Importance of creating a financial plan for your new family

Why it’s important to create a financial plan for your new family

Financial planning helps you identify your short- and long-term goals and create a roadmap for achieving those goals. That’s why it’s crucial to have a financial plan, whether you’re single or looking to start your own family.

However, financial planning is even more important for newlyweds and new parents, as they need to consider their children’s future in addition to their personal life goals.

If you haven’t already, it’s not too late to start creating a financial plan for your new family. It is essential for the following reasons:

1. Family security

Even if you are newlyweds or not yet parents, ensuring your family’s financial security is a crucial aspect of financial planning.

You might think that your income combined with your spouse is enough to cover monthly expenses and even some occasional indulgences. However, you also need to plan for unforeseen events that can strain your finances, such as unemployment, accidents, or illnesses that can lead to costly hospitalization.

Therefore, you should build up an emergency fund which should ideally cover your basic living expenses for three to six months. Depending on whether you have debt or loans and credit cards to pay, consider purchasing appropriate life insurance or additional coverage for peace of mind.

2. Revenue ManagementNew family financial planning

Knowing and understanding the benefits of financial planning forces you to budget your income each month. When you regularly budget your income, you will realize that planning your expenses is an essential practice on the road to financial well-being and independence.

By keeping track of your monthly expenses, such as bills, mortgage, loan or credit card payments, rent and taxes, you’ll know exactly where your money is going.

You can use this as a basis for reassessing your spending and checking where you can cut. This way, you can allocate part of your budget to your savings and to building up your emergency fund and other aspects of your financial backup plan. It doesn’t matter if you start small. What is important is that you will slowly but surely build up your savings and your emergency fund. You can always increase the amount you save after most or all of your debts have been paid off.

3. Debt Reduction

When it comes to financial planning, debt reduction and elimination are considered primary goals. If you’re saddled with debt or can’t manage it, it may take years to build up savings and a lot longer to get insurance. You may even find yourself unable to achieve your goals for the future of your children in time.

Therefore, whenever you budget your income, always set aside a portion for debt repayments above the minimum to reduce the principal amount while paying interest.

If you are struggling to balance your finances, you can seek help from a financial advisor or personal accountant. They can help you keep track of your finances, including your expenses, savings, and taxes. They can also guide you in finding the right financial products that could help ease your financial burden and help you achieve your goals.

4. Funding for children’s education

Among new families, one of the main goals of financial planning is to prepare for the future of their children, especially with regard to education.

In New Zealand, your children’s education is free from age 5 to 19 if they enroll in government-owned and government-funded public schools.

For higher education, the New Zealand government covers tuition and compulsory fees for the first 120 credits for eligible students. However, you still need to consider your child’s living expenses and tuition throughout their college life.

If you want to ensure that your children will have the freedom to choose their degree and school when they reach college age, you need to start preparing financially today. You can consider saving and investing for the long term to finance your children’s higher education.

5. Planning for retirement

Important family financial plan

There is no official retirement age in New Zealand, although most people stop working from the age of 65 once their super and other retirement benefits kick in.

However, when planning for your retirement, you need to consider what lifestyle you want, when you will retire and where you will live, as this will inevitably have an impact on how much you will have. need when the time comes. After calculating the cost, would your super and pension payments be enough or will you need more?

Remember that reasonably healthy people these days live into their 90s. So if you plan to retire at age 65, you need to have a budget to cover your cost of living for the next 25 years or more. You also need to factor in inflation and plan for things you’ll spend on, such as trips, dance lessons, or club memberships where you can indulge your hobby or passion.

Again, you may want to consider investing in portfolios managed by professional investment advisers, KiwiSaver, alternative superannuation, and other similar products. By doing so, you will have additional sources of income to tap into when you decide to retire.

6. Financial health and freedom

It’s okay to think that love and commitment are enough to sustain a relationship. Of course, these are essential foundations for building a healthy, loving relationship and a happy family.

However, financial stress can impact even the most committed marriages. And, without financial planning, you will compound this strain on your relationship.

So to avoid money problems and avoid straining your marriage, focus on creating a viable financial plan that you can work on on a monthly and long-term basis. Once you work on it, you will not only gain the coveted financial freedom you want, but also contentment and peace of mind.

One day you will be able to spend on the things you need and want without having to worry about unpaid bills and mounting debt.

Discipline is key, and it’s something your kids could emulate one day so they too can enjoy financial freedom when they’re on their own.