For something that plays such a big role in our lives, it’s
safe to say that money and the care of it, baffles a good many of us. It’s
understandable. Most people spend their days just trying to get through them.
They have bills to pay and soccer-mom/ dad duties to attend to.
The problem with this, however, is that the future comes faster than most
people realize. Often, when the inevitable comes, they don’t have money in the
bank for all the important stuff, like their kids’ college educations, a down payment
for their first house, or money for retirement.
If you find yourself in this predicament, then you’ll want to take note of the
following tips. They’ll help guide your financial planning, allowing you to
save more money (and heartache) in the long run.
1. Start Early
Yes, it’s possible to play catch-up, but the real way to build wealth is to use the power of compounding, according to an article on the Vanguard website.
If you don’t know about compound interest, here’s how it works. You put some money in an account, say $10,000; the account earns 6% interest. You don’t touch the money, neither the principle that you put in nor the interest that it earns.
You then leave it alone for about 40 years. At the end of the 40 years, you’ll have almost $103,000, all due to compound interest. The initial $10,000 was what you put in the bank. The rest was the interest you’ve earned on the amount. You can use compound interest to save for your kids’ college education, to buy a home, or for retirement.
2. Reduce Your Debt
No plan for your family’s future will get very far if you don’t get a handle on your debt. Consumer debt, like credit cards can really take a bite out of the money you get to take home. What’s worse is that most interest rates on credit cards are more than the interest rate you’ll earn on your investments.
There are a couple of ways that the financial experts at companies, like Trout Associates have seen consumers tackle their debt. One tried-and-true way is the debt snowball.
Basically, the debt snowball requires you to put all of your extra money toward any debt you have. If you don’t have extra money, then you might get a 2nd job or sell some of the stuff you have stored in your attic.
You start with the smallest debt, paying it off first. Once that’s paid off, then you move on to the next-largest debt. You use the money you would have used to pay the smallest debt, plus any other extra money you have to pay down the second-smallest debt.
Once that’s paid, you repeat the process until all of your debts get paid. Every other debt that you’re not “snowballing,” you just pay the minimum payment until all of your debts are gone.
You can also try debt consolidation to lower your interest payments. This plan allows you to stop paying so much in interest payments, which in turn allows you to get out of debt faster. You can put any extra cash you have toward your debts until they’re paid off.
3. Plan for Elder Care
According to Guideposts, more than 34 million people in the U.S. take care of an adult in their lives, aged 50 and above. Many of them are adult children caring for their aging parents. This is due in part because the parents didn’t plan adequately for their care.
The reality is this type of care isn’t cheap. A room in a nursing home can cost almost $8,000 a month. In lieu of this type of care, many families opt for in-home care, which still is costly, but less costly than a stay in a nursing home.
The time to plan for this eventuality is years before it comes. Both of the previous steps can help in this regard. By getting out of debt and employing the power of compound interest, you’ll have more money at your disposal to save for this eventuality.
Final Thoughts
Planning for your family’s financial future is really all about you approaching your family’s finances in a methodical and logical way. When it comes to saving large sums of money, compound interest proves that time is on your side.
Additionally, financial planners and other financial experts, like the staff at Trout Associates have seen how powerful debt consolidation is as a tool for getting out of debt. You can use a consolidation loan to pay off high-interest credit cards and loans and put more money toward your debt.
Finally, saving for your final years means that you’re cared for and your children aren’t the ones doing the primary work of it. These years should be filled with joy and family. Planning for them financially gives you a realistic way to make that happen.