10 Steps to Family Financial Planning

Since a young age I have always been informed of the value of planning in order to achieve your financial and personal goals. While there is no one way to plan for your financial success, it is important that every household has an established strategy in place to not only execute for today but also to plan for tomorrow.

Here is a list of ten steps that I like to follow when managing the finances of my family. Hopefully many of you can apply these steps in your household as well. Have additional tips that aren’t listed below? I’d love to hear from you! Comment below or email brittany@themodernjuggle.com

1. Outline Monthly Household Income: Pull up recent pay-stubs and determine your monthly household take-home pay after taxes, 401K, 529 distribution or other items that typically come out of your paycheck. If your pay fluctuates based on variables such as commission, take an average value across the past three months.

2. Determine Monthly Obligations: Determine fixed obligations that are paid monthly including, mortgage/rent, child care, car payment, insurance, cable, student loans, cell-phone etc. and determine your monthly total. Try to account for any variable obligations as well, including groceries and gas. The best way to do this is to take a 3 month snap shot of the varying expenses and use that to determine your average monthly spend. You may be surprised with how much your are spending in these fluctuating areas so use this as an opportunity to set budget targets for these variable items.

3. Set Monthly Discretionary Income / Discretionary Plans: Deduct your obligations (both fixed and variable) from your take-home pay to determine the value of your remaining “discretionary” income.  From there outline activities / plans that may utilize this income including saving, dining out, shopping, vacations, etc.

4. Set Savings Goals: Pay yourself first! The first distribution of discretionary funds should always be to yourself / your savings. Determine what you can afford to put aside and stick to it. You may not have the ability to save from every paycheck but set a realistic target across various points in time (monthly, quarterly and annually). Keep in mind that every little bit counts, so don’t assume that it isn’t worth saving just a little bit.

5. Limit Purchases on Credit: Limit discretionary purchases to what you can afford to pay today, in cash. While credit cards are a great method for establishing and improving credit (when used appropriately), they can also serve as a detriment to your financial success. Many people like to use credit cards for their incentive program, such as cash back, rewards points, etc. (which I am a huge supporter of), however I suggest only charging items that you can afford to pay off at the end of the month, without accruing interest . By doing this you will not only prevent unnecessary debt, but you will also leave your credit line available for any unforeseen and potentially costly expenses, such as a car or household repair.

6. Track Details Electronically: The details outlined above can be easily recorded, tracked and monitored electronically. I personally like to use Excel workbooks to manually track our family’s finances but several different websites and apps (including Budget Simple and Mint) can do the work for you. In addition, most online banking sites offer tools to monitor and group expenses, set savings goals and so much more.

7. Be Accountable: Once outlined, stick to budgets and savings plans. Your future self will thank you!

8. Don’t Overextend Yourself: Do not view discretionary income as an automatic means to hit the mall or increase your monthly obligations, by jumping into a higher car payment for example. Adding to your monthly expenses will only take away from your savings potential and may affect future goals, such as buying a home or going on a family vacation. Before making a substantial purchase or investment, think of the impact that it will have on your bottom line and make sure you are comfortable with it.

9. Treat Yourself When Able: Yes saving is important but you have worked hard for the life that you have built. From time to time, treat yourself to discretionary items or services that you both enjoy and can afford. Prohibiting spending altogether may lead to harbored resentment and ultimately an impromptu splurge that you may regret in the future.

10. Think Long-Term: While it is important to set goals for the short-term (paying off debt, saving X amount a month, going on a vacation this summer, etc.), it is equally if not more important to also think ahead towards the future. Where do you see yourself in one year? Five years? Ten years? Plan ahead for your children’s college education even if they are young…  Set a goal of purchasing your forever home or vacation home by the time you are X age… Thinking of not only today, but also tomorrow will provide a road map for you and your family and will enhance your probability of success.

Thank you all for reading and happy planning!


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: