- Date : 16/05/2020
- Read: 3 mins
- Read in English: A family that plans together builds wealth in the long term
Here’s why you should plan your finances with your family’s input.
A good part of your income goes towards meeting expenses incurred by the family as a whole – from the monthly rent to annual vacations. Therefore, when it comes to financial planning, it is best to involve the entire family. Charting finances together goes a long way in building wealth by saving more and using that savings to earn more.
Here’s how to plan your finances together as a family:
Create a budget with everyone’s inputs
Working on next month’s budget? Make sure the entire family is present to give inputs on their expenses as well as understand what budgetary constraints they need to keep in mind. From factoring in your child’s school trip cost to purchasing a new refrigerator, listing upcoming expenses gives an idea of the costs that are scheduled to occur, preventing the family from going overboard while still getting their requirements done.
It’s also important to educate children about your financial status and goals. They need to understand that outlandish demands may strain your monthly budget. Also, it’s best to identify responsibilities, such as what percentage you and your spouse will be contributing to the rent, who will pay the monthly bills to avoid late charges, etc.
Talk long-term financial goals
Do you want to build a post-retirement life in your hometown or send your kids to an Ivy League school for their education? Will the grandparents leave some inheritance towards your child’s wedding in their will? Do you want to start a long-term savings account where you and your spouse can contribute something periodically?
Setting long-term financial goal helps to identify areas where you need to save and invest. Doing it together will help to throw light on each person’s goals, and allow you to estimate every individual’s contribution.
Individual or joint insurance and investments?
Both insurance and investments have long-term implications on your lifestyle and finances. Its effects can spill over to affect your entire family. A major change in the family – such as a wedding or the birth of a child – calls for re-evaluating assets and charting a fresh portfolio to factor in the new inclusion.
You will need to take certain decisions after much thought. Should you take multiple term plans or include your family with an additional cover? Is it better to invest a sizeable amount in multiple fixed deposits or pool the money to invest in real estate?
Cut corners without ruining the fun
Savings are an important part of every healthy financial plan. However, when you are trying to save, your family members may have to refrain from weekend movies or regular getaways. This may lead to resentment. To avoid this, plan fun movie nights at home, a picnic at the local park, or other less expensive activities that allow you to bond with your family – without burning a hole in your pocket.
We hope these tips will make financial planning with your family easy, help you achieve your immediate financial goals, and build wealth in the long run.