Protecting your finances becomes especially important when your family begins to grow. Both unexpected and expected expenses will begin to pop up, and you need to have a plan in place that will keep your family free from any ongoing financial burdens. Here is a look at four key steps to help protect your family’s finances without making major changes to your lifestyle.
1. Start by Creating a Cushion
Most financial specialists will tell families to build up a cushion before almost anything else. While making investments and paying off debt is important, everyone should have ready access to cash for any emergencies. For the average family, the cushion should cover anywhere from 3 to 6 months of their total household’s income. If something major such as a medical emergency is followed by being laid off, this cushion could mean the difference between buying groceries and not buying groceries.
2. Focus on Your Taxes
While most people dread tax season, it is important to not pay the IRS before doing some research. Families will often pay thousands of dollars in extra taxes throughout the years without even realizing they are overpaying. Couples should sit down with one another at least once or twice a year and carefully look over any tax deductions that they are missing out on as well as how they are filing taxes.
3. Build Your Equity as Quickly as Possible
Purchasing a home is generally the biggest financial decision that a family will ever make, but these decisions do not need to be static for 20 or 30 years. Instead, families should take a look at their refinancing options every few years to see where they can save some money or if they can adjust their mortgage to build up their equity. Contacting companies such as Low VA Rates could cut down on one’s monthly payments and APR if they qualify for military service discounts.
4. Pay Off Debt Before Investing
It is more important than ever for families to have their own private nest egg and not rely on federal security programs, but paying off debt is typically a better investment. Yearly investments may have an annual return of 4 to 8 percent, but a family could be squandering that when their credit card debt is at 15 percent or higher. If the debt percentages are exceptionally high, then it may be time to consider debt consolidation for a better APR.
No one wants to stay awake at night worrying about their family’s financial future, and these four steps could help you prepare your household for any eventuality without making major sacrifices.