency fund for when life sends you a hiccup. From a hospital bill for a broken arm to needing to get braces repaired, life will throw little inconveniences your way. Be prepared by saving six months of expenses. Don’t worry! It doesn’t need to be built with one deposit. Take baby steps and build the fund as quickly as your budget will allow.
Save for your future
You’re in your thirties, so there is obviously time to build your retirement, right? Well, finance professionals agree the earlier you start, the better off you will be.
“Once you are living on retirement, it’s a fixed budget,” explained Aric. “If you don’t have enough saved up to match your lifestyle, there’s going to be some hard changes you’re going to need to make.”
If your job offers a 401(k) consider contributing something to it. Usually, the costs are lower since the company is buying in volume. Meet with your Human Resources department to get started.
If a 401(k) is not an option, meet with a financial advisor to open an individual IRA account. You can set up direct deposits on a monthly basis, too, which allows for consistency and stability with your retirement fund growth.
Parents need to take care of themselves. When you are young, you have time to make up the expenses of lost income, but once you get older, the opportunity for growth begins to dwindle.
Save for their future
As your income allows for more flexibility and your bases of monthly expenses are covered, opening an education fund for your child is a great investment. Higher education inflation is much greater than regular inflation, so any money you can set aside to help is a great way to provide to your children. Of course, the earlier you can start saving, the better off you’re going to be—but, there is no age limit on setting up an educational fund.
A 529 Plan lends some flexibility between children and will also grow tax deferred—meaning you don’t need to pay taxes on that money as long as it’s used for educational purposes. There are some guidelines on what the money can be used for, but is a great way to get a start on heavy expenses.
As you start looking at your expenses this year and gather a plan of action heading into 2018, connect with a professional to guide you through all of
the steps and process.
With a professional, you will be able to discuss your goals, eye-to-eye. They will also be there to hold you accountable while trying to stick to your budget in the New Year.
Baby steps will get you to where you want to go, and you can determine where and how much money will be put into your accounts. There’s no right or wrong way to start saving for your future; all it takes is a single step moving in the right direction.